• by Aaron Baar , December 17, 2008

Car insurance companies would do well to examine and reinforce the relationships they have with their customers to keep them from switching carriers, according to J.D. Power and Associates.

"From the moment a customer purchases a policy, that relationship has begun," Stephen Crewdson, a senior research manager with J.D. Power, tells Marketing Daily. "Something as simple as offering an annual policy review can make the difference in keeping a customer."

According to a survey of nearly 200,000 households, about one-third of car insurance customers reported shopping for a new provider. About 15% of all customers switched to another carrier, while another 20% were considered to be "at risk," according to Crewdson. The two main reasons for shopping around were price and customer service, he says.

"What we see is that when someone does shop as a result of poor service, about three-quarters of them wind up switching," he says.

Of the 15% who did switch providers, only about a third intended to switch at the beginning of their shopping experience. But only 30% of those who shopped around said their current provider tried to keep their business.

"If the company catches wind that a customer is out shopping, obviously, the best thing you can do is offer a better price," Crewdson says. "One other strategy is something like a last-moment policy review, discuss the coverage they're buying and make an apples-to-apples comparison."

Of the customers who did have such conversations with their car insurance providers, 80% chose to stay with their provider, rather than switch, Crewdson says.

Perhaps not surprisingly, price is the primary driver for switching insurance customers, according to the survey. Nearly 60% of those who switched said price was the primary reason, while 40% of those who stayed with their provider did so because of price. Another driver was customers looking for bundled products such as life and home insurance as well as auto, Crewdson says.

Nearly a quarter of customers with bundled packages shopped for new policies, while 40% of those with non-bundled policies shop around. For those shopping for bundled policies, only about 25% defect, while nearly half of people searching for only auto insurance change providers, according to the survey.

Customers who remain loyal to their insurance providers have also been with their companies for an average of four years longer than defectors. And the propensity to shop around decreases as consumers age: more than 45% of generation Y customers shopped around, while only 31% of baby boomers did so.