Amica Mutual ranked highest in satisfaction for the eleventh-consecutive year among homeowners and performed well in all five factors that contribute to overall customer satisfaction, including billing and payment; claims; interaction; policy offerings; and price, according to J.D. Power and Associates “2012 U.S. National Homeowners Insurance Study.” USAA, which is open only to U.S. military personnel, Auto Club of Southern California and Erie Insurance followed Amica in the rankings.
"The increase in satisfaction with policy offerings is directly related to customer perceptions that insurers are doing a better job in offering the right coverage options at competitive prices when policies are bundled," said Jeremy Bowler, senior director of the insurance practice at J.D. Power and Associates. "Bundled policies not only may provide a reduced premium for customers, but may also be advantageous to both parties, as it allows customers to interact with a single insurer, potentially streamlining both billing and payment."
Homeowners insurance premiums have increased 19 percent year-over-year on average, and many industry executives are anticipating a period of policy churn, according to the “National Homeowners Insurance Study,” by J.D. Power and Associates. Overall, the retention rate for homeowners policies was 89 percent from 2011 to 2012. However, the study found that bundling home and auto insurance raises retention rates to 95 percent.
Customer satisfaction and stated retention among bundling customers rises with each additional product they purchase, the study found, and as customers’ insurance needs increase and they add more products to their portfolio, customers are more inclined to keep their policies with a single insurer. Retention drops off quickly for unbundled customers; the retention rate for homeowner policy holders who purchase auto insurance from a different insurer is 83 percent. The retention rate for monoline auto with no home policy is 81 percent.
“The number one driver [for retention] is the multi-policy discount,” says Mark Garrett, insurance research director for J.D. Power and Associates. “We’d expect that, it’s a price driven decision, but secondary to that is overall CSI [customer service index]. You have to be delivering a good customer experience to get more products to the customer. Where we saw a lot of variation is by product.”
Not all policies have the same positive impact on retention, the study found. Bundling auto and homeowners policies provides the biggest bump in stated intent to renew (+9 percentage points); umbrella insurance increases retention by 6 percentage points. Life insurance policies, however, did not contribute to customer retention. The effects of bundling also are cumulative. Adding both auto and umbrella policies to a homeowner’s portfolio increases retention by 15-percentage-points, for example.
For insurers, however, simply messaging additional products isn’t sufficient.
“There are a couple things insurers can do. The first is the annual policy review,” Garrett says, which can uncover opportunities to insure a second home or recreational vehicles, for example. “Staying aware of your customers’ insurance needs gives you a chance to talk about other products you offer, but it’s also helps keep that relationship going with that customer.”
However, insurers must backing that up with competitive pricing and a good service experience, Garrett says. “The moment of truth is when you have that claim.”
Household Product Density by Insurer (percentage of products with home insurer)
1. State Farm: 80 percent
2. USAA: 79 percent
3. ACSC (AAA): 78 percent
4. American Family: 76 percent
5. Erie Insurance: 74 percent
6. Allstate: 72 percent
7. Liberty Mutual: 67 percent
8. Farmers: 64 percent
9. Travelers: 52 percent
Retention rates vary from company to company, and factors such as a customer’s age, tenure with their insurer, and number of insurance products owned had notable effects on retention. Younger, newer customers owning fewer insurance products were least sticky. The study was based on responses from more than 12,600 homeowners insurance customers.
See also:
June 25 2012 Insurance Networking News - UK report shows uneasy balance between customer claims experience and resulting loyalty.
March 16, 2012 Insurance Networking News - USAA, The Hartford and Kaiser Permanente score highest on net promoter score study; Aetna and Anthem the lowest.
