Direct and Independent Agent Sales Channels Become Ground Zero in Auto Insurers’ Battle to Win New Customers

With just 2-3% of new customers entering the personal lines auto insurance market each year, insurers have only one option when it comes to growing their business: taking market share from competitors. According to the J.D. Power 2019 U.S. Insurance Shopping Study, success in driving new customer acquisition comes down to having a strong brand and meeting customer expectations of convenience and competitive price—for which direct and independent agents are best positioned. Meanwhile, insurers who are largely reliant on exclusive agents for new business growth are facing headwinds.

Source: JD Power | Published on April 26, 2019

J.D. Power

“We’re entering a new era of consumerism in the auto insurance marketplace, in which customers are in the driver’s seat when it comes to the shopping and servicing of their policies,” said Tom Super, Vice President of Insurance Intelligence at J.D. Power. “That trend is having a profound effect on the relationship between insurers and customers. A more empowered customer increases the importance of factors such as choice, personalization and maintaining a strong reputation to win and keep their business. That puts significant pressure on insurers to get their customer models just right with the proper mix of self-service tools, strong brand awareness and an engaged distribution network.”

Following are some key findings of the 2019 study:

  • Shopping and switching rates put strain on loyalty: While very few new customers have entered the auto insurance marketplace this year, the number of existing customers shopping for new policies has increased by 4 percentage points to 33 shops per 100 policies. Likewise, the rate of switching among insurance shoppers has increased from 31% to 35% during the past year. These two factors have driven down overall insurance customer retention by 2 percentage points to 88%.
  • Price and financial outlook related to shopping behavior: Price is the leading factor that triggers a customer to shop, with 64% of insurance shoppers citing price as their primary reason to look for new insurance and competitive pricing (33%) is the most influential driver of the decision to close with a brand. When customer satisfaction with price is lower, shopping rates are higher the following year. Conversely, when satisfaction with price is higher, shopping rates are lower the following year. Shopping rates are also higher when customers have a more positive personal financial outlook.
  • Direct and independent agent models resonate with customers: The direct and independent agent channels continue to show increasingly higher levels of customer satisfaction, while the exclusive agent channel is falling behind. In the shopping process, top-performing insurers are operating as customer-facing brands. For instance, insurers that achieve the highest consideration and quote rates among profiled insurers also achieve strong unaided awareness and are perceived as having likeable advertising, competitive pricing and being innovative.
  • Unaided brand awareness critical for attracting insurance shoppers: Insurance shoppers obtain an average of three to four quotes when shopping, making it critical for insurers to be top-of-mind to make it into the consideration set. Brands recalled on an unaided basis are twice as likely to be considered and quoted than brands that are only recognized on an aided basis.
  • High-value customers become next frontier: High-value shoppers, a segment of the marketplace that represents preferred risk profiles, better credit scores, fewer traffic violations and more insurance products, account for 22% of all insurance shoppers identified in the study. Currently, very few insurers are gaining more high-value customers than they are losing, underscoring the importance of attracting and retaining this lucrative subset of the market.

Study Rankings

Erie Insurance ranks highest among auto insurers in providing a satisfying purchase experience, with a score of 917 (on a 1,000-point scale). This marks the seventh consecutive year Erie Insurance has ranked highest in the study. Amica Mutual (885) ranks second and Auto-Owners Insurance (883) ranks third.

Now in its 13th year, the U.S. Insurance Shopping Study measures auto insurance shopping, purchase behavior and purchase experience satisfaction among customers who recently purchased insurance. Satisfaction is measured in three factors (in order of importance): price; distribution channel; and policy offerings.

The study is based on responses from more than 14,400 insurance customers who requested an auto insurance price quote from at least one competitive insurer in the past nine months and includes more than 38,800 unique customer evaluations of insurers. The study was fielded in April, July and October 2018 and January 2019.

For more information about the U.S. Insurance Shopping Study, visit https://www.jdpower.com/business/resource/jd-power-us-insurance-shopping-study.

J.D. Power is a global leader in consumer insights, advisory services and data and analytics. These capabilities enable J.D. Power to help its clients drive customer satisfaction, growth and profitability. Established in 1968, J.D. Power has offices serving North America, South America, Asia Pacific and Europe.