Customer Satisfaction Gap Between Agency, Direct Auto Insurers Closing


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Overall customer satisfaction with auto insurance companies is up significantly in 2009. But the gap between agency writers and direct writers may be coming closer to a “photo finish,” says the author of a new study by J.D. Power and Associates 2009 National Auto Insurance Study. The satisfaction level also seems to be driven primarily by low premiums, the study found.

In 2009, 18 of the 34 profiled insurers had year-over-year-improvements, according to J.D. Power and Associates. “Just one — AIG — has significant erosion in customer satisfaction in 2009,” the study said.

The study measures customer satisfaction with auto insurance companies across five factors. In order of importance, they are: interaction, policy offerings, billing and payment, price and claims.

The study claims that overall customer satisfaction with auto insurance companies has reached a five-year high in 2009, averaging 801 on a 1,000-point scale — up by 14 points from 2008. More than one-half of the 32 companies ranked in the 2009 study improved year over year.

Pricing was the most notable increase in satisfaction, which was up by 32 points from 2008. In addition, 42 percent of customers in 2009 report that their premiums decreased — without the customer switching to another insurer — which is nearly twice the rate from 2008.

Historical data from J.D. Power and Associates indicates that approximately 12 months after the start of the 2001 to 2002 recessionary period in the U.S., overall customer satisfaction with auto insurance companies declined considerably as insurance companies raised rates. As signs of market hardening and rising rates are already beginning to show in the 2009 recessionary period, a similar decline in customer satisfaction could ensue in 2010 and 2011, the study’s authors concluded.

“If history repeats itself, one could anticipate a notable decline in overall customer satisfaction as a result,” said Jeremy Bowler, senior director of the insurance practice at J.D. Power and Associates. However, Bowler notes that insurers that compete less on price and more on quality of services or through affinity relationships may be able to mitigate some of the expected decline in satisfaction.

One key behavior that can help mitigate dissatisfaction is engaging customers in discussions about rate increases prior to policy renewal time, he advised. “When customers are notified in advance of rate increases greater than $100, and insurers or agencies offer to discuss coverage or policy options available that may mitigate the price change, customers are significantly more satisfied with their insurer overall,” the study said.

The study finds that important shifts have occurred in the area of non-claims interaction, which is the most important factor driving overall satisfaction. Customer satisfaction with Web sites and call centers improved from 2008.

Agency vs. Direct

Agency insurers may also be losing their stronghold on satisfacation when it comes to interaction with the customer, according to the study. The study found that while agency insurers perform more strongly in the interaction factor than do direct insurers, the advantage of agencies in this regard is slight — an increase of only seven index points.

This is the first year that the study has seen “close to parity in terms of service level and satisfaction” when it comes to agency versus direct writers, Bowler said. In the past, the gap has always been very large, he said.

“The web ratings have improved double digits for the last couple of years, and this year for example, the agents (agency insurers) have gained nothing compared to last year — it was static,” Bowler said. Web ratings for the entire auto insurance industry, not indvidual carriers gained 17 points, and call centers gained 11 points. “So the gaps between the direct and the agency writers has become more of a photo finish,” he added.

Bowler says insurance customers are increasingly seeking the ability to research and change coverage options at their convenience and beyond typical agency hours. “While direct insurers have updated their Web sites and phone-based customer service systems accordingly, a number of agency insurers have some catching up to do,” he said.

When the study first began to look at the web in terms of satisfaction in 2004, Bowler said that less than 10 percent of customers admitted that they had visited their insurance company’s Web site. “It was a drop in the bucket,” he added. Today, customers tell a different story.

“In the mainstream we are seeing close to a majority of customers for some reason touching the Web site of the carrier,” Bowler said. A few insurers have even launched iPhone applications, he said.

“It’s no longer the technophile visiting the Web site but it’s Joe Average,” Bowler said, adding that carriers have stepped up their technology game. “The Web sites of companies like Progressive have really advanced expectations. If you jump from consumer friendly environments like, and you go to an insurance company Web site that is just cumbersome, it leads to lower (satisfaction) ratings,” he said.

High Satisfaction Scores

Of all the insurers evaluated in the study, Amica Mutual ranks highest in customer satisfaction with auto insurance companies for a 10th consecutive year, followed by State Farm, Shelter, Auto-Owners, Erie Insurance and COUNTRY, respectively. Although not included in the rankings due to the closed natures of their respective memberships, New Jersey Manufacturers Insurance Company (NJM) and USAA also achieve high levels of customer satisfaction.

The 2009 National Auto Insurance Study is based on 22,930 responses from auto insurance policyholders. The study was fielded in March and April 2009.

Source: J.D. Power and Associates,


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