Rising insurance costs are prompting more customers to shop around for alternative carriers, according to a new J.D. Power study.

“Auto insurance customers are starting to shop for insurance like they shop for gas,” said Stephen Crewdson, J.D. Power’s senior director of insurance business intelligence. “They are taking a much more active stance in seeking out plans that fit their needs and their budgets, which could have a serious long-term effect on carriers that have been working for years to build lifetime value through bundling and other initiatives. In the near term, this shopping trend manifests itself in increased customer interest in usage-based insurance (UBI) plans and some reshuffling of market share among the top carriers.”

According to the study, which is available online with a subscription, the insurance shopping rate reached 13.1% in 2023, the highest rate since June 21, 2021. Meantime, the 30-day switch rate reached 4.1% in March, compared to a yearly average of 3.4% in 2021.

Overall satisfaction among those shopping for new carriers remained flat year-over-year, despite shopping and switching insurers increasing, the study found.

Rising insurance costs have triggered more policyholders to shop around, J.D. Power said, noting auto insurance prices rose 14.5% in February alone.

“Accordingly, among those shopping for reasons of price, 44% say they are price checking and 42% say they are being spurred by a rate increase,” it said. “Similarly, 41% of those shopping because of a rate increase say that their rate increased 20% or more.”

The study also found that more insurers are purchasing UBI programs to monitor customers driving habits and base their rates on safety and the amount of road miles driven.

The telematics programs are now offered to 22% of insurance shoppers with 18% buying them, compared to 2020, when they were presented to 16% of shoppers with just 12% subscribing.

“When carriers offer a UBI option, customer satisfaction increases 6 points,” J.D. Power said.

Last month, the president of OnStar Insurance detailed how telematics have the capability to improve and expedite the repair process following a collision, further raising customer satisfaction.

During his keynote speech during the recent International Bodyshop Industry Symposium (IBIS) in Nashville, Andrew Rose told delegates that onboard data will eventually create a “transformative” insurance process from the moment an accident occurs.

“You can imagine in the future that before that vehicle has fully stopped rolling, it’s already sending data back saying ‘these things are false; these things look like they’re broken,’” he said. “Then you can use machine learning behind the scenes to say ‘there is a 98% probability that bumper is going to need replaced, there’s an 87% probability this light is going to need replaced, there’s a 49% probability the radiator is going to be replaced,’ and have those parts ordered almost instantly. The repairs can be scheduled immediately.”

J.D. Power’s Insurance Shopping Study, now in its 17th year, also ranked major insurers, finding:

• • State Farm ranked highest among large auto insurers with a score of 877;
  • Liberty Mutual ranked second with a score of 865; and
  • Nationwide ranked third with  861 points, which was the segment average.

Among midsized auto insurance, The Hartford was ranked most favorably, followed by Erie Insurance and the Automobile Club of Southern California (AAA).

J.D. Power’s study also found Progressive was gaining market share over GEICO.

“GEICO raised its rates significantly above industry average throughout much of the second half of 2022 while Progressive raised rates in the first quarter of 2022 and then registered lower-than-average increases during the second half of the year,” it said. “During the same period, Progressive posted a notable gain in market share, becoming the second-largest auto insurer in the United States, ahead of GEICO and behind State Farm.”

Waning customer satisfaction among larger insurance companies was documented in a recent Consumer Reports survey, which found boutique auto insurance companies earned higher satisfaction scores than industry behemoths such as GEICO, Progressive and Allstate.

In ranking of 36 companies, USAA, NJM, Amica and Erie topped the list despite spending less on advertising and being less familiar than their competitors, CR said. All four of the insurers received favorable scores.

USSA was the lone insurer to receive exceptional scores throughout the rating categories, which included:

• • Price paid for premiums;
  • Claim settlements;
  • Non-claims customer service;
  • Proactive attempts by the insurer to help and offer advice to customers;
  • The thoroughness of policy options;
  • Breadth of coverage; and
  • Clarity of a policy’s contract.

Alternative insurance companies such as Chubb are responding to the need for more comprehensive coverage through policies that cover repair aspects that might be considered an add-on, or even unavailable, through other companies. It lets policyholders choose their own repair shop, approves only OEM parts, and promises agreed value coverage for total loss, with no deductible or depreciation regardless of a vehicle’s age or mileage.

A chart Chubb released for marketing purposes lays out the services it offers that its competitors do not.

“As you can see, we provide the highest level of protection for you and your family,” it said. “Our Auto Technical Specialists are certified collision repair professionals, and act as safety advocates for you, making sure your vehicle is repaired correctly, every time.”

Meantime, a previously-released J.D. Power report offered additional insights on the latest property and casualty insurance trends, laying out the pain points prompting customers to switch insurers.

J.D. Power’s 5 Factors Influencing Insurance Shopping report detailed how inflation and long wait times have caused customer satisfaction with auto claims to steadily drop since 2021. Despite insurers offering larger payouts, policyholders remained irked by other components.

In total loss claims, customers struggle to find replacement vehicles, the report said. In cases where vehicles are repairable, customers are waiting longer to have the keys back in their hands, with repair times growing from 12 days in 2020 to 17 days in 2022, it added.

“The claim is the ‘moment of truth’ in the insurer carrier relationship, when the promise to make things better when something goes wrong for the consumer is delivered upon,” the report said. “More than twenty years of syndicated research in the auto insurance industry at J.D. Power has shown that a poor claims experience is a powerful trigger to shop for a new carrier and also increases the rate at which those who do shop decide to switch insurers.

“Carriers know this all too well and have spent generations honing their claims experiences to not only indemnify their customer (as is contractually obligated), but to build a stronger relationship with customers via an exemplary experience. Many factors outside of their direct control are now harming those experiences.”

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Featured image credit: Mohamad Faizal Bin Ramli/iStock

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