Rising Prices Sink Overall Satisfaction with Auto Insurance

Last year’s all-time high level of satisfaction with auto insurance was driven down in 2013, according to a J.D. Power and Associates study released Monday that linked steeper coverage prices to the dip in overall happiness of consumers.

The firm reported a 10-point decline in overall consumer satisfaction with auto insurers between last year and this year in its 2013 U.S. Auto Insurance Study. The current 794 score, based on a 1,000 point scale, is still the second-highest total since the annual study’s inaugural year in 2000, according to J.D. Power. In 2011, the score was 790.

Average scores for all five factors measuring overall satisfaction declined since last year: price, policy offerings, billing and payment, and claims.

Price and policy offerings saw the biggest drops, each falling by 13 points.

J.D. Power rates policy offerings by five “attributes,” according to Jeremy Bowler, the firm’s senior director of the global insurance practice:

–the variety of insurance coverage options offered
–degree to which policy meets needs
–ease of making changes to an existing policy
–ease of obtaining a new policy
–competitiveness of discounts offered

Bowler said that ratings for all attributes fell in 2013 compared to the previous year, but “competitiveness of discounts offered” saw an especially pronounced decline. The drop “ties back” to consumers’ overall dissatisfaction with the price of auto coverage, Bowler said in an interview with Online Auto Insurance News (OAIN).

Consumers were especially unhappy with insurers’ prices, as the average rate increase jumped from $113 last year to $153 this year, according to Jeremy Bowler, the firm’s senior director of the global insurance practice.

Price was the lowest-rated factor at 716 points, which was more than 100 points lower than the average totals for interaction and claims.

Consumers with “little understanding” of how rates are calculated can become frustrated when they shop for quotes and find differences of “hundreds of dollars between companies,” Bowler said.

“In today’s low-interest market, many insurers are filing for new rate structures in order to rectify underwriting losses,” Bowler said in a statement. “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.”

Communication Vital in Mitigating Rate Hike Dissatisfaction

The low score for pricing highlights the need for insurers to communicate better with their customers before rate adjustments, according to Bowler.

The J.D. Power study found that less than 1 out of every 5 policyholders reported they “had a discussion with their insurer” about the potential that their coverage prices could change.

Holding such discussions before prices rise or a renewal document is sent is vital to minimizing a consumer’s dissatisfaction with his or her insurer, according to the study.

Average satisfaction totaled 698 for consumers receiving pre-notification and pre-renewal discussions with an insurer about possible price changes, a whopping 67 points higher than those who did not have such discussions.

The study also outlined how higher premium hikes drive away customers. Nine percent of customers switched insurers when their annual price tag for auto coverage increased by $50 or less, a rate that almost doubles to 18 percent for hikes between $51 and $100. The rate of switching increased again to 32 percent when the price jump was more than $200.

But insurers may have an easier time of communicating with their customers, according to the Bowler, who said the rise of coverage programs like user-based (UBI) and pay-as-you-drive (PAYD) insurance are a “significant step forward” for the industry.

Within the category of price, J.D. Power found that some companies communicate their price better than others and ended up with a better overall score. According to Bowler, scores were “significantly higher on average” for Progressive’s Snapshot program compared to other non-Snapshot programs because “the consumer has a fundamentally better understanding of how their rate is calculated.”

Snapshot has been one of the more heavily advertised UBI programs and widely available among auto coverage companies. In a recent marketing report by SNL Financial, Progressive was also highlighted for its “consistent improvement” in the perception of its quality and value in the past five years.

But communicating that value isn’t as simple as it seems. The local agencies and call centers that used to be the hub of communicating with an insurer has given way to a multi-channel “landscape,” according to Bowler, who said that figuring out which channel is a customer’s first preference “is a foundational first step to meeting or exceeding consumers’ expectations.”

Still, he said, companies must strive for consistency across the range of advertising and marketing channels to establish a brand presence, according to Bowler.

“New technologies are increasing the number of choices available to the consumer,” he said in an interview with OAIN. “We have seen a rapid adoption of self-service channel utilization in the industry, with consumers seeking service via email, on-line website or on-line chat, and more recently through social avenues such as Facebook.  When consumers seek service through such channels, the challenge for agents or carriers alike is to maintain a consistent brand experience and service level via these various channels.”

Top Insurers Named by Region

J.D. Power also released consumer scores of insurers, categorized this year by region. The firm said that overall satisfaction levels in the Texas region saw the biggest decline, while satisfaction in the Central region saw the smallest. The leading insurers were:

–California: Wawanesa
–Central: State Farm
–Florida: MetLife
–Mid-Atlantic: State Farm
–New England: Amica Mutual
–New York: New York Central Mutual
–North Central: Auto-Owners Insurance
–Northwest: PEMCO Insurance
–Southeast: Tennessee Farm Bureau
–Southwest: State Farm
–Texas: Texas Farm Bureau

The Southwest region scored the highest average total of 805 points.

Bowler said that J.D. Power decided on a more localized approach to rankings “because the demographics and regulatory environments vary so significantly from one part of the country to another.”

“We have moved toward regional focus in our rankings to better profile the competitiveness of individual providers in their local markets,” he told OAIN.

About Charles Nguyen
Charles Nguyen is an enterprising journalist who reported for Patch.com 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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