Study: Younger Consumers May Be Most Likely to Switch Car Insurers

A new report based on a summer 2011 survey from business-consulting firm Deloitte indicates that high customer satisfaction with auto insurers is making it tough for coverage providers to siphon off consumers from the competition but that increasing brand trust and targeting certain demographics—particularly young ones—can help them do so.

The survey conducted by the company included responses from 1,080 car insurance policyholders.

deloitte survey highlightsAccording to the Deloitte, the vast majority of those auto policyholders are satisfied with their current providers—88 percent said they were satisfied with service, and 80 percent reported satisfaction with price.

This, combined with what may be a general lack of initiative to shop around, has resulted in very few respondents’ routinely checking for better prices on coverage. Only about 1 in 5 respondents said they get auto insurance quotes annually in search of better or cheaper coverage, and a whopping 1 in 4 say they never shop for alternatives to their insurer.

Targeting the Young

Deloitte says that, while many are satisfied with their current carriers, insurers’ best bet for drawing customers away from their competitors might be to target younger buyers, who are typically less satisfied compared with other age groups.

“A key lesson suggested by the results of these surveys could be summed up with the following advice to personal lines insurers: Get consumers while they’re young!” write the report’s authors.

According to the report, respondents under 35 were most likely to shop frequently for better or cheaper coverage and were least likely to renew a policy at the end of the term.

A big issue with getting the business of this demographic, the authors say, is overcoming a trust gap between younger consumers and insurers.

Out of the under-26 respondents to the survey, 71 percent believe “that an agent will get them a better price than if they buy on their own.” That proportion drops to 53 percent for over-50 respondents.

Despite younger motorists’ lack of trust, their demographic has the largest portion of directly purchased policies, meaning they didn’t go through an insurance agent for the purchase. About 60 percent of under-35 respondents bought directly, which is at least 10 points higher than any other age group.

But if insurers want to increase direct business from younger drivers, they have to convince them they can get a better price directly by enhancing marketing strategies and introducing “a strong educational component.”

According to the study, the following factors are most important to young insurance consumers:

  • Number of communication options
  • Social media reputation
  • User-friendliness of insurer’s website
  • Caliber of online services
  • Quantity of mobile applications

Price Still a Big but Complicated Factor in Making Coverage Decisions

The Deloitte data show that price is still a major influence on how drivers decide on which policy to ultimately purchase, but it’s a little more nuanced than simply buying whichever is cheapest at the time.

The majority—80 percent—of respondents said price was influential in their last decision to switch carriers, with 54 percent calling it “extremely” influential and 28 percent calling it “very” influential.

That proportion spiked for 26- to 34-year-old drivers, with 71 percent of them calling price extremely influential.

But when the question is phrased not about the last time they switched providers, but instead the next time they shop for a policy, the importance of price dropped, with only 58 percent saying it would be extremely or very influential.

And significant portions of auto insurance consumers said that the availability of multi-policy and telematics discounts could be a major influence in their next policy purchase, although the shares that said it would be influential varied based on age range and discount size.

Other significant factors included brand recognition and coverage levels.

Readers can access the full, 24-page report through the Insurance section of Deloitte’s website.

About John Pirro
John Pirro is a licensed fire and casualty insurance agent specializing in various aspects of the auto insurance industry. He worked in the auto body repair industry before taking a reporting position at Online Auto Insurance News.

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