According to a new study from J.D. Power and Associates, auto insurance companies on average are successfully signing only 2% of all shoppers. For the most part, the companies lose prospective customers before even offering them a quote, says Jeremy Bowler, senior director of the insurance practice.
"It's a good thing the industry has a phenomenal policy retention rate," Bowler says.
The reasons that many people don't request a quote are varied, Bowler says. Some consumers are put off by a company's lack of bundling options (i.e., the ability to have home and auto insurance through one company), while others have received negative word of mouth about a company from friends or family. Or the process involved to get a quote may be too cumbersome. "Some companies are rooted to traditional sales processes," Bowler says. "That's sort of an inhibitor; you're making it hard to get a quote."
According to the survey of nearly 8,500 people, 36% of auto insurance customers have actively shopped for a new insurer in the past year. When asked about various companies, 38% of those shoppers did not recognize many of the country's 26 largest auto insurers, and an additional 39% don't care about the brands.
"What's left is a group of people who have strong feelings about certain companies, and some of those are negative," Bowler says. After eliminating the 6% of shoppers who said they would avoid certain insurance companies, the pool of prospective customers is down to 18% of auto insurance shoppers, he says.
Of those 18% who might be willing to switch, only 10% ask for a quote (and only half of them make the switch), Bowler says. With many insurance companies gathering most of their personal data through the quote process, insurance companies are leaving a lot of leads that are not followed up on, Bowler says. "[Insurance companies] spend all this money advertising to get people to come to the door, and they only follow up if the customer has filled out an application," he says. "Insurance companies have no way to measure how many more prospects escaped earlier in the shopping process--whether they were driven away by a cumbersome quote process, a non-responsive agency or misconceptions about price or service quality."
The study found that many people (60%) are researching insurance policies online, although the channel loses more customers than traditional in-person or phone channels. Only 20% of Internet sales are closed successfully, versus 52% of traditional channels, Bowler says.
However, one tactic has been very successful online: offering quotes for other competitors. According to Bowler, one in three shoppers who get a competitive quote from a car insurance company don't bother to follow up to see if that quote is accurate. "If the ambition is to head people off [before researching a competitor], they seem to be hugely successful," Bowler says.