UBI, negative claims experiences influence auto shopping: J.D. Power

Unsatisfying claims experience, exacerbated by supply chain issues, are causing consumers to shop with different auto insurance carriers. 

That’s according to J.D. Power’s “The Five Forces Influencing P&C Insurance Shopping” report, which highlights the trends and forces that are altering the insurance shopping environment, including inflation and changes in insurers’ marketing strategies. The report also discusses the increasing adoption of usage-based insurance (UBI).

There was a 20% increase in UBI offers to auto insurance customers from their current carrier. That still is only 28% of total customers, however, the company notes. UBI adoption itself is up, with 17% of consumers responding that they are in a UBI program versus 12% in 2020.

The report also references the “J.D. Power 2022 U.S. Auto Insurance Study,” which finds that 16% of consumers currently participate in a UBI program and 32% would have previously enrolled or would enroll if a program were available. 

“Generally speaking, consumers are demanding personalization in many of their purchases and auto insurance is no exception,” writes Stephen Crewdson, Senior Director, Global Business Intelligence of Insurance at J.D. Power. “By way of example, the pandemic brought to light to many consumers the benefits of sharing your driving data with your insurer as those with UBI who found themselves driving far fewer miles in 2020/2021 saw their insurance premiums reflect their decreased mileage without any communication with the insurer on their own part. In today’s environment of rapidly increasing auto insurance premiums, the many benefits of UBI are attractive to an ever-increasing share of U.S. drivers.”

Meanwhile, vehicle repairs times have increased from 12 days in 2020 to 17 days in 2022, and customer satisfaction has decreased since 2021, according to the “J.D. Power 2022 U.S. Auto Claims Satisfaction Study” cited in the report. This dissatisfaction with the auto claims process is leading to increased insurance shopping – J.D. Power’s fourth quarter LIST results show “the highest rate of customers citing a poor recent claim experience as their main reason for shopping in the more than two years we have collected LIST data,” stated in the report.

The same study shows that two-thirds of UBI participants receive a discount, with 13% seeing savings of 20% or more. One-third of auto insurance consumers enrolled in UBI do not receive a premium discount, but the study indicates that even those who do not see savings are more satisfied with their insurance carriers than those  not involved with a UBI program. The report also notes that buyer satisfaction increased when UBI was offered, whether or not the customer accepted. 

“UBI offers customers the opportunity to have their insurance premium set based on how they drive, as an individual, not what broad rating class they fall into. Consumers value this personalization as they do in many other aspects of their lives,” explains Crewdson. “Furthermore, not receiving a discount today does not mean you won’t receive one tomorrow if your driving habits were to change. Many UBI programs offer tips (based on the individual’s actual driving behaviors) on how to become a ‘less risky’ driver. This personalized pricing and for many consumers, the feedback on driving behaviors, lead to a better customer experience.”

The report notes that UBI offerings may affect shopping behavior as the potential savings from such programs could outweigh the savings seen in home and auto bundling, as consumers are driven by price concerns and may see a benefit in purchasing policies with different carriers. 

But underlying the insurance shopping environment is the dissatisfaction felt by consumers throughout the claims process. Added pressures from inflation and supply chain issues contribute to customer frustrations, though many are aware that the carrier is not directly responsible for such issues, as noted in the report.

“Our Auto Insurance Study finds there are a variety of Key Performance Indicators that drive higher overall satisfaction among U.S. auto insurance customers,” Crewdson writes. “Some of the more influential KPIs include: Ensure customers completely understand their policy and what it covers, avoid implementing insurer-initiated premium increases [and] avoid customers having to repeat information when interacting with the insurer.”

He also notes, “Online service channels play a significant role in satisfying auto insurance customers. Whether for the more mundane day-to-day interactions or the more important claims experiences, digital channels are helping industry leaders distinguish themselves from the competition by offering quicker/easier service, faster claims reporting, etc.”