Rising premiums and less attractive policy offerings are driving customer satisfaction with auto insurance companies downward. Overall satisfaction is down in 2013 from 2012’s all-time high, although it’s still high compared with the previous decade, according to the just-released J.D. Power 2013 U.S. Auto Insurance Study.SM
The study measures customer satisfaction across five factors: interaction, price, policy offerings, billing and payment, and claims. Among the five factors, price satisfaction is lowest, at 716 (on a 1,000-point scale)–more than 100 points lower than the average scores for interaction and claims. Overall satisfaction with auto insurance companies stands at 794, down 10 points from 2012. Despite this drop, satisfaction in 2013 is at the second-highest level since the study launched in 2000.
Scores across all five factors have decreased year over year, with price and policy offerings showing the greatest decline. Both are down by 13 points.
“In 2013, there is a sharp rise in the number of customers who have experienced premium increases,” said Jeremy Bowler, senior director of the global insurance practice at J.D. Power. “The dollar amount of those increases is also larger, averaging $153 in 2013, compared with an average rate increase of $113 reported in the 2012 study.”
Higher Premium Increases Lead to Higher Levels of Switching
A direct correlation is apparent between the size of the premium increase and the proportion of affected customers who switch insurers. While only 9% of customers who experienced an annual rate increase of $50 or less switched insurers, the switching rate nearly doubles to 18% when the increase is between $51 and $100, and to 32% when the increase is more than $200.
Customer ire over premium increases appears to be mitigated by timely notification and explanation. When customers are warned in advance of a premium increase and are given the opportunity to discuss their options prior to renewal, satisfaction averages 698–67 points higher than among customers who did not get to discuss options (and any associated rate increase) prior to renewal.
“In today’s low-interest market, many insurers are filing for new rate structures in order to rectify underwriting losses,” said Bowler. “To prepare for the likely downturn in customer sentiment and risk of increased attrition following a premium increase, insurers need to do a better job of proactively reaching out to their customers and explaining the reasons behind the rate increases.”
The study finds that only 16% of customers with a rate increase indicate that they had a discussion with their insurer regarding potentially changing their coverage.
“Generally, customers typically have little understanding of how their rates are set by their insurer, or why prices may vary by sometimes hundreds of dollars between companies when they shop for multiple quotes,” said Bowler. “We’ve seen many companies focus on communicating discounts to strengthen customer perception of value. But the introduction of personal driving data characteristics in establishing discounts, and hence rates, represents another significant step forward for the industry in terms of better communicating price to customers.”
Lone Star State Declines Most Among Regions
The study includes breakdowns for 11 U.S. regions, including four state-specific regions. Satisfaction has declined in each of the regions, compared with 2012. The highest levels of satisfaction among award-eligible insurers, by region, are as follows:
- Wawanesa (820)
- State Farm (812)
- The Hartford (811)
- State Farm (833)
- Auto-Owners Insurance (821)
- Shelter (817)
- MetLife (808)
- The Hartford (802)
- State Farm (800)
- State Farm (836)
- Erie Insurance (826)
- GEICO and The Hartford (811 each)
- Amica Mutual (850)
- GEICO and State Farm (794 each)
- The Hartford (793)
- New York Central Mutual (814)
- State Farm (807)
- Travelers (783)
- Auto-Owners Insurance (833)
- State Farm (824)
- Erie Insurance (823)
- PEMCO Insurance (834)
- The Hartford (820)
- Mutual of Enumclaw (813)
- Tennessee Farm Bureau (850)
- State Farm (822)
- North Carolina Farm Bureau (821)
- State Farm (824)
- The Hartford (821)
- GEICO (809)
- Texas Farm Bureau (862)
- GEICO (815)
- State Farm (810)
Compared with 2012, the Central region declines the least in overall satisfaction (4 points), while the Texas region declines the most (23 points).
New Jersey Manufacturers Insurance Company (NJM) and USAA also achieve high levels of customer satisfaction in the study, although they are not included in the rankings due to the closed natures of their respective memberships.
Based on the study, J.D. Power offers the following consumer tips:
- Carefully read all communications from your insurers.
- Ask your agent to alert you to any upcoming changes in your premium, as well as any changes in coverage or changing policy options.
- Discuss your vehicle(s) and your needs with your insurer to determine that you have the right coverage (neither too much nor too little) for the kind of car you drive and how you use it.
- Be aware of current events or economic changes that might affect the auto insurance industry as a whole, or your insurer in particular.
- View 2013 U.S. Auto Insurance Study Ratings
- View All Insurance Study Ratings & Articles