• by Tanya Gazdik , September 4, 2007

A customer's experience getting service on an auto insurance policy is far more likely to impact satisfaction and likeliness to renew versus exposure to any kind of brand marketing, according to the J.D. Power and Associates' "2007 National Auto Insurance Study."

The study measures customer satisfaction with auto insurance carriers across five factors. In order of importance, they are: interaction, policy offerings, billing and payment, price and claims. It is based on responses from 16,012 auto insurance policyholders who were surveyed in March and April 2007.

For an eighth consecutive year, Amica Mutual ranks highest in customer satisfaction, followed by Erie, Geico and State Farm, respectively. American Family and Auto-Owners rank fifth in a tie. USAA, a financial services provider open only to the U.S. military community and their families, and therefore not included in the rankings, also achieves a high level of customer satisfaction.

The study shows that satisfaction with the overall insurance experience accounts for 45% of the customer commitment model, which specifically measures a customer's propensity to remain loyal to an insurer. Among customers who indicate high levels of satisfaction with a carrier overall, 88% said they definitely would renew their policies with their auto insurance providers. Conversely, only 16% of customers who report low levels of satisfaction said they would definitely renew their policies.

"Ultimately, everyone is looking for a company they can trust, someone who is going to be around next year," says Jeremy Bowler, senior director of the insurance practice at Westlake Village, Calif.-based J.D. Power and Associates.

Amica takes a more "consultative approach" to its business, he says. Geico, on the other hand, is successful because it sets a realistic expectation in the minds of its customers and then delivers--it doesn't overpromise, he adds. Insurers like Allstate and State Farm are more challenged in terms of rankings because their objective is to write insurance for as many people as they can. Consequently, they are trying to be all things to all people--which is difficult, Bowler tells Marketing Daily.

Maximizing renewal rates is key to the success of every carrier, as just a 1% shift in market share can represent $1.6 billion in annual premiums, Bowler says. 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 policies and enhancing the Web service experience.

Consumers increasingly expect to be able to interact with their carriers on the Internet. It is important for insurance companies to provide online policy access, a user-friendly Web site, and to effectively convey the availability of these services to their customers, Bowler says.

The study finds that 33% of customers say they use the Internet to interact with their auto insurance carriers. While only 5% of customers report that they are unable to access their auto insurance information online, overall satisfaction among this group of customers is considerably lower compared to customers who say they are able to access their information online.

"Even though customer satisfaction ratings for Web interactions tend to be lower than those for agency or call center experiences, the gap is closing," Bowler says. "A handful of insurance companies have really embraced the Internet and have created a business within a business."

The study also reveals that the typical auto insurance policyholder has been with one carrier for more than 10 years. Those customers who have reviewed their insurance needs with their insurers in the previous 12 months tend to be considerably more satisfied.

However, one in three policyholders has not reviewed his or her policy since first selecting an 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 premiums, yet those receiving dividends, accident or ticket forgiveness or credit for belonging to a professional organization tend to be the most satisfied with their insurer.