During its most recent earnings call, Tesla’s CEO Elon Musk, announced that the company would be rolling out its own proprietary auto insurance product later this year.
In an article on Tesla’s quarterly earnings, an article in Business Insiderdiscussed how the new Telsa insurance product will likely be offered to new owners through the car’s Autopilot system thereby creating a totally new and highly customized insurance buying experience for consumers. As the article also noted this has long been in the works at Tesla and stems in part from the semi-autonomous vehicles difficulties in being insured via the traditional route. Mr. Musk is also quoted as saying that the new product will offer more “personalized pricing for drivers based on its proprietary data.”
So what does this latest development have to do with this year’s J.D. Power 2019 U.S. Insurance Shopping Study? Interestly three things: First, strong brand recognition matters, ease of shopping and innovation are the main ways in which agents, insurers, insurtechs and car companies are going to focus on in getting a larger share of the shrinking auto insurance consumer marketplace.
“That trend is having a profound effect on the relationship between insurers and customers. A more empowered customer increases the importance of factors such as choice, personalization and maintaining a strong reputation to win and keep their business. That puts significant pressure on insurers to get their customer models just right with the proper mix of self-service tools, strong brand awareness and an engaged distribution network.”
As the marketplace shrinks, current insurance shoppers obtain an average of three to four quotes when shopping
According to the latest J.D. Power 2019 U.S. Insurance Shopping Study, only 2-3% of new customers are entering the personal lines auto insurance marketplace each year. This is making for a highly competitive market place in which new customer acquisition depends upon the development of both a strong brand and a convenient shopping experience.
“We’re entering a new era of consumerism in the auto insurance marketplace, in which customers are in the driver’s seat when it comes to the shopping and servicing of their policies,” said Tom Super, Vice President of Insurance Intelligence at J.D. Power.
The result is a smaller marketplace in which insurers and agents need to stand out from the crowd.
“That trend is having a profound effect on the relationship between insurers and customers. A more empowered customer increases the importance of factors such as choice, personalization and maintaining a strong reputation to win and keep their business. That puts significant pressure on insurers to get their customer models just right with the proper mix of self-service tools, strong brand awareness and an engaged distribution network.”
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Amica and Liberty Mutual are the only two New England-based insurers to make the
Final takeaways for insurers and agents
The following are the JD Power’s takeaways for agents and insurers from this year’s survey…
- Shopping and switching rates put strain on loyalty: While very few new customers have entered the auto insurance marketplace this year, the number of existing customers shopping for new policies has increased by 4 percentage points to 33 shops per 100 policies. Likewise, the rate of switching among insurance shoppers has increased from 31% to 35% during the past year. These two factors have driven down overall insurance customer retention by 2 percentage points to 88%.
- Price and financial outlook related to shopping behavior: Price is the leading factor that triggers a customer to shop, with 64% of insurance shoppers citing price as their primary reason to look for new insurance and competitive pricing (33%) is the most influential driver of the decision to close with a brand. When customer satisfaction with price is lower, shopping rates are higher the following year. Conversely, when satisfaction with price is higher, shopping rates are lower the following year. Shopping rates are also higher when customers have a more positive personal financial outlook.
- Direct and independent agent models resonate with customers: The direct and independent agent channels continue to show increasingly higher levels of customer satisfaction, while the exclusive agent channel is falling behind. In the shopping process, top-performing insurers are operating as customer-facing brands. For instance, insurers that achieve the highest consideration and quote rates among profiled insurers also achieve strong unaided awareness and are perceived as having likeable advertising, competitive pricing and being innovative.
- Unaided brand awareness critical for attracting insurance shoppers: Insurance shoppers obtain an average of three to four quotes when shopping, making it critical for insurers to be top-of-mind to make it into the consideration set. Brands recalled on an unaided basis are twice as likely to be considered and quoted than brands that are only recognized on an aided basis.
- High-value customers become next frontier: High-value shoppers, a segment of the marketplace that represents preferred risk profiles, better credit scores, fewer traffic violations and more insurance products, account for 22% of all insurance shoppers identified in the study. Currently, very few insurers are gaining more high-value customers than they are losing, underscoring the importance of attracting and retaining this lucrative subset of the market.
