Auto insurance rate hikes erode price satisfaction and lead to increased value purchases


Auto insurers are caught between a rock and a hard place.

On one side: the galloping demand for used vehicles which has driven prices up by an average of 41% in 2021, pushing the costs of replacing and repairing vehicles into uncharted territory. On the other: frustrated customers, disappointed by the price increases put in place by insurers to cope with this rising cost, who are now seeking better, more personalized policies at their own risk.

According to J.D. Power 2022 U.S. Insurance Shopping Study, released May 23, auto insurance customer satisfaction with price plummeted, leading to increased new policy buying activity while also dragging the index of shopping experience.

“A perfect storm of record-breaking replacement costs, increased frequency and severity of collisions and an economic outlook that suggests this situation will not change any time soon are forcing major disruption to the industry,” said Marty Ellingsworth, executive general manager of P&C insurance intelligence at JD Power. “In the short term, this disruption manifests itself in very low customer satisfaction with price and high rates of new policy purchases. In the longer term, this may be the catalyst for significant adoption of usage-based insurance, which may be the only way for insurers to navigate financial realities while successfully engaging with customers and retain them by meeting their specific needs.

Here are some key findings from the 2022 study:

Auto insurance customer satisfaction plummets: The average overall auto insurance buyer satisfaction score is 862 (on a 1,000-point scale), down six points from a year ago. In total, six of the nine large insurers and six of the 11 medium-sized insurers are seeing a decline in shopping experience satisfaction scores this year.

Price hikes drive new policy buy rates: Buy rates were down at the start of 2022 compared to 2021, but recent rate increases seen in March and April bring buy rates back to historical norms. The top drivers for finding new policies for retained and switched buyers are proactive price verification (51%) and price increases (35%). Of those shopping for a new policy because of a rate hike, 64% experienced a price increase of 11% or more.

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