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New Auto Customers Dissatisfied with Promised Rates: J.D. Power

Research shows that poor experience drives policyholders to shop for auto insurers, but new customer satisfaction has declined due to unmet price expectations.

Auto insurers must improve their customer experience to retain current policyholders and adjust their advertised prices to satisfy new ones, says J.D. Power & Associates.

About one-third of auto insurance customers sought a new insurer in 2013, according to the research company’s 2014 U.S. Insurance Shopping Study. Most were driven by poor service. Twenty-eight percent shopped after a bad customer experience while just 13% were motivated by a rate increase.

Results indicate that poor experience is largely related to claims, billing and service interactions. If a customer had a poor experience with any of these, which oftentimes occur together, they were more likely to switch, says Colleen Cairns, research manager at J.D. Power & Associates, in an interview.

In order to improve customer experience, insurers must avoid payment fees, provide error-free billing, ensure the customer understands their billing statement, offer online access to policy information, and deliver problem-free service for a 12-month period. Survey data indicates that 81% of customers will stay with their insurer after a highly satisfying first year.

[ 5 Areas Where Insurance CIOs Must Be Cautious. ]

Price is not as likely to cost insurers their customers, but it remains a key factor among current and incoming policyholders. Eighty percent of customers select the lowest-priced insurer, and results show that overall satisfaction among new auto insurance customers averages 821 (on a 1,000-point scale), a notable decrease from the 2013 score of 828. The drop is largely due to prices, which customers often find higher than advertised by insurers.

“While poor experience will more likely drive customers to shop and switch, rate increases are somewhat more prevalent and occur more than poor service experience. This results in more customers being impacted by rate increases,” explains Cairns. “The market is flooded with shoppers that have perceptions that they’re going to save money.”

Each rate increase typically leads to a corresponding loss of policyholders. With an increase of $50 or less, about 9% of customers will switch insurers. At $50 to $100, that rate doubles to 18%. An increase of $200 or more will lead to a switch rate of 33%.

Insurers may want to reconsider their website content to improve the satisfaction of today’s policyholders. In this year’s study, the agent and call center distribution channels ranked 854 and 850, respectively, says Cairns. Insurers’ websites were rated 806, and this was the first time in a few years that the website score did not increase. The score is based on criteria such as appearance, ease of navigation and clarity of policy explanation, which was the lowest-rated attribute.

“Insurers clearly aren’t doing as good of a job ensuring that the coverage is clearly laid out and easily found on their website,” says Cairns.

This year, Erie Insurance topped the survey results with an overall score of 843. MetLife and State Farm ranked second with a tie of 839. American Family and Ameriprise tied for third with a score of 835. Survey data is based on responses from over 16,900 shoppers who requested an auto insurance price quote from at least one competitive insurer over the past nine months.

Kelly Sheridan is an associate editor for Insurance & Technology. Prior to joining InformationWeek Financial Services, she was a staff writer for InformationWeek and InformationWeek Education. Kelly has also written for trade publication Promo Marketing and a number of ... View Full Bio

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Kelly22
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Kelly22,
User Rank: Author
4/28/2014 | 9:23:32 PM
re: New Auto Customers Dissatisfied with Promised Rates: J.D. Power
That's an interesting way of looking at it. Chances are, there are some customers out there who will chase low prices regardless of the level of service they receive.
KBurger
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KBurger,
User Rank: Author
4/28/2014 | 8:53:20 PM
re: New Auto Customers Dissatisfied with Promised Rates: J.D. Power
Maybe there is a corrolation in some customers' minds between price and service -- that is "you get what you pay for" -- higher rates connote better service (or engender expectations service will be better), lower rates connote worse service.So I wonder if it's even worth it for insurers to invest in improving service/experience to retain customers that selected the company based on a low rate? Maybe it's a losing battle? That is, maybe there is a growing segment of customers thatis not going to be loyal and is always going to hunt for a better price, regardless of the service level.
Kelly22
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Kelly22,
User Rank: Author
4/28/2014 | 1:45:05 PM
re: New Auto Customers Dissatisfied with Promised Rates: J.D. Power
I was pretty surprised myself; I also thought that rates would cause customers to shop more than poor experience would. You're right though, this is yet another reason for insurers to pursue omnichannel communications and provide a better experience so they can meet customers' high expectations for service.
Becca L
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Becca L,
User Rank: Author
4/27/2014 | 9:28:48 PM
re: New Auto Customers Dissatisfied with Promised Rates: J.D. Power
Interesting findings. I can't believe a third of auto insured customers looked for alternatives last year - that's a lot! I'm also surprised rate changes weren't a bigger factor in customer dissatisfaction. This really helps explain the push for ominchannel customer analytics and investments in customer satisfaction.
Nathan Golia
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Nathan Golia,
User Rank: Author
4/26/2014 | 1:24:04 PM
re: New Auto Customers Dissatisfied with Promised Rates: J.D. Power
Yes, it's very dangerous for the industry to continue its march toward ever lower rates. At some point there won't be much more of a floor to reach G or the companies won't be pulling in enough revenue to provide a decent experience for the price.
chet777
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chet777,
User Rank: Apprentice
4/24/2014 | 6:32:57 PM
re: New Auto Customers Dissatisfied with Promised Rates: J.D. Power
One of the unspoken truths about insureds shopping for insurance directly on a carrier web site is that there is no way for an insured to accurately compare policies. And if an assumption was made by the insured, the insured stands alone without an insurance professional to both offer advice and to seek compensation through E&O. While high level limit amounts and deductibles are easily seen, there are a whole truckload of other things that are included and excluded.

"There are several areas of possible difference: sub-limits, the actual coverage grant, specific endorsements, definitions for areas such as Gǣwho is an insured,Gǥ what is excluded on one policy compared to another, deductible issues (such as wind/hail) and the rating of the carrier." Source: http://www.agentseotips.com/
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