Carriers Turn to Agents As Auto Insurance Sales Stagnate: J.D. Power

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Amid a second straight year of stagnant auto insurance shopping activity and modest rate increases, auto insurance companies have grown increasingly reliant on great customer service, personalized advice and strong agents to win over their customers, according to the J.D. Power 2017 U.S. Insurance Shopping Study.

With average premiums increasing by a modest 2-3 percent annually, new insurance shopping rates flat and new customer acquisition rates unchanged, auto insurers are faced with the challenge of resisting commoditization, he report says.

The study finds that as auto insurers struggle to compete on price, they are being forced to differentiate based on factors such as brand reputation, agent recommendations, product and service to drive new business sales.

Communication remains critical, as the key performance indicator (KPI) that has the greatest influence on customer satisfaction in this year’s study is ensuring that customers completely understand their coverage.

“The auto insurance industry is at an inflection point where customer patterns and behaviors are on the verge of shifting,” said Greg Hoeg, vice president of U.S. insurance operations at J.D. Power. “To survive this period of price stagnation, insurers must develop strategies to be able to better differentiate not just to acquire new customers, but also to acquire customers with desirable risk profiles in order to maintain profitability.”

Key findings of the 2017 study include:

  • Auto insurance market shopping stagnates: This year sees a continuation of the slowdown in shopping activity that was first noted in 2016. Average premium rates have increased just 2-3 percent; customer acquisition rates are flat; new quote volume is flat; and the total number of insurance shoppers is largely unchanged from the last year.
  • Price is more influential in brand consideration and quoting: Despite stagnant pricing, price remains a driver in every stage of the acquisition process, meaning insurers must always take it into consideration to be competitive in the market. For example, the influence of price on a shopper’s decision to consider and quote a brand has increased 5 percentage points in each of the past two years. As a result, the importance of price has surpassed that of a good past service experience when a shopper considers or quotes a brand.
  • Agents continue to play key role: Agent recommendations have become an increasingly important driver of customer consideration and quote generation. Shoppers are also increasingly reliant on agent recommendations when considering and quoting insurers, compared to 2015 (a 9- and 10-percentage point increase, respectively).
  • Communication is critical driver of satisfaction: The KPIs affecting the purchase experience index the most are ensuring the customer completely understands coverage; providing guidance and/or tools for selecting the right coverage; and ensuring customers understand premium calculations.
Study Rankings

In the JD Power customer satisfaction rankings, Erie Insurance came in highest among auto insurers in providing a satisfying purchase experience, with a score of 879. This marks the fifth consecutive year Erie Insurance has ranked highest in the study. American Family ranks second (869); The Hartford third (861); Automobile Club Group fourth (852); and Amica Mutual fifth (850).

The study is based on responses from more than 16,400 shoppers who requested an auto insurance price quote from at least one competitive insurer in the past nine months and includes more than 50,000 unique customer evaluations of insurers. The study was fielded in April, July and October 2016 and January 2017.

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  • May 12, 2017 at 8:35 pm
    AZ Ins Man says:

    One specific insurer which damaged all agent relationships has now come back to the same agencies which originally built that insurer from the ground up. The “direct” segment is allowed a significant price advantage in most cases with a higher overall loss result?
    Most agents limit concentration with a single insurer to a small % to avoid large business disruption when a company raises rates.
    So, the same company that reduced agency compensation to the lowest in the industry wants more agent business? All producers should require some benefits historically withheld by the company such as contingency commissions at smaller production levels, higher base commissions since the agent is quoting a rate more than 10% higher than the direct marketing group!
    We have a small number of markets and would like profit sharing at smaller production.
    THE “pioneer” company allows the “direct to quote with un-deserved discounts with a totally un-justified rate deviation.

  • May 15, 2017 at 5:58 pm
    brian says:

    insurance companies should just pay independent agents higher commissions if we’re the ones driving business. forget contingency bonuses – keep them and just pay us better commissions.

  • May 25, 2017 at 8:49 pm
    Long Island Independent Agent says:

    If agency companies really want auto business, they need to show it. Lower rates, better compensation, more marketing.

    I once had a company say they couldn’t compete with the gecko because the gecko didn’t pay commissions to agents. My response was that the gecko’s advertising and marketing budget was well more than 10 times what they paid all of their agents that year.

  • July 26, 2017 at 2:48 pm
    andy says:

    good article! I know some company doesn’t care about the relations they will build on there customers. I think this is also a good area that they need to look up. Having an affordable premium like JS Downey Insurance Services will help individuals aside from the services that they can offer.

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