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J.D. Power Study Shows a Decline in Satisfaction Among Auto Insurance-Buying Consumers

Source: J.D. Power

Posted on 04 Aug 2010

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A new J.D. Power and Associates study that focuses on the attitudes and habits of auto insurance shoppers reveals that while price is a key factor in the shopping process, its impact on new-buyer satisfaction has declined over the past year.

The J.D. Power and Associates 2010 U.S. Insurance Shopping Study (SM), which is based on survey responses from more than 14,500 shoppers who requested an auto insurance price quote from at least one competitive insurer in the past 12 months, reveals that 10 percent of auto insurance shoppers did not select the provider with the lowest price quote they received, with some shoppers foregoing considerable savings.

In fact, 12 percent of shoppers who didn’t choose the lowest-price insurer could have saved more than $250 had they chosen the lowest quote. Why did a significant portion of these shoppers make the decision they did? It all comes down to customer service.

It’s Not All About Money

The 2010 U.S. Insurance Shopping Study, which examines consumer shopping and purchasing behaviors and overall satisfaction of buyers who recently purchased from an auto insurance provider, includes more than 68,000 unique insurer evaluations. The study measures auto insurance shopper satisfaction across three factors: distribution channel, price, and policy offerings.

The study finds that 76 percent of shoppers who obtained a quote from an insurer but did not purchase a policy from that insurer cite price as a reason. However, price accounts for only 28 percent of overall customer satisfaction with the purchase experience—less important than both policy offerings (29%) and distribution channel (43%).

“While competitive pricing is critical to closing the sale for most shoppers, insurers must perform on all elements of the purchase experience to gain and retain satisfied customers,” said Jeremy Bowler, senior director of the insurance practice at J.D. Power and Associates. “In fact, past service experiences play a considerable role in the purchase decisions of retained customers, and in some cases, may even outweigh the appeal of a lower-priced competitor.”

Erie Insurance, with a score of 886 on a 1,000-point scale, ranks highest among auto insurance companies in satisfying new buyers with the purchase experience for a third consecutive year. Erie Insurance performs particularly well across all three factors driving satisfaction. The Hartford ranks second overall with a score of 868, followed closely by Auto-Owners Insurance at 867.

Younger Customers Less Price Sensitive, Use Web More

The study reveals that significant differences exist among customers in different age groups. For instance, the following trends are observed about Generation Y auto insurance shoppers (those born between 1977 and 1992):

* Generation Y shoppers tend to be less sensitive to price, as only 68 percent cite price as a reason for shopping for a new auto policy, compared with 83 percent of Baby Boomer shoppers (those born between 1946 to 1964).

* More than one-half (58%) of Generation Y shoppers have used insurers’ Web sites to gather information when shopping for auto insurance, compared with 46 percent of Baby Boomer shoppers.

* Generation Y shoppers are substantially more likely to gather quotes directly from an insurer’s Web site—48 percent—compared with 28 percent of Baby Boomers.

* A slight majority (51%) of Generation Y new buyers purchased their auto insurance direct from the insurer, rather than through a local agent, compared with only 36 percent of Baby Boomers.

“Generation Y is the next big wave of new homeowners and parents with more complicated insurance needs,” said Bowler. “As a result, it’s important for insurers to understand the differences between Generation Y and Baby Boomer insurance shoppers and respond to these differences accordingly. At more than 70 million strong, this group will have a dramatic impact on the insurance distribution landscape in the years ahead.”