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Q2 2024

Quarterly Embedded Auto Insurance Report

Insights on the embedded auto insurance opportunity for automotive dealers

Embedded Insurance Report

 

The Embedded Insurance Opportunity

Inflation, natural disasters, supply chain issues, and auto repair costs have led to insurance rate increases in recent years. These rate increases depressed new policy sales to a low point in Q4 2023.

The good news is that the 2024 insurance market continues to strengthen. Q2 results suggest the market is stabilizing with market health increasing across the nation.

When Rates Rise, Consumers Shop

Today’s consumers are more price sensitive than ever. The latest J.D. Power U.S. Insurance Shopping Study found that almost half (49%) of auto insurance customers shopped insurance in the past year.

And more than a quarter (29%) switched carriers, with Gen Z leading the charge. This aligns with our 2024 Study, where we found 50% of younger buyers changed insurers within 4 years.

Continued Market Improvement

The embedded insurance opportunity continues to improve for dealers in 2024. 

For the second quarter in a row, the embedded insurance market improved broadly on a national level. The New England market continues to improve dramatically from last year’s lows.

The Pacific Northwest continues to improve as well. However, states with more regulations like California, New Jersey, and New York continue to struggle.

Overall, national market conditions continue to improve and present an opportunity for dealers who have insurance integrated into their sales processes. Savvy dealers who provide a solution for their buyers to receive competitive quotes will be best positioned to help consumers find better insurance coverage with the potential for savings.

EMBEDDED AUTO INSURANCE MARKET OPPORTUNITY: Q2 2024*

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Embedded Auto Insurance Market Recovery: Q2 2023 – Q2 2024*

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Declining Margins Bring Back-End Gross to the Front Seat as a Profitability Driver

Over the last quarter, average front-end gross continued to decline to around $1,400 per transaction on average – 60% lower than the highs in 2021.

However, back-end gross has remained steady and now contributes an average 58% of the per vehicle gross profits. The trend line is clear. Back-end is more important than ever, and dealers will become more reliant on it for profitability than they have in years.Trends_BackGross_Chart_LP

Analysis Across 993,784 Transactions Shows F&I Gross  Profit Increases with Insurance

INCREASE IN F&I GROSS PROFIT**

Q2 2024 Dealership Back-End Gross

The Q2 data is in, and it’s conclusive. F&I gross profit per deal is significantly higher when insurance is integrated into the sales process.

Even when the customers just see quotes and don’t buy insurance, F&I gross profit is higher by 18% on average. When customers buy insurance, the increase in F&I gross profit is 20% higher on average. And when customers switch and save on insurance, the increase in F&I gross profit is considerably higher -- 29% on average. This analysis is for all transactions within Polly dealerships.

20% F&I Gross Profit Increase with High Usage of Polly Insurance in Our Top 10 Most Engaged Dealer Groups

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Engaging customers with auto insurance quotes embedded in the sales process lifted back-end gross profit across these 10 dealership groups by 20% on average.

For highly engaged dealership groups, the average back-end gross for sales with quotes is $2,367, or $399 higher, than the $1,968 average for the transactions without quotes.


20% Higher Back-End Gross Profit for Sales with Embedded Insurance Quotes

In our latest report, we continue to analyze dealerships where we have DMS and other dealer system data access. Sales and insurance volume meets minimum criteria for analysis. In our Q2 report, that includes 10 dealer groups covering 159,838 transactions.

All 10 dealer groups** saw an improvement in back-end gross when insurance was introduced, with the median dealership seeing an increase of 20% over deals with no insurance quotes.

AVERAGE BACK-END GROSS PER DEAL: 10 FRANCHISE DEALER GROUPS*

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21% Increase in VSC Penetration with Insurance Quotes

VEHICLE SERVICE CONTRACT PENETRATION

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Over the last 12 months, when car buyers had an opportunity to view insurance quotes, they purchased a vehicle service contract in 53.3% of deals.

That’s a 21% higher VSC penetration compared to deals where insurance was not included in the sales process (43.8% penetration). VSC penetration overall has been trending lower over the past 36 months, down from 46.9% in June ’22-May ’23 and 50.7% in June ’21 – May ’22.

But VSC penetration for sales where Polly insurance quotes were discussed has remained consistently higher by around 9 percentage points over that time.

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Predictions for Q3 2024

The insurance market is improving in 2024. 
The embedded insurance opportunity is expected to continue to improve throughout 2024. As insurance costs continue to rise, shopping activity will remain at an all-time high.

This trend will become notable even among typically less active demographics such as the Silent Generation and Baby Boomers. Sophisticated insurance companies will be well-prepared to capture new business. And insurance will be an even more significant factor in the consumer car buying journey for car shoppers and dealers.

Scorecard_Logo@4x-8

Get Personalized Recommendations Instantly

Access actionable recommendations on how to increase the impact of your dealership’s insurance program. Increase your income and provide an outstanding customer experience.

Predictions for Q3 2024

The insurance market is improving in 2024. 
The embedded insurance opportunity is expected to continue to improve throughout 2024. As insurance costs continue to rise, shopping activity will remain at an all-time high.

This trend will become notable even among typically less active demographics such as the Silent Generation and Baby Boomers. Sophisticated insurance companies will be well-prepared to capture new business. And insurance will be an even more significant factor in the consumer car buying journey for car shoppers and dealers.

The Experts

Weili Yuh

Weili Yuh
SVP of  Underwriting

Sonia Xing

Sonia Xing
VP of Acquisition Analytics

Kalin Kostadinov

Kalin Kostadinov
Director of  Analytics

Methodology

* Embedded auto insurance market opportunity data from Q2 2023 through Q2 2024, defined as new policies per car buyer engaged in an insurance conversation at the dealership, weighted by consumer mix and insurance carrier risk appetite

** The report is based on analysis of 993,784 vehicle sale transactions dated between 2021-06-01 and 2024-05-31, identified by a valid unique VIN number.

This includes 397,832 transactions in the latest 12 month and 402,432 in the prior 12 months.

The sales transactions are reported by 149 dealership groups at more than 500 rooftops, with some dealerships reporting at the group level and some at the location level.

A dealership group is designated as ‘highly engaged’ over a period of time if it has reported 1,000 transactions over that period and has both one, auto insurance quotes with Polly embedded technology associated with at least 2% of the reported transactions and two, at least 50 transactions with Auto insurance quotes with Polly embedded technology associated to these.