Study: Rising auto insurance rates spur consumer dissatisfaction

Rising auto-insurance rates have lowered driver satisfaction with price, leading to a surge in consumers shopping for new policies while dragging down consumer satisfaction, according to the J.D. Power 2022 U.S. Insurance Shopping Study.

“A perfect storm of record-high replacement costs, increased frequency and severity of collisions and an economic outlook that suggests this situation won’t change anytime soon is forcing a major industry disruption,” said Marty Ellingsworth, executive managing director of P&C insurance intelligence at J.D. Power.

May spur usage-based insurance

“In the near term, that disruption is manifesting itself in very low customer satisfaction with price and high rates of new policy shopping,” she said. “Longer term, this may be the catalyst to significant adoption of usage-based insurance, which may be the only way insurers can navigate the financial realities while still managing to engage with customers and build loyalty by meeting their specific needs.”

Usage-based auto insurance is an umbrella term under which certain driver behaviors are tracked, such as the number of miles driven, speeding, exhibiting road rage while driving, and harsh braking. The car insurance premium is adjusted based on these and other driving behaviors. “For example,” Ellingsworth explained, “if you routinely drive many miles or drive recklessly, you will be charged more. Drive safely and you will save more on insurance.”

More Survey Findings

Additional findings from the survey include:

• Auto-insurance customer satisfaction falls: The average overall satisfaction score among auto insurance shoppers is 862 (on a 1,000-point scale), down 6 points from a year ago. All told, six of nine large insurers and six of 11 midsize insurers see decreases in purchase experience satisfaction scores this year.

“When insurance rates go up, shoppers are not happy, and this is the biggest contributor to their high level of dissatisfaction,” Ellingsworth said. Overall inflation is part of the reason for this increase in rates as well, Ellingsworth added. For example, the cost of a used car increased by an average of 41% in 2021. “This is not the first time there has been an increase in the price of cars, but this is the first time it has been this dramatic,” he said.

• Price hikes spur new policy-shopping rates. Shopping rates were down early this year, compared with 2021, but recent rate increases seen in March and April of 2022 are pushing shopping rates back to historical norms. The largest drivers of new-policy shopping for retained and switched shoppers are proactive price checking (51%) and rate increases (35%). Among those drivers who are shopping for a new policy because of a rate hike, 64% experienced a price increase of 11% or more.
• Direct insurers see customer satisfaction drops significantly. The direct insurer channel reversed course after several straight years of steadily increasing customer satisfaction and fell 17 points this year. The overall satisfaction score for the direct channel is 860, which puts it behind the exclusive-agent channel (866) for the first time in five years. The independent-agent channel climbs to 854 from 848 a year ago, but still lags behind direct- and exclusive-agent channels in overall customer satisfaction.
• Older customers are more price-sensitive. As customers age, they are more likely to shop for insurance due to price factors. Among Pre-Boomers, for example, 67% of insurance shopping is driven by price, while, among Gen Z, only 41% of shoppers are price-driven.

Company Rankings

According to the survey, State Farm ranks the highest among large auto insurers in providing a satisfying purchase experience, with a score of 885. The segment average is 863.

The Hartford ranks highest among midsized auto insurers, with a score of 889. Erie Insurance (878) ranks second and Amica Mutual (874) ranks third. The segment average is 855.

Steps to Lower Rates

What can consumers do to lower their auto-insurance rates? Among other things, Ellingsworth suggested, they can drive safely, reduce coverage on older cars, shop around for insurance policies, and review the policies they have in place to make sure that as they go through different stages of their lives, their policies are in line with their current insurance needs. Consumers can also visit www.III.org to get more information on ways to save more, he added.

Now in its 16^th year, the U.S. Insurance Shopping Study captures insight into each stage of the shopping funnel and is based on responses from 10,804 insurance customers who requested an auto insurance price quote from at least one competitive insurer in the previous nine months. The study was fielded from March 2021 through January 2022.

Ayo Mseka has more than 30 years of experience reporting on the financial-services industry. She formerly served as Editor-In-Chief of NAIFA’s Advisor Today magazine. Contact her at [email protected].               

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Ayo Mseka has more than 30 years of experience reporting on the financial services industry. She formerly served as editor-in-chief of NAIFA’s Advisor Today magazine. Contact her at [email protected].