J.D. Power & Associates is out with the latest customer satisfaction numbers for auto insurance, and the news is sobering: The industry, which had recorded record high satisfaction in 2011, fell from its peak due to increased prices.
Scores across all five factors studied -- interaction, price, policy offerings, billing and payment and claims -- have decreased year over year, with price and policy offerings both declining by 13 points, according to the research.
"In 2013, there is a sharp rise in the number of customers who have experienced premium increases," said Jeremy Bowler, senior director of the global insurance practice at J.D. Power. "The dollar amount of those increases is also larger, averaging $153 in 2013, compared with an average rate increase of $113 reported in the 2012 study."
The study says that by effectively communicating the cause of rate increases, insurers can subvert some of the drop in satisfaction:
When customers receive pre-notification, and discuss their options prior to renewal, satisfaction averages 698, 67 points higher than among customers whose did not get to discuss a rate increase prior to renewal.
But it seems that there's another way for insurers to keep satisfaction high and churn low in a difficult pricing environment: Be local.
J.D. Power broke out the top-scoring insurers on its 1,000-point scale over 11 regions, four more than the traditional seven. The most satisfactory insurer in eight of those regions is headquartered in the region itself. New York Central Mutual (NYCM), headquartered in the tiny upstate town of Edmeston, N.Y., ranks highest in satisfaction in that state. Wawanesa, though a Canadian insurer by origin, has a long-standing U.S. operation based in San Diego -- and is first in California.
The list goes on: Auto-Owners Insurance (Lansing, Mich.) in the North Central region, Amica Mutual (Providence) in New England, PEMCO Insurance (Seattle) in the Northwest, Tennessee Farm Bureau in the Southeast and Texas Farm Bureau in Texas. (The 11th is State Farm, headquartered outside Chicago, which got the top score in the Central region and also in Mid-Atlantic and Southwest regions).
There are also some interesting peculiarities to the rankings: Last year, when New York and New England were combined into one region, Amica was first to NYCM's third -- but this year neither appears in the region the other topped. And, Erie Insurance appeared in the top three of two neighboring regions near its headquarters (North Central and Mid-Atlantic), while the Southeast and Central regions both had additional local companies in the top three.
Many of these insurers have touted their local connections in interviews with I&T over the years. Rod Brooks, CMO of PEMCO, has used social media adeptly in the company's "We're A Lot Like You: A Little Different" marketing campaign, which gently lampoons the sometimes eccentric denizens of the Northwest and invites additional interaction with the community and policyholders that insurance companies don't always get.
"We learned early on that people don't want to talk about insurance ... They want to talk about the neighbors, the people of the Northwest. [This is] something other than insurance that people can talk about, and it gives us a platform at the right time and right place to enter insurance information and connect them to opportunities to buy," Brooks told I&T.
Auto-Owners CIO Bob Buchanan has worked hard to cultivate relationships with Michigan service providers and colleges in the IT organization. Perhaps that filters all the way down to the customers, who feel a connection to their insurer that they might not with a different company.
At a time of intense customer churn and dropping satisfaction in auto insurance, this phenomenon shouldn't be ignored. What is it about these regional companies that gives them better satisfaction scores? Is it that they know and understand the risks of their policyholders on a more intimate level, because they live them as well?
Whatever it is, one must conclude that while technology enables insurance companies to enjoy greater reach than ever before, there's still something to be said about local connections within the industry. Insurers with growth strategies must work diligently to not simply apply one-size-fits-all strategies to new markets.
Nathan Golia is senior editor of Insurance & Technology. He joined the publication in 2010 as associate editor and covers all aspects of the nexus between insurance and information technology, including mobility, distribution, core systems, customer interaction, and risk ... View Full Bio