Auto insurance

Rising auto insurance premiums erode home/auto bundling, survey finds – InsuranceNewsNet

The future of the home and auto insurance bundle, once a mainstay of P&C insurance, customer loyalty and lifetime value strategies, is in question as legions of customers have begun to break their policies, according to the JD Power 2022 U.S. Home Insurance Study. The rapid increase in car insurance premiums is largely responsible for the potential defection of consolidators.

The consolidation is extremely important for the insurance industry, explained Marty Ellingsworth, executive managing director of Global Insurance Intelligence at JD Power. Like any transaction with a cost, the expense is smaller in proportion to larger and larger sales. “So,” he said, “finding a customer with two or more insurable assets that you can handle in one phone call creates the ‘bundle’ sale, which is often rewarded with ‘bundle savings’.

For many who follow personal lines insurance, a common package would be the car-plus-home package (aka a Robinson household), Ellingsworth added. Some carriers offer a combination of multi-product bundling opportunities, while others only encourage a car-plus-home combination.

In any neighborhood, one would observe households at every stage of life, he added, and shared the following examples: “just a car and living with friends”, newly married tenants, a new couple of owners, a house full of children who become teenagers, the empty nesters and the residences of widows/widows.

“If you can keep big customers as happy as small customers, your customer retention spend ratio is also proportionally lower,” Ellingsworth said. “Often you hope small customers grow, but it’s more subtle that big customers can grow as well, often at an even faster rate, but sometimes at greater risk,” such as when teenage drivers do part of the mixture.

Effects of beam attenuation

The weakening of the beam has several effects, according to Ellingsworth. For example, when the consumer’s savings in the bundle are diminished or offset by price increases for one or more products, the consumer naturally considers options for better savings, he said. Additionally, traditional “consolidators” have better retention rates, likely due to cost savings. Finally, he added, there is the convenience of doing business with one company.
“But if a happy bundler sees better savings by switching products and/or suppliers, their traditionally higher retention rates will suffer,” Ellingsworth noted.

Key findings from the survey include:

Overall satisfaction has decreased, led by home and auto consolidators: Overall owner satisfaction decreased by 6 points (on a 1,000 point scale) and tenant satisfaction decreased by 7 points this year. Declines among owners are driven by a sharp decline in price satisfaction, which is most pronounced among auto consolidators, where customers experienced a 10-point drop in price satisfaction, while non-consolidators n only experienced a drop of one point.

Retention rates are significantly lower among non-aggregators: The average retention rate for home insurance customers among those who bundle their home and auto policies was 95%. Among non-consolidators, this rate fell to 85%. Similarly, among tenants, consolidators had a retention rate of 95% and non-consolidators a retention rate of 82%.
Automatic premium increases jeopardize bundled home policies: Nearly a third (31%) of consolidators said they would “definitely” switch home insurers if they changed auto insurers after an insurer-initiated auto premium increase. Auto premium increases initiated by insurers also had a negative impact on the retention and defense of home insurance intentions, regardless of pool status.

According to the survey, Amica Mutual ranked first in the home insurance segment for the second consecutive year, with a score of 849. American Family (842) ranked second and The Hartford (839) placed third. Nationwide ranked first in the renters insurance segment with a score of 859, Lemonade (853) ranked second, and Automobile Club of Southern California (852) ranked third.

The US Home Insurance Study examines overall customer satisfaction with two lines of personal insurance products: homeowners and renters. Satisfaction in the home and renters insurance segments is measured by looking at five factors: interaction; policy offers; the price; billing process and policy information; and claims. The study is based on responses from 11,630 landlords and tenants via online interviews conducted from May to July 2022.

Ayo Mseka has over 30 years of experience reporting on the financial services industry. She was previously editor of NAIFA’s Advisor Today magazine. Contact her at [email protected].

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