J.D. Power: The 5 forces shaping policy shopping
A recent report from J.D. Power delves into what is driving customers to explore their auto policy options.
J.D. Power’s Q4 2022 Loyalty Indicator and Shopping Trends (LIST) report showed auto insurance shopping was up to 12.1% across all regions of the United States, and the rate of customers who were switching carriers was 4.1% — up from 3.8% in Q3 2022, and 3.5% a year prior in Q4 2021.
Following this bump in shopping J.D. Power has released information detailing the five main forces currently driving customers to check out their auto policy options.
1. Inflation is driving rates, and rates are driving shopping
The rising costs of vehicles, repairs, replacement parts, medical claims and a host of other loss-related expenses has made rate adequacy a challenge as insurers work to maintain their bottom line while keeping customers. Though efforts have been made by carriers to cut costs on things like ad expenditures to compensate for inflation, consumers have still been subject to rate increases.
These increases, combined with inflation in other areas of customers’ lives, have left many scrambling to shop around for more budget-friendly coverage. J.D. Power’s latest LIST report showed many customers cited rate increases as their main reason for policy shopping.
2. UBI is taking a larger role in shopping
Usage-based insurance (UBI) is increasing in popularity as customers look for ways to reduce their auto insurance costs. These telematics programs are driving some to break up insurance bundles, as they believe cost savings with a UBI policy would surpass the savings of bundling their home and auto policy with the same carrier.
J.D. Power reports about one-third of customers who participate in UBI are not actually saving any money on their auto premium, but these customers still reported being more satisfied (and more likely to renew) with their auto carrier.
3. Insurers are targeting the most profitable customers
Insurers are combatting increasing rates and decreasing profits by putting more effort into attracting the most profitable insureds – those who bundle their home and auto policies with the same insurer. These customers represent about half of insured U.S. households, and are attractive because they represent the potential for more premium and are less likely to shop and switch carriers than other insureds.
Insureds who fall outside of this target group saw increases in shopping from Q3 to Q4 2022, while shopping rates stayed mostly steady within the group. J.D. Power reports that efforts from insurers to attract these more profitable customers have not actually succeeded in bringing more of these customers to market.
4. Insurers are pulling back as more consumers are shopping
Despite growth in the overall number of insureds shopping for auto policies, many insurers have pulled back efforts to acquire new business as they fight increased profit pressures. Many have also decreased or eliminated the amount of money spent on advertising, closed sales offices and started requiring payment in full from new customers in order to help their bottom line.
These changes can create challenges for customers who are currently shopping for auto policies as sales channels decrease, payment options change and consumer awareness lessens.
5. Less satisfying claims experiences are influencing more consumers to shop
Longer claims cycle times are affecting customer satisfaction, which has driven many to shop around after what they see as a less-than-ideal claims experience. J.D. Power reports repair cycle times have increased by five days, from 12 days in 2020 to 17 in 2022, and their Q4 LIST report showed the highest rate of customers they’ve recorded since the report began who cited a bad claims experience as their main reason for shopping for a new policy.