After reaching a five-year high in customer satisfaction, auto insurers took it on the chin in the recently released annual J.D. Power 2016 U.S. Auto Insurance Study. The report notes that overall satisfaction with auto insurers dropped by a “significant” seven points, with 17 of the largest carriers leading the way. Why? Because customers are essentially unhappy with premium pricing, says J.D. Power.

Specifically, the overall decline is chiefly influenced by a 3-point decrease in price satisfaction, which is attributable to a year-over-year 2-percentage-point decline in the percentage of customers who say they have not experienced a premium increase in the past 12 months, notes J.D. Power.

For all the studies conducted by insurers to determine what customers really want, it’s surprising to see this obvious slip. Customers don’t want to pay more, especially 6.6 percent more, which is how much motor vehicle insurance premiums have actually increased, according to May’s Consumer Price Index. Further, the perception among some customers is that they have experienced an insurer-initiated increase, even though they have not experienced a specific incident or life change that could account for the price hike. Here, insurers could minimize the risk of losing their customers by simply communicating the reasons for any spike.

As might be expected, the fallout for larger insurers is palpable. This year marks the first time in the past six years that small insurers achieve a higher satisfaction score than do large insurers. J.D. Power says this is because more positive perceptions of price have helped drive the differing performances between the two groups, as the price factor is the largest advantage small insurers have over large insurers.

“Price perception among customers of smaller insurers is likely influenced by the fact that they frequently select their insurer with the help of an independent agent,” said Greg Hoeg, vice president of the U.S. insurance operations at J.D. Power. “Smaller insurers benefit from the personal interactions provided by their agency force, including their ability to educate customers about the value their policy provides.”

Larger insurers performed higher in digital interactions—website and assisted online—but that’s because they have more resources to invest in improving online interactions, notes J.D. Power.

Today’s responses to challenges will determine tomorrow’s success. At a time when insurers understand that premium increases can be a death knell, and communication and interaction may turn negative perceptions into positive outcomes, doesn’t it make sense to facilitate a customer-centric strategy that focuses on doing whatever is necessary to retain the customer?

The opinions posted in this blog do not necessarily reflect those of Insurance Networking News or SourceMedia.

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