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2016 U.S. Insurance Shopping Study: Insurers Lean on Online Presence to Grow Premiums

2016 U.S. Insurance Shopping Study: Insurers Lean on Online Presence to Grow Premiums

By Joseph Dobrian, May 01, 2016
The J.D. Power 2016 U.S. Insurance Shopping StudySM shows a relationship between online presence and premium growth among leading insurance providers. The study, now in its 10th year, measures auto insurance shopping, purchase behavior, and purchase experience satisfaction among customers who recently purchased car insurance. The study measures satisfaction in three factors (in order of importance): Price, Distribution Channel, and Policy Offerings.

According to SNL Financial, direct premiums written (DPW) in the personal lines auto insurance market in the United States increased by approximately 4.7% to $199 billion in 2015, with much of that growth coming from new business generated by direct writers.

“Direct writers have invested heavily in digital channels to increase the functionality and ease of using their websites, which has clearly created an advantage for direct distribution relative to traditional agency distribution in some respects and has supported agency distribution in others,” said Greg Hoeg, vice president of U.S. insurance operations at J.D. Power.

Online Shopping Gains Importance
Consumers shopping for insurance providers often look for them online: the study shows that 74% of shoppers use insurer websites or aggregators for obtaining quotes and researching information. While nearly half of shoppers obtain a quote via insurer websites, only 25% actually purchase their policy online; 50% close the purchase through direct contact with an agent; and 22% do so by phoning a call center.

The study also shows that agency writers quote nearly as many shoppers on their website as they do through their agency channel (38% vs. 40%, respectively). However, only 10% of agency writers’ new business is closed on the website. In efforts to improve online close rates, some insurers are offering online shoppers virtual chats with a representative or agent.

“While many consumers want to shop online, they often still want to talk to someone when they buy their insurance to make sure they are getting the right coverage or have questions about their policy answered,” said Hoeg. “Insurers need to focus on the delicate balance of providing an easy shopping experience while providing product differentiation and professional service.”

Fewer Auto Insurance Customers Shopping
Since insurance premium prices are remaining flat or trending downward, customers seem to be shopping less. The study finds that fewer auto insurance customers are shopping for a new insurer, with 33 shops per 100 policies in 2016, compared with 39 in 2015. Among those who are shopping, only 30% actually switch, the same pace as a year ago. Customers who switch are saving an average of $356 on their annual premiums, which is less than the average $388 savings for those who switched in 2015.

“With more price competition and smaller savings, there simply is not as much motivation for most customers to switch,” said Hoeg. “Many policyholders see insurance as a price-differentiated commodity, and shoppers are opting to remain with their incumbent insurer as they find the savings offered by competitors is not as great as they had expected, or as much as they saved the last time they switched.”

Overall Satisfaction Slips; Erie and Liberty Mutual Lead Field
Satisfaction with the purchase experience among customers who recently bought a new policy drops to 826 (on a 1,000-point scale) in the 2016 study from 833 in 2015. Young shoppers have the highest adoption rate of online-only quoting, with 29% of those born between 1965 and 1994 getting their price quotes exclusively online. Only 17% of customers born before 1946 are getting their quotes only through online channels. Close rates are more than 1.5 times higher when shoppers get quotes on insurer websites and use the assisted online options, compared with overall close rates through the website.

Erie Insurance and Liberty Mutual rank highest (in a tie) among auto insurers in providing a satisfying purchase experience, each with a score of 853. This marks the fourth consecutive year Erie Insurance has ranked highest in the study. The Hartford ranks third (850), followed by American Family (845) and Automobile Club Group (840).

About the Study
The 2016 U.S. Insurance Shopping Study is based on responses from more than 17,000 shoppers who requested an auto insurance price quote from at least one competitive insurer in the past 9 months and includes more than 50,000 unique customer evaluations of insurers. The study was fielded in April, July, and October 2015, and January 2016.

Consumer Tips

Based on the study, J.D. Power offers the following consumer tips:

  • Look for car insurance websites that provide clear information about policy options and about how your premium will be calculated.
  • If an insurance website makes it easy to contact an agent directly, that might indicate a service-oriented company.
  • Compare policies and premiums on several websites, record the information, and develop a list of questions to ask your agent.
  • Ask your agent about ways to lower your premium.

Additional Research:

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