• by Tanya Gazdik , August 18, 2009

Overall customer satisfaction with auto insurance companies is up significantly in 2009, according to the J.D. Power and Associates 2009 National Auto Insurance Study.

Lincoln, R.I.-based 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. The bottom five finishers are Travelers, Commerce, 21st Century, GMAC and AIG.

The satisfaction is driven primarily by low premiums, according to the study, which measures customer satisfaction with auto insurance companies across five factors: interaction, policy offerings, billing and payment, price and claims.

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

While satisfaction has increased for the four most important factors contributing to overall satisfaction, the most notable increase has occurred in the area of price, which is up by 32 points from 2008. About 42% of customers reported that their premiums decreased -- without the customer switching to another insurer -- which is nearly twice the rate from 2008.

About 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, according to historical data from Westlake Village, Calif.-based J.D. Power and Associates. 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.

"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, in a statement. "However, such upheaval in the marketplace creates opportunities for insurers to differentiate themselves and gain a competitive advantage. Most notably, companies 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 way that insurers can reduce key dissatisfaction is engaging customers in discussions about rate increases prior to policy renewal time, Bowler says. 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 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 has improved considerably. In addition, while agency insurers perform more strongly in the interaction factor than direct insurers, the advantage of agencies in this regard is slight -- an increase of only seven index points.

"Insurance customers are increasingly seeking the ability to research and change coverage options at their convenience and beyond typical agency hours," Bowler says. "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."

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.