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2014 U.S. Insurance Shopping Study Results

By: Jeff Youngs, 4/29/2014
Findings from the just-published J.D. Power 2014 U.S. Insurance Shopping StudySM suggest that auto insurance customers might be trading dissatisfaction with service for dissatisfaction with price, when they switch carriers. According to the study, a poor experience with their insurer is the leading reason customers shop for and switch to another carrier. On the other hand, declining new price satisfaction is the primary reason customers experience lower satisfaction once they've switched.

Dissatisfaction with the new insurer's premium is not the norm. The study finds that on average, customers saved $300 when switching insurers in the past 12 months. The longer customers had been with their previous insurer, the greater the savings when they switched carriers, probably because the old policy came with annual premium increases. Customers who were with their prior insurer for 11 years or longer before switching save an average of $426 per year on their new premiums, compared with an average saving of $291 for those who had been with their previous insurer less than two years before switching. Moreover, satisfaction among customers who had been with their insurer 11 years or longer prior to switching is higher than among those who were with their insurer fewer than two years: 855 vs. 820, respectively, on a 1,000-point scale.

"The insurance industry spends billions of dollars each year on advertising, and over the last seven years many of those ads have tried to entice customers with big savings," said Jeremy Bowler, senior director of the insurance practice at J.D. Power. "While switching to a new insurer usually results in savings, the ads make promises of savings that a growing number of new customers don't believe they've received."

Customers who rate their onboarding experience with a new insurer "outstanding" are more likely to retain that carrier. Among customers who are highly satisfied in their first year with their insurer (overall satisfaction scores of 850 or higher), 81% remain with that insurer and only 41% shop for other insurers. Among customers with lower satisfaction in the first year (809 or lower), only 61% remain with that insurer and 61% shop. Rate increases do not drive customers to shop as much as poor service does, as customers are tolerant of a certain level of rate increases. However, rate hikes of more than $200 can triple the rate of customers who switch insurers.

The study finds that 30% of auto customers shopped for a new insurance provider in 2013, and 36% of that group switched insurers. Customers who experience a premium increase shop at a rate of 13%--less than half the 28% rate of shopping among those who have had a poor experience with their current insurer.

Overall new-buyer satisfaction with the auto insurance purchase experience averages 821 (on a 1,000-point scale), down from 828 in 2013. The decline in satisfaction is driven by a 17-point drop in the price factor, which has the greatest impact on overall satisfaction.

Auto Insurance Company Rankings
The study, now in its eighth year, examines insurance shopping and purchase behavior and overall satisfaction among customers who recently purchased insurance across three factors (in order of importance): price, distribution channel, and policy offerings. For a second consecutive year, Erie Insurance ranks highest among auto insurers in providing a satisfying purchase experience, with a score of 843. Erie Insurance performs particularly well in all three factors. MetLife and State Farm rank second, tied at 839, while American Family and Ameriprise tie for fourth at 835.

Consumer Tips
Based on the study, J.D. Power offers the following consumer tips when shopping for auto insurance:
  • If you're considering changing carriers on account of price, give your current insurer the opportunity to lower their premium for you.
  • If you're considering changing carriers on account of poor service, ask competing agencies specific questions about the service they provide.
  • When you're offered a low premium, ask the agent to give you an idea of how much the rate is likely to rise, and how increases are determined. Expect slight increases year to year, but make sure they're not arbitrary.
  • Don't overinsure your vehicle. If it's an older model, you might be able to dispense with collision and comprehensive insurance.

About the Study
The 2014 U.S. Insurance Shopping Study is based on responses from more than 16,900 shoppers who requested an auto insurance price quote from at least one competitive insurer in the past nine months. It includes more than 50,000 individual customer evaluations of insurers. The study was fielded in July 2013, October 2013, and January 2014.

Additional Research:

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