31% of US auto insurance customers experienced a rate increase during the past year as the industry raises rates an average of 15.5%, and insurers continue to battle through the forces of record high loss ratios.
At the same time, auto insurers also lost an average 12 cents on every dollar of premium they collected in 2022, marking the worst performance in more than two decades. This left them with very few alternatives but to raise rates at the expense of customer satisfaction.
As a result, customer satisfaction within auto insurance has seen a drop. According to the J.D. Power 2023 US Auto Insurance Study, satisfaction has dropped 12 points – on a 1,000-point scale – year over year.
This makes it the biggest decline seen within the past 20 years.
J.D. Power noted that the decline was largely driven by lower satisfaction with the price customers pay for insurance, a factor that has declined 25 points this year.
According to the study, more customers likely experienced increases but awareness is affected by the method and frequency of billing and payments. Among those customers who received a bill in the mail and paid in full via credit card, 45% of them said they had a price increase, compared with more than 28% of those who received a digital bill and made automatic recurring installment payments.
Elsewhere, participation in usage-based insurance (UBI) programs has more than doubled since 2016, with 17% of auto insurance customers now participating in such programs. Price satisfaction among customers participating in these programs is 59 points higher on average than among non-participants.
However, while more customers have adopted UBI, the programs are still relatively new to the industry. 33% of customers currently using UBI have been on the program for less than one year.
“Overall customer satisfaction with auto insurers has plummeted this year, as insurers and drivers come face to face with the realities of the economy,” said Mark Garrett, director of insurance intelligence at J.D. Power.
“While insurers are caught between a rock and a hard place when it comes to balancing profitability with customer experience, there are several ways they can blunt the negative effects of rising costs, such as proactively offering customers UBI alternatives, clearly signaling and explaining necessary rate increases and consistently delivering on brand promises to instill trust.”
