Auto Insurance Satisfaction Surges As Customers Adopt Direct-To-Consumer Models
The last decade of seemingly non-stop direct-to-consumer advertising and heavy investment into digital self-service technologies have driven roughly one-fourth of auto insurance customers to adopt direct distribution models that bypass agents in favor of do-it-yourself tools.
According to the J.D. Power 2019 U.S. Auto Insurance Study,SM that transition has helped overall customer satisfaction with auto insurance providers reach its highest level ever.
"Auto insurance customers have more access, control and visibility into the details of their policies, and that is translating into record high levels of customer satisfaction," said Robert Lajdziak, Senior Consultant for Insurance Intelligence at J.D. Power. "As customers take greater control of their auto policies, it's also becoming more important for insurers to offer superior digital experiences and easy access to account management features such as bill pay, policy information and an integrated experience for customers who bundle multiple policies."
Following are some of the key findings of the 2019 study:
Record-high satisfaction driven in part by direct service models: Overall customer satisfaction with U.S. auto insurers improves in 2019 and is now at a record-high level of 831 (on a 1,000-point scale). Within the total universe of auto insurance customers, the 23% of customers who use direct distribution models have the highest overall satisfaction.
The more, the merrier: Satisfaction levels are significantly higher when auto insurance customers bundle their auto policy with additional policies, such as home and life insurance (837) than when they do not bundle (812). While, overall satisfaction scores, advocacy rates and likelihood-to-renew levels are all higher when customers bundle one or more insurance products with their auto policies, insurers have done a poor job at making the customer experience easier for bundlers.
Average premium amount flat this year, which helps customer satisfaction: Customers say auto insurance premiums have leveled in 2019, following significant increases the previous two years. The tipping point is where customer satisfaction and retention start to become negatively affected by a price increase, is $100. The threshold for the likelihood to shop around at other insurance companies is lower, just $50.
Attrition risk likely to rise: Price sensitivity peaked in 2010, shortly after the S&P 500 reached its lowest point following the Great Recession, when 87% of auto insurance said they would switch insurers for any amount of financial savings. In 2019, that number is 72%. With a possible market correction in sight, insurers will need to understand how to execute on the key performance indicators identified in the study that mitigate price sensitivity.
A do-it-yourself attitude: Customers' reliance on agents—feeling they are extremely important—has declined 33% over the past 20 years. Nearly one-fifth (17%) of customers with an agent say they have never met their agent in-person or over the phone.
"One of the reasons direct models are posting higher satisfaction scores is because the customer experience is centralized in the organization and therefore more consistently executed," Lajdziak said.
Following are the highest-ranked auto insurance brands by region:
California: Esurance Central: Shelter Florida: Allstate Mid-Atlantic: Erie Insurance New England: Amica Mutual New York: New York Central Mutual North Central: Westfield Northwest:PEMCO Insurance Southeast: Farm Bureau Insurance—Tennessee Southwest: The Hartford Texas: Texas Farm Bureau
The 2019 U.S. Auto Insurance Study, now in its 20th year, examines customer satisfaction in five factors (in order of importance): interaction; policy offerings; price; billing process and policy information; and claims. The study is based on responses from 42,759 auto insurance customers and was fielded from February through April 2019.
J.D. Power is a global leader in consumer insights, advisory services and data and analytics. These capabilities enable J.D. Power to help its clients drive customer satisfaction, growth and profitability. Established in 1968, J.D. Power has offices serving North America, South America, Asia Pacific and Europe.