June 26, 2017—Usage-based insurance programs, which leverage telematics technology to set insurance premiums based on how far and how safely a customer drives, may be the great equalizer when it comes to customer perception of price, according to the J.D. Power 2017 U.S. Auto Insurance Study.
A combination of record numbers of miles driven, increased frequency and severity of collisions, and extreme weather has crimped U.S. auto insurer profitability, resulting in rate increases for 26 percent of customers and a strain on customer satisfaction, the study said. Howeve, the price satisfaction scores for those with usage-based insurance are between 54 and 72 points higher among customers who are usage-based insurance participants, even when those participants have experienced premium increases.
The study finds that the number of customers receiving an annual rate increase of more than $200 per vehicle has more than doubled during the past four years, and that's having a profound effect on customer satisfaction. Price satisfaction scores among customers who receive a price increase of $200 or more are, on average, 188 points lower than among those who experience price increases of just $25 or less. This shows that auto insurers need to do a better job of increasing the perception of value in the services they provide.
"Differentiating on service and demonstrating the value of the policy for premiums paid is going to be the key to improving customer satisfaction," said Greg Hoeg, vice president of U.S. insurance operations at J.D. Power. "As the amount of losses continues to increase for a myriad of reasons, premiums must go up for carriers to remain profitable. However, carriers that are successful in getting beyond price by clearly communicating and demonstrating value through smooth claims processing, exceptional customer service and a great selection of offerings will emerge as leaders. Initiatives such as usage-based insurance programs and other proactive communications that show customers what they are getting for their money will help that value perception."
