That’s one of the questions that J.D. Power asked in the USA last month, after several big name car insurers offered partial premium repayments. In the UK, Admiral also stated they were going to refund £25 across the board to their van and car insurance customers. Nice gesture, but is it enough to head off consumer anger on social media against the insurance sector in particular after Corona related claims have been refused?
Her’s the word from J.D. Power;
The market research firm has been conducting weekly pulse surveys since March 24, reaching more than 4,000 total respondents. The most recent wave captures data through April 14. It finds that just 37% of customers are even aware of the discounts. However, those who are aware, are also 50% more likely to shop, switch or cancel their policies. Ultimately, the data finds that instead of provoking customer loyalty, the discounts appear to be pushing customers to seek alternatives. Oh dear.
Following are some of the key findings:
· Discounts too small to drive customer loyalty: Even though 57% of consumers that are aware of the premium relief offered by auto insurers believe that it will help to ease financial pressure, it clearly wasn’t enough. These customers are still seeking further premium relief, most common methods are reducing coverage (30%), shopping for another carrier (27%) and increasing deductibles (26%). They are also 1.8x more likely to shop, 1.3x more likely to switch and almost 2.0x as likely to cancel. The number of customers who say they will cancel their policy has grown 4X in the past 4 weeks (8% vs. 2%, respectively which represents approximately 9 million customers)
· COVID-19 response will provoke a surge in shopping: Once consumers become aware of the premium relief offered by their auto insurer they are almost 1.8x more likely to shop. One of the best ways to reduce shopping is to pro-actively reach out to your customers, but only 36% of customers have been contacted. Not reaching out when a consumer wants to hear from their carrier drives not only shopping, but an almost 50% increased likelihood of switching. If they haven’t been contacted by their carrier, but wanted to Nearly half (45%) of auto insurance customers say they plan to take action to reduce the cost of their auto insurance.
· Auto insurance customer satisfaction suffers: The number of auto insurance customers who say they are “very satisfied” with how their insurer is responding to COVID-19 has declined 27% over the last four weeks.
· Dramatic reductions in miles driven may be new normal: Nationally, 70% of auto insurance customers say they’re driving fewer miles than normal and 57% of auto insurance customers believe their average miles driven will remain lower, once stay-at-home restrictions are lifted.
Many UK consumers now believe that it will be a long time before normal commuting resumes and that means many policies based on annual miles really aren’t going to cut the mustard in future.
· Usage-based insurance on many customers’ minds: A whopping 40% of auto insurance customers say they are more willing to consider usage-based insurance last week—in which premiums are based on driving behavior and miles driven—due to COVID-19. This number is almost three times higher than it was three weeks ago.
Insurance Edge has long believed that PAYG car insurance, based on driving style, locations parked and routes chosen regularly, is far fairer than any annual premium system. If the industry builds something simple that links to smartphone data and a cigarette lighter plug-in gadget, it could be the perfect car insurance solution for the new normal after Corona.