The concept of being a customer for life, especially in the highly competitive auto insurance marketplace, seems to be a thing of the past. Some of the highest-performing car insurers in the UK successfully renew more than eight in 10 policyholders, but others manage to retain barely one-third of theirs, according to Jeremy Bowler, senior director of the insurance practice at J.D. Power and Associates.
Those statistics are courtesy of J.D. Power’s inaugural study measuring car insurance policyholder satisfaction with their primary insurer. The “2010 UK Auto Insurance Customer Satisfaction Study,” based on responses from 5,036 auto insurance policyholders, indicates that 44% of customers switched insurers during the past 12 months, which represents nearly £3.5 billion in premiums that were up for bid. “It’s clear that focusing on customer retention can bring insurers substantial benefit in reducing costs and boosting profitability,” Bowler says.
For the study, customer satisfaction—a primary driver of policy renewals—was measured across five factors (listed in order of importance): billing and payment; price/premium; interaction; policy offerings; and claims. Overall satisfaction in 2010 had an average score of 708 on a 1,000-point scale.
The study finds that bundling insurance policies has a positive effect on overall satisfaction and retention with car insurance providers. However, 62% of customers say they hold a car insurance policy, but no other policies, with their insurer. Satisfaction among these customers averages 705—slightly lower than the industry average. Overall satisfaction is considerably higher among customers who hold three or more policies with their car insurance provider—728, on average.
However, only 9% of policyholders indicate bundling three or more policies with their insurer. Among customers who bundle, roadside assistance/breakdown cover and home insurance are the most commonly added policies.
“Some insurance providers are beginning to promote significant discounts to customers who bundle their car insurance with other policies, which will likely drive an increase in this practice,” Bowler says. “Consumers may receive lower premiums and the added convenience of dealing with just one provider for multiple insurance policies, while insurance providers may achieve higher customer satisfaction levels and as a result, higher customer retention and advocacy, as well as financial profitability.”
The study also finds that policyholders who interact with their insurance provider through a local broker are much more satisfied (752, on average) than policyholders who use other contact methods such as call centers (722), websites (721), e-mail (662) or automated phone systems (649). Among policyholders who seek car insurance information via websites, those who use a comparison website to select an insurer are considerably less likely to renew with their insurer, compared with those who use an insurer’s website.
High levels of satisfaction with car insurance providers have a particularly strong positive effect on customer renewal and retention rates. Among the most highly satisfied policyholders (satisfaction averaging 901 or higher), 86% say they “definitely will” or “probably will” renew their policy, while 96% say they “definitely will” or “probably will” recommend their insurer to others. Among the least satisfied customers (satisfaction averaging 550 or less), only 39% indicate they are likely to renew and only 44% say are likely recommend their insurer.
The study findings also include the following key trends:
• Satisfaction with car insurers tends to decline considerably during the first year of service, then gradually recovers over time. It takes an average of four years for satisfaction to return to initial levels. Customer retention also increases significantly following the first year of service, with more than three-fourths of policyholders with tenure of three years indicating they are likely to renew their current policy.
• Approximately 9% of policyholders have filed a claim within the past 12 months. Seventy-five percent of customers who indicated they filed a recent claim subsequently renewed their car insurance policy.
• Satisfaction among policyholders who filed a claim for physical damage to their vehicle averages 733—25 points higher than the industry average.
As for customer satisfaction rates regarding the UK auto insurers themselves, RSA ranks highest in customer satisfaction with car insurance providers with a score of 762 and performs particularly well in the price/premium and interaction factors. LV= (Liverpool Victoria) follows RSA in the rankings with a score of 755. LV= ranks highest in the billing and payments and policy offerings factors. Rounding out the top five car insurers are Sheilas’ Wheels (723), Diamond (722) and Swiftcover (721).
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Corrected November 17, 2010 at 1:56PM: yes