Study: Customers Are More Satisfied When Bundling Policies

Bundling auto and homeowners policies has a bevy of benefits, the foremost being higher customer satisfaction levels and a better possibility that they will renew with their insurer, according to a study from J.D. Power and Associates released Thursday.

An insurer will generally bundle policies at discounted rates to entice their customers to keep their insurance coverage within that company. According to a statement from the firm, “auto is the most typically bundled policy with homeowners.”

Measuring overall satisfaction levels on a 1,000-point scale, the study found a 9-point swing between policyholders bundling auto and homeowners coverage within the same carrier and policyholders holding coverage with different companies.

Combining policies also improved customers’ satisfaction with specific factors, including billing and payment and policy offerings.

In 2012, satisfaction with policy offerings rose 35 points while billing and payment rose 27 points compared to last year, according to the study. Bundling policies showed a 39 point increase of satisfaction with policy offerings and 25 point increase with billing and payment.

“Bundled policies not only may provide a reduced insurance premium for customers, but may also be advantageous to both parties, as it allows customers to interact with a single insurer, potentially streamlining both billing and payment,” Jeremy Bowler, a senior director at the firm, said in a statement.

Bundling Helps Insurers Keep Customers

In addition, bundling reinforces customer retention, according to the study, which found that while 28 percent of policyholders say they “definitely will” renew coverage with the same insurance carrier, bundling two policies increases that rate to 46 percent. Bundling four or more policies pushed that rate even higher to 66 percent.

“Insurance companies have a tremendous opportunity to create loyal customers by delivering a satisfying bundling experience and deepening their penetration into the household,” Bowler said.

The study also found that bundling increased consumers’ overall satisfaction levels with their homeowners coverage to historic highs.

A June study from the firm exploring satisfaction with auto insurance found that rate hikes of $50 or more dragged down overall satisfaction levels and signified “a bit of a tipping point,” Bowler said.

More than half of customers who had their rates increased were not notified beforehand, according to the study. Insurers could retain their policyholders better if they had policy review offers and opened dialogue about rates, according to Bowler.

Part of that conversation should be presenting options including bundling, which could help retain policyholders looking for cheaper auto insurance, he said.

“Whatever the stratagem, having that conversation early is a great salve,” he said.

Forced Bundling Has Stoked Controversy

In some instances, insurers have also engaged in “forced bundling,” where they refuse renewal to policyholders who don’t combine their policies.

During Maryland’s last legislative session, lawmakers debated a proposal that would have prohibited insurers in the state from the practice. Part of the debate centered on tens of thousands of nonrenewals of Allstate customers that occurred March 2011 in North Carolina.

The measure ultimately stalled in a Senate committee, with industry representatives saying at a committee hearing that the state had not seen widespread cases of forced bundling and that the robust market had many options for customers if they were expelled from their company.

In July, Allstate sent nonrenewal notices to thousands of homeowners policyholders in South Carolina. Policyholders without auto coverage with Allstate, owning homes more than 10 years old and holding coverage worth less than $220,000 were asked to “contact their agent to discuss options,” according to Nancy Lemke, an Allstate spokeswoman.

About Charles Nguyen
Charles Nguyen is an enterprising journalist who reported for and the Desert Dispatch and was the editor in chief of the Guardian (the twice-weekly newspaper at the University of California, San Diego) before coming to Online Auto Insurance News.

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