Poor service -- more than pricey premiums -- is the main reason people dump one car insurance company for another, according to a new analysis by J.D. Power.
To keep customers, the research firm says insurers must improve in the key areas of claims and billing resolution and overall interactions with policyholders. A big step toward satisfying new clients is to have advertised savings better reflect the real cost of coverage, according to the "2014 U.S. Insurance Shopping Study" report.
The study found that almost a third (30 percent) of people shopped for new auto insurance in 2013, with 36 percent deciding to change companies. About 13 percent of consumers said they were motivated to browse the aisle after reeling from a rate increase. But many more (28 percent) began shopping after encountering what they believe was lousy service, the report notes.
Picking a new insurer may pay off -- J.D. Power says those who switched saved, on average, about $300 during the past year, just one good reason among many to compare insurance companies and shop your policy.
But Jeremy Bowler, senior director of the insurance practice at J.D. Power, points out that many of those surveyed were disappointed because they expected even bigger price breaks ballyhooed in ad campaigns.
"The insurance industry spends billions of dollars each year on advertising, and over the last seven years many of those ads have tried to entice customers with big savings," he says."While switching to a new insurer usually results in savings, the ads make promises of savings that a growing number of new customers don't believe they've received."
Here are some of the report's other central findings:
- Erie Insurance, MetLife, State Farm and USAA were rated the best for customer satisfaction among the 23 companies evaluated by J.D. Power. Farmers, Progressive, Safeco, 21st Century, Travelers and Mercury received the lowest marks.
- Customers are willing to stomach some rate increases. But premium jumps of more than $200 can triple the rate of those who change insurers.
- The longer customers had been with their previous insurer, the greater the savings when they switched carriers. The study says this is likely because they'd been experiencing rate increases over the years.
- Customers who were with their prior insurer for 11 years or longer before switching saved an average of $426 per year on premiums, compared with $291 among those who had been with their previous insurer less than two years before switching. Also, satisfaction for customers who had been with an insurer for at least 11 years before changing is higher than among those who were with their insurer less than two years.
- Among customers who are "highly satisfied" in their first year with their insurer, 81 percent remain with that insurer and only 41 percent shop around. Among customers with lower satisfaction in the first year, only 61 percent remain with that insurer and 61 percent look elsewhere.
When you compare insurance companies, use these tips to find those with excellent customer service
If, like those surveyed by J.D. Power, stellar customer service is a priority for you, here are four tips to keep in mind when you compare insurance companies:
1. What does your state's department of insurance say? Every state has a department that regulates insurers and is designed to protect consumers. Most of these departments publish "consumer complaint ratios" on their websites, which usually show how many complaints a company receives per 1,000 coverage claims. By comparing the ratios of companies, you can develop a useful profile before buying a policy. If your state department doesn't have "consumer complaint ratios," then check other states that do to get a clearer picture.
2. Who do body shops recommend? Edmunds.com suggests doing some leg-work to learn which insurers bring smiles instead of frowns from body shops that will be fixing your car after an accident. Body shop managers may alert you to potential hassles you could face with certain insurers.
3. Is the insurer financially stable? You can check out the financial strength ratings of companies through Standard & Poor's and A.M. Best. Both grade an insurer's ability to pay out claims, which is clearly something to know. For A.M. Best, only consider companies with at least a B+ rating. For Standard & Poor's, don't go below a BBB. This information may be at the insurer's website. If not, do a search at the sites of Standard & Poor's and A.M. Best.
4. Look for insurers with good satisfaction ratings. Besides J.D. Power's rankings, consider the companies that get good reviews from Consumer Reports. Also, Insure.com put USAA, State Farm and Farmers at the top of its 2014 customer satisfaction rankings. You might also turn to family and friends for their thoughts, suggests Penny Gusner, consumer analyst for Insure.com.
"Don't be afraid to ask friends and family if they are satisfied," she says. "First-hand knowledge from a trusted source can help you determine which insurer is best for your needs."