Study: Dissatisfaction with auto insurance rises among policyholders

By Posted : 06/25/2013

unhappy car insurance customersConsumers are less satisfied with their car insurance than last year, citing rising rates they don't fully understand as a key problem, according to a J.D. Power report released this week.

The J.D. Power 2013 Auto Insurance Study asked more than 4,500 policyholders countrywide about price, company interaction, policy offerings, billing and payment and claims. Their overall satisfaction rating was 794 on a 1,000-point scale, a 10 point drop below 2012. Even with the decline, this year's score was the second highest since J.D Power began the study in 2000.

Although consumer satisfaction dipped in all five areas, the biggest fall (13 points) was tied to escalating insurance rates, which many say are not adequately explained by insurers. Further, some complained that they didn't understand their coverage enough or were not confident it met all their needs, says Jeremy Bowler, J.D. Power's senior director of the global insurance practice. (See: "Insured and confused: Test reveals dismal knowledge of car insurance.")

"In 2013, there is a sharp rise in the number of customers who have experienced premium increases," says Bowler. "The dollar amount of those increases is also larger, averaging $153 in 2013, compared with an average rate increase of $113 reported in the 2012 study."

And how are policyholders reacting? The report says they find a new insurer, with the most aggressive shoppers are those facing the biggest rate hikes. (See: "5 ways to compare car insurance companies.")

"While only nine percent of customers who experienced an annual rate increase of $50 or less switched insurers, the switching rate nearly doubles to 18 percent when the increase is between $51 and $100, and to 32 percent when the increase is more than $200," according to the study

Study recommends more customer service

More interaction and clearer communication with an agent could help consumers confused by cost hikes and other potential brain-twisters like filing complicated claims, Bowler points out.

"In today's low-interest market, many insurers are filing for new rate structures in order to rectify underwriting losses," says Bowler. "To prepare for the likely downturn in customer sentiment and risk of increased attrition following a premium increase, insurers need to do a better job of proactively reaching out to their customers and explaining the reasons."

He says insurers should reach out to customers before mailing a renewal letter announcing a rate hike and also discuss policy options that could cut their rates. The study found that only 16 percent of customers facing a rate jump talked about possible coverage changes with an agent. (See: "How to compare car insurance quotes.")

Consumers who received pre-notifications and discussed policy options had satisfaction scores 67 points higher than those who didn't, according to the study.

"Generally, customers typically have little understanding of how their rates are set by their insurer, or why prices may vary by sometimes hundreds of dollars between companies when they shop for multiple quotes," says Bowler. (See: "How car insurance rates work.")

It's just common sense -- and good business sense -- for insurers to open up more, says Pete Moraga, a spokesperson for the Insurance Information Network of California.

"It's important that insurers and agents offer the best guidance on how to minimize risk and costs," he says. "There has to be a direct discussion of the factors, so that consumers can make smart decisions."

Michael Barry, a spokesperson for the Insurance Information Institute, agrees, but adds that policyholders should be more assertive.

"When they get a renewal notice they aren't content with, they need to be proactive and call the agent for an explanation," he says. "Then, if the consumer isn't satisfied with what they're told, they should see what other insurers are offering."

The most satisfying car insurers -- a regional look

The J.D. Power study also noted the auto insurance companies with the best satisfaction ratings in 11 regions. The scores below are based on a 1,000-point scale:

  • California: Wawanesa (820), State Farm (812) and The Hartford (811).
  • Central: State Farm (833), Auto-Owners Insurance (821) and Shelter (817).
  • Florida: MetLife (808), The Hartford (802) and State Farm (800).
  • Mid-Atlantic: State Farm (836), Erie Insurance (826) and GEICO and The Hartford in a tie (811 each).
  • New England: Amica Mutual (850), GEICO and State Farm in a tie (794 each) and The Hartford (793).
  • New York: New York Central Mutual (814), State Farm (807) and Travelers (783).
  • North Central: Auto-Owners Insurance (833), State Farm (824) and Erie Insurance (823).
  • Northwest: PEMCO Insurance (834), The Hartford (820) and Mutual of Enumclaw (813).
  • Southeast: Tennessee Farm Bureau (850), State Farm (822) and North Carolina Farm Bureau (821).
  • Southwest: State Farm (824), The Hartford (821) and GEICO (809).
  • Texas: Texas Farm Bureau (862), GEICO (815) and State Farm (810).

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