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Service Quality - More Than Brand Image - Drives Auto Insurance Renewal

Customer experience outweighs brand image in auto insurance policy renewals (a critical factor in the financial success of auto insurance carriers), according to the findings of the J.D. Power and Associates 2007 "National Auto Insurance Study" released last week, reports MarketingCharts.

The study measures customer satisfaction with auto insurance carriers across five factors (in order of importance): interaction, policy offerings, billing and payment, price, claims.

For the eighth consecutive year, Amica Mutual ranks highest in customer satisfaction, followed by Erie, GEICO and State Farm. American Family and Auto-Owners are tied for fifth.

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USAA, a financial services provider open only to the US military community and their families, and therefore not formally included in the rankings, also achieves a high level of customer satisfaction.

The study finds that satisfaction with the overall insurance experience accounts for 45 percent of the "customer commitment model" (CCM), which specifically measures customers' propensity to remain loyal to their insurers.

Brand image drives 17 percent of the CCM for customer retention, switching costs account for 16 percent of the CCM, and loyalty propensity (the individual customer's tendency to be brand-loyal across all types of products and services) accounts for 22 percent of the CCM, according to the study.

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Among customers who indicate high levels of satisfaction with their carrier overall, 88 percent said they "definitely would" renew their policy with their auto insurance provider. Only 16 percent of customers who report low levels of satisfaction said they would definitely renew their policy.

"Maximizing renewal rates is key to the success of every carrier, as just a 1 percent shift in market share can represent $1.6 billion in annual premiums," said Jeremy Bowler, senior director of the insurance practice at J.D. Power and Associates. "Examples of auto insurance business practices that drive higher customer satisfaction include offering annual policy reviews, loyalty discounts, proactively providing customers with helpful information pertaining to their policy, and enhancing the Web service experience."

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The study also finds that 33 percent of customers say they use the internet to interact with their auto insurance carrier. Only 5 percent of customers say they are unable to access their auto insurance information online - and overall satisfaction among this group is considerably lower than for those who say they are able to access their information online.

Customer satisfaction for online interactions are usually lower than for agency or call-center interactions - but the gap is closing, according to Bowler: "Satisfaction is highest among the 77 percent of customers who were able to complete an entire service transaction online, such as making a bill payment," he said.

The study also finds the following patterns:

  • The typical auto insurance policy holder has been with his/her carrier for more than 10 years.
  • Those customers who have reviewed their insurance needs with their insurer in the previous 12 months tend to be considerably more satisfied.
  • However, one in three policy holders say they have not reviewed their policies since first selecting their current insurer; this group of consumers is particularly less satisfied, on average.
  • Nine out of ten customers say they receive some kind of discount on their premium.
  • Those receiving dividends, accident or ticket forgivenesss, or credit for belonging to a professional organization tend to be the most satisfied with their insurer.

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