Car insurer web sites boost retention and satisfaction

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By: Wise Marketer Staff |

Posted on September 6, 2005

As vehicle insurance providers in the USA continue to develop their online presence and offerings, the number of consumers who turn to the internet to find insurance quotes and help also increases considerably, according to the J.D. Power and Associates '2005 National Auto Insurance Study'.

More than one-quarter (27%) of consumers surveyed for the study said they had shopped for car insurance in the past year and, of those, 33% used the internet to get a quote. However, the greatest increase in online traffic occurred among existing customers using their insurer's web site to seek service.

Fighting churn
According to Jeremy Bowler, senior director of the insurance practice at J.D. Power and Associates, consumers were greatly compelled by the cost of insurance to switch providers, and the internet provided them with a quick and easy way to get quotes from competing providers.

Bowler explained: "This price transparency presents a challenge to providers in terms of customer retention, so many are building service functionality and actively promoting their own web sites as a means of attracting and retaining customers."

Building loyalty
The study found that, apart from the internet providing agencies and direct writers with an opportunity to attract new customers, it also provides an excellent opportunity to build loyalty by providing internet-enabled self-service.

The study also identifies five major factors that contribute to overall customer satisfaction with auto insurance providers (listed in order of importance):

  1. Non-claim interaction with the provider;
  2. Billing;
  3. Purchase and policy experience;
  4. Cost;
  5. Claims experience.

Satisfaction growing
According to the study, overall customer satisfaction with auto insurance providers has improved every year since 2002, now standing at 796 index points (based on a 1,000-point scale). For the sixth year running, Amica Mutual ranks highest in overall customer satisfaction, setting the benchmark in all five of the factors driving overall satisfaction. Amica is followed in the rankings by State Farm and GEICO respectively.

State Farm, American Family and Allstate, all 'captive agency carriers' (those that use exclusive agents to sell and service policies) demonstrated significant improvements in overall customer satisfaction compared to 2004. With a 25 index-point increase over 2004, State Farm showed the largest year-over-year satisfaction improvement among the 24 companies profiled in the study.

Consumer impact
For the typical customer, their day-to-day interaction with the insurance provider has the greatest impact on their overall impression of the company and its brand. Having a dedicated local agent handling their insurance needs can be a big advantage in creating a lasting relationship between insurer and policyholder. But, according to Bowler, some customers with simple needs place less importance on a local agent and several providers have made big strides in refining their direct communication channels with customers.

The study found that customer satisfaction has a "direct and profound" effect on customers' intent to renew their policies with the same provider. Among customers who say they are highly satisfied with their provider (providing an overall index score of 813 or higher), 54% said they would not switch for a lower coverage price. That proportion drops to 34% among customers providing an index rating of 775 or lower.

More satisfied, more loyal
"The costs of attracting new customers are significantly higher than in keeping existing customers, so it's important for carriers to earn loyalty through customer satisfaction measures," concluded Bowler. "So, while less satisfied customers are more easily lured away by providers offering low prices, those that deliver high quality service are rewarded with stronger customer loyalty and higher renewal rates."

The '2005 National Auto Insurance Study' was based on responses from 15,272 auto insurance policy holders, and is available from J.D. Power and Associates.

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