Study: Policy Offerings Drive Auto Insurance Customer Satisfaction to All-Time High

June 27, 2012

Led primarily by increases in satisfaction with policy offerings and billing and payment, overall customer satisfaction with auto insurance companies has reached an all-time high, according to the just released J.D. Power and Associates 2012 U.S. Auto Insurance Study.

The study measures customer satisfaction with auto insurance companies across five factors: interaction, price, policy offerings, billing and payment and claims.

Overall satisfaction with auto insurance companies is 804 (on a 1,000-point scale), up 14 points from 2011. Satisfaction levels in 2012 are the highest since the study was launched in 2000.

Satisfaction increases in all factors in 2012, with significant improvements in policy offerings (+30 points) and interaction (+19 points). Satisfaction with price is essentially unchanged from 2011.

“Although satisfaction with price remains consistent from 2011, auto insurance companies have made great strides in all other areas,” said Jeremy Bowler, senior director of the insurance practice at J.D. Power and Associates. “Specifically in the area of policy offerings, a number of insurance companies place an emphasis on product differentiation in their advertising and packaging of discounts and offerings.”

The Most Satisfied Customers Are More Willing to Tolerate Rate Hikes, to a Point

The study finds that 20 percent of customers have experienced an insurer-initiated rate increase from 2011, with 63 percent of these customers experiencing an increase of $50 or more. Satisfaction among customers whose premiums increased by at least $50 is 735, compared with 797 among those experiencing an increase of less than $50.

“Among customers whose insurers meet or exceed all their service expectations, modest rate increases appear to be well tolerated, provided the rate adjustment amounts to less than $50. However, larger rate adjustments may trigger customers to consider shopping for a new insurer, especially those customers who are less engaged with their insurance company,” said Bowler. “One method auto insurers can use to mitigate dissatisfaction with increasing rates is to proactively communicate the rate change prior to the renewal notice, and engage in discussions with customers regarding their options.”

Discussing rate increases with customers and offering options may have a positive effect on satisfaction. Of auto insurance customers receiving a rate increase, 56 percent were not notified prior to the renewal notice, among whom satisfaction is 746. Conversely, satisfaction among customers who were notified prior to a rate increase and had a discussion with their insurer is 807.

Social Media Insurance Rate Chatter

Research conducted by J.D. Power’s Consumer Insight and Strategy Group finds that a significant proportion of social media comments on the topic of personal auto insurance rate hikes indicate a strong desire to switch insurers, or to begin the shopping process. Additionally, many ask peers whether they have experienced similar results with a specific insurer or whether they would recommend another insurer altogether.

“Our research shows that most customers who shop for insurance ultimately do not switch. However, among those who are driven to shop because they are dissatisfied with the service they receive, three of four will keep shopping until they find a new insurer. With many insurers filing new property and auto rates across the country, a growing proportion of customers are starting to receive rate increase notifications, often a catalyst for shopping behavior,” Bowler said. “Proactively notifying customers and discussing options may help mitigate disappointment and shopping for insurance.”

The study measures satisfaction with auto insurance companies in seven regions. Study results by region are:

California Region: Wawanesa ranks highest among award-eligible insurers in the California region with a score of 823, followed by Automobile Club of Southern California (AAA) (807) and State Farm (806).

West Region: State Farm (837) ranks highest among award-eligible insurers in the West region, and is the only award-eligible insurer to perform above regional average.

Central Region: Texas Farm Bureau (857) ranks highest among award-eligible insurers in the Central region, followed by State Farm (832) and GEICO (830).

Southeast Region: Farm Bureau Insurance – Tennessee (828) ranks highest among award-eligible insurers in the Southeast region, followed by North Carolina Farm Bureau (823) and State Farm (821).

North Central Region: Auto-Owners Insurance and State Farm (in a tie at 828 each) rank highest among award-eligible insurers in the North Central region, followed by Erie Insurance (823).

Northeast Region: Amica Mutual (867) ranks highest among award-eligible insurers in the Northeast region, followed by New York Central Mutual (811) and GEICO (793).

Mid-Atlantic Region: Erie Insurance (834) ranks highest among award-eligible insurers in the Mid-Atlantic region, followed by State Farm (813).

Customer satisfaction varies from an average high of 814 in the Southeast region to a low of 784 in the Northeast region. While the Southeast region achieves the highest scores in interaction, billing and payment, policy offerings and claims, the West region performs particularly well in price.

The 2012 U.S. Auto Insurance Study is based on nearly 35,000 responses from auto insurance customers. The study was fielded between March and May 2012.

Source: J.D. Power and Associates

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