Insurance Purchases Begin Online

One of the most popular tips for saving money on auto insurance is to shop for it online, but how many people actually follow this advice? According to the recently released results of the J.D. Power and Associates 2011 U.S. Insurance Shopping Study, for the first time ever, more new auto insurance purchasers at least started the process online than those who followed more traditional, offline, methods of shopping.

The study, now in its fifth year, looks at the shopping and buying patterns and satisfaction of people who are recent buyers of car insurance. Specifically, three different factors are examined, and ranked in order of importance: distribution channel, policy offerings, and price, and the results are interesting:

Distribution channel results show that an insurer’s website now accounts for more than a quarter of the importance result, coming in second only to the presence of a local agent. As well, over half of all insurance shoppers, or 54%, said they got their quotes online. This demonstrates that websites have become the dominant source of leads for the auto insurance industry.

In fact, according to Jeremy Bowler, senior director of global insurance practice at J.D. Power, “While nearly one-half of all accepted Web quotes are closed by either an agent or call center representative, customers are clearly more often looking to insurers’ sites or third-party sites in the early stages of the shopping process, and this behavior is blurring the lines of how we traditionally think about the discrete sales channels.”

The shopping study also found that policy churn – the rate of customers’ switching companies – has increased in the last two years, and is now at a level unseen since 2008. This is caused, in part, by a combination of factors, including the fact that 33% of insurance shoppers now engage in serious comparison shopping, as opposed to only 30% last year, and 27% in 2009. As well, among those consumers who said they had shopped for insurance in 2011, forty percent switched to a new provider. Last year, that number was only thirty-three percent.

Bowler elaborated, “In 2010, the insurance industry spent $5 billion on marketing and advertising, with the top four companies alone spending more than $2.6 billion. As a result, the rate of shopping has increased significantly year over year, as has the policy defection rate. A majority of the customers shopping for a new insurer are doing so either because of a life event that has changed their insurance needs, or because they are looking for a better deal. However, no group is more interested in switching than customers who are displeased with the service provided by their incumbent insurance company.”

So which insurance companies got the best ratings from this year’s survey? At the top, with a score of 864 out of a possible 1,000 points is American Family Insurance, which scored particularly highly in the areas of policy offerings and distribution channel factors. The other two thirds of the top three were Auto-Owners Insurance (860/1,000) and Erie Insurance (857/1,000)

The responses for the 2011 U.S. Insurance Shopping Study were provided by more than 15,500 customers who requested auto insurance quotes from at least one company during the last twelve months. More than 75,500 unique insurer evaluations were provided, and the actual study was fielded during the months of March and April, 2011.