Two insurance carriers—GEICO and Progressive—captured nearly 92% of all premium growth in the past year, putting an exclamation point on a trend toward increased adoption of direct-to-consumer auto insurance that has been building for several years. According to the J.D. Power 2020 U.S. Insurance Shopping Study,SM this trend is likely to get a further boost as customers increasingly pivot to convenience and value, in response to the COVID-19 pandemic.
“Over the past decade, auto insurance costs have risen at two times the rate of inflation,” said Tom Super, head of property & casualty insurance at J.D. Power. “That’s consuming a larger share of discretionary income and playing an increasingly significant role in household finances. Add the effects of record high levels of unemployment and the 52% of auto insurance customers who say they plan to either reduce coverage, shop for another carrier or switch to another carrier because of COVID-191, and the outcome for the industry is clear: price is going to be a bigger factor. Direct insurers are in the best position right now to benefit from this trend due to their cost-of-acquisition advantages, but there’s more to acquiring—and retaining—customers than price alone. Customers who have a poor experience are eight times more likely to shop than those who do not, and brand perception remains critical.”
Following are some key findings of the 2020 study:
Little loyalty in auto insurance market: Prior to the COVID-19 pandemic, 77% of auto insurance customers were either actively shopping or experienced an adverse event that triggered shopping (e.g., poor service or a rate increase). Softening market conditions have done little in the way of stemming the tide of eroding brand loyalty. According to a J.D. Power pulse survey conducted April 14 when the COVID-19 pandemic was rampant, 52% of auto insurance customers said they plan to manage the cost of insurance by either reducing coverage, shopping for another carrier or switching to another carrier because of COVID-19.
Price continues to become bigger factor in customer satisfaction: Since 2012, the price factor measured in the study has increased by 54% as a key driver of satisfaction with the purchase experience. At the same time, there is a growing gap in overall satisfaction vs. price satisfaction. In the past decade, customers have become generally more satisfied with their current insurer in all areas except price.
Direct models click with customers: Several structural advantages are helping direct insurers reset the auto insurance leaderboard. For one, lower commissions and administrative expenses enable direct carriers to enjoy a 10-percentage point cost advantage vs. exclusive and independent agent carriers. From a technology standpoint, 90% of customers say they are open to purchasing their auto insurance online. Direct carriers have taken seven percentage points of market share from agent insurers in the past decade, and this year earn the highest scores in every factor comprising the purchase experience in this study.
Poor customer experience is loyalty death knell: The primary drivers that push customers to shop are negative service experiences and price-related factors. Customers who express price frustration are five times more likely to shop and those who experience poor service are eight times more likely to shop.
Yes, all that advertising does matter: A reflection that the personal lines auto market is functioning more as a consumer product, large insurers continue to take share from mid- and small-size carriers. Brand factors, including reputation and long-term viability, are key facilitators of converting shoppers to consider and quote a brand. Brand attributes such as convenience, leadership and clear messaging are associated with brands that have higher sales conversion rates. Moreover, brands recalled by shoppers on an unaided basis are four times more likely to be quoted than brands only recognized on an aided basis, which illustrates the effectiveness of insurers’ extensive marketing initiatives.
GEICO ranks highest among large auto insurers in providing a satisfying purchase experience, with a score of 867 (on a 1,000-point scale). Nationwide (862) ranks second and State Farm (860) ranks third.
The Hartford ranks highest among mid-size auto insurers, with a score of 895. Erie Insurance (880) ranks second and American Family (878) ranks third.
Now in its 14th year, the U.S. Insurance Shopping Study underwent a significant redesign for 2020. The study now captures advanced insight into each stage of the shopping funnel and a new index and award structure, which adds the quoting process to the overall customer satisfaction index. It also now measures auto insurance shopping, purchase behavior and purchase experience satisfaction in two categories: large insurers and mid-size insurers.
The study is based on responses from more than 14,300 insurance customers who requested an auto insurance price quote from at least one competitive insurer in the past nine months. The study was fielded from April 2019 through January 2020.
For more information about the U.S. Insurance Shopping Study, visit