No Surprise: Price Drives Insurance Purchase

By Mark E. Ruquet

J.D. Power & Associates releases consumer studies
on primary driver of insurance purchase.

It appears no matter how insurers cut it, price remains the primary driver of insurance purchase and satisfaction in the personal lines space, according to two J.D. Power & Associates surveys.

In the past two weeks, the consumer satisfaction research firm released its Auto Insurance Shopping study and Household Insurance and Bundling studies, indicating how much the cost of insurance influences buying and satisfaction.

In a study of 5,500 auto insurance shoppers, J.D. Power found rate increases drove more buyers to shop for auto insurance while price satisfaction took a hit, dropping 13 points to 808 on a 1,000-point satisfaction scale. Price satisfaction is the lead driver of overall new-buyer satisfaction, some indication that mature buyers are seeking more from their insurer.

Customer retention averaged 97 percent—good news for carriers and agents—but 8 percent shopped for a better rate. Those that did switch insurers saved about $387 annually, about where it stood the previous year.

The survey also noted the importance of a carrier developing a user-friendly website for buyers as 20 percent of new buyers purchased auto insurance online.

Jeremy Bowler, senior director of the global insurance practice at J.D. Power, recommends that, “communicating new offerings and allowing customers to tailor their policies helps demonstrate the value of the policy and improve customer satisfaction.”

Turning to homeowners insurance coverage, in a study of more than 21,000 respondents, purchasers of renters insurance are more satisfied with their insurer than homeowners insurance customers and the main driver of that satisfaction: price.

In its customer satisfaction index, carriers scored an average of 809 from renter insurance customers, while

coming in with an average score of 787 on homeowners. J.D. Power said price satisfaction is 45 points higher among renters than homeowners.

Due to a younger customer base, the online experience is more important for renters than homeowners, said the research firm. Among renters, 22 percent said the carrier’s website mattered while 11 percent said assisted online interaction was important.

Insurance agents not writing renters insurance are missing an opportunity not just in current sales, but attracting future customers who one day will mature into homeowners, observed J.D. Power. Twenty-five percent of consumers rent, but 46 percent are uninsured, says the study, indicating the potential for growth.

Bowler called agents that concentrate on selling only high-dollar products for higher commissions “shortsighted because agents who satisfy the large renter population today are more likely to retain and service their growing household insurance needs over time.”

Insurance agents should also note that bundling policies is an effective way of keeping their renter insurance customers. The study found that retention rates were 91 percent for those with bundled polices compared to 67 percent for those not bundled.

As far as carrier rankings for homeowners insurance, Amica Mutual comes out on top with a satisfaction ranking of 842, and State Farm was next in line at 813. For renters, while State Farm has the largest share of the market at 26 percent, followed by Allstate at 12 percent, Nationwide had the highest satisfaction rating at 823. State Farm ranked fourth with a rating of 811 and Allstate was just behind at 807.

Of all the insurers, USAA ranked highest for both renters and homeowners, but was not part of the overall ranking because it is only open to U.S. military personnel and their families. The company scored 901 for renters and 894 for homeowners.