Rising Auto Insurance Costs Trigger Largest Customer Satisfaction Decline in 20 Years
Wednesday, June 14th, 2023 Auto Insurance IndustryThe recently released J.D. Power 2023 U.S. Auto Insurance Study has found that nearly one-third of auto insurance customers in the United States have experienced rate hikes over the past year. The insurance industry has raised rates by an average of 15.5%, leading to substantial dissatisfaction among policyholders.
According to the study, the overall satisfaction with auto insurance has dropped by the largest decline witnessed in the past 20 years.
This dissatisfaction has fueled a surge in the adoption of usage-based insurance (UBI) programs. These programs determine policy costs based on a driver’s behavior, utilizing telematics data. Notably, 26% of new customers have actively participated in UBI. Adoption of usage-based insurance programs have more than doubled since 2016. Currently, 17% of auto insurance customers participate in these programs. Satisfaction with prices among UBI program participants is, on average, 59 points higher compared to non-participants. However, as UBI adoption grows, concerns regarding data accuracy persist.
Key findings from the 2023 study include the revelation that auto insurance price increases are outpacing inflation; they are three times higher than other categories tracked by the Consumer Price Index, with an average increase of 15.5% compared to the overall average of 4.9%.
The study suggests that more customers likely experienced price increases, but the awareness of these increases may have been influenced by the method and frequency of billing and payments. Customers who received a bill in the mail and paid in full via credit card reported a price increase rate of 45%, while those who received a digital bill and made automatic recurring installment payments experienced a rate of 28%.
The study also suggests that while price increases negatively impact customer satisfaction, notifying customers in advance through their preferred communication channel, such as a phone call from their agent, and providing clear explanations for the increase can make a significant difference in how they perceive the insurer.
The 2023 U.S. Auto Insurance Study encompasses customer satisfaction with auto insurance in 11 geographic regions. This year marks the 24th edition of the study, which examines five key factors: billing process and policy information, claims, interaction, policy offerings, and price. The study collected responses from 41,437 auto insurance customers between January and April 2023.
