J.D. Power: Despite cycle time decrease, premium increases erode consumer trust and lead to record-high shopping
By onAnnouncements | Insurance
According to J.D. Power’s 2024 U.S. Auto Claims Satisfaction Study, the overall average repair cycle time is 22.3 days, down one day compared to 2023.
The average repair cycle time for claims filed in Q3 2024, later in the fielding period, was 18.9 days — down five days from 23.9 during Q4 2023, early in the fielding period. The study was fielded from October 2023 through August 2024.
However, repair costs have gone in the opposite direction, with the average rising 26% in the past two years, and premiums have followed suit rising 15% during the past year, according to J.D. Power.
“The claims process is the moment of truth for auto insurance customers, so when they experience rate increases and then have a claim with longer-than-expected repair times and other inconveniences, their overall trust in the brand is greatly diminished,” said Mark Garrett, J.D. Power’s director of global insurance intelligence, in a press release.
“In fact, 80% of auto insurance customers who have poor claims experiences have already left or say they plan to leave that carrier. That makes this year’s significant improvement in repair cycle times very good news for insurers and their customers. However, premium increases have created a new challenge for insurers as trust is eroding and affecting the way customers view their claims. There are still many challenges the industry needs to navigate to maintain customer loyalty.”
When results are broken out into the quarter during which the claim was filed, cycle times have improved steadily since peaking in early 2023 for a total five-day reduction throughout the fielding of this year’s study, J.D. Power said.
Overall, 48% of study respondents said their insurance premium increased during the past year. According to J.D. Power, satisfaction is particularly low among those who incurred increases before their claim, and those customers may have been entering the claim process already upset by rising prices.
“The study shows that these customers were more likely to have an issue — such as communication with the insurer not being very easy or timing expectations not being managed — and thus they didn’t feel more at ease after submitting their claim. Furthermore, nearly half of those increases were attributable to claims,” the release says.
“Compared with those customers who did not have an increase, satisfaction scores fall more than 100 points (on a 1,000-point scale) following a claim-related rate increase. This negative effect is most pronounced among Boomers1 and Pre-Boomers, with a 178-point decrease in trust following a claim-related rate increase.”
For the past three years, claims filed via call centers or agents outperformed digital channels but now digital is receiving higher scores with mobile apps achieving the highest. Satisfaction is higher among those who stay in the app to submit photos and receive status updates (775) than for all other digital experiences. However, this group comprises only 13% of customers.
Baby Boomers and pre-Boomers are still hesitant to adopt fully digital processes, with 32% stating they disagree with being comfortable using digital tools for the entire claim, according to J.D. Power’s findings.
Customers also rate digital channels lower than speaking with someone if they have a specific question.
The No. 1 key performance indicator in the study is to ensure that communicating with insurer representatives is easy, J.D. Power said.
“Being accessible, responding in a timely fashion, reps providing consistent service, managing timing expectations, and providing options for proactive updates are all critical elements of communication throughout a claim,” J.D. Power said. :This is another area in which digital tools play a key role in customers’ ability to access information and stay informed.”
NJM Insurance Co. ranked highest in overall customer satisfaction with a score of 782 followed by Amica (746) and Erie Insurance (733).
The U.S. Auto Claims Satisfaction Study was redesigned for 2024. Scores are not comparable year over year with previous studies. The 2024 study is based on responses from 9,725 auto insurance customers who settled a claim within the past nine months before participating in the survey.
Customer experience was measured across eight core dimensions (in order of importance according to J.D. Power):
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- Trust
- Fairness of settlement
- Time to settle claim
- People
- Communication
- Ease of resolving claim
- Ease of starting claim
- Digital channels
The study excluded claimants whose vehicle incurred only glass/windshield damage, was stolen, or who only filed a roadside assistance claim.
Regarding insurance policy shopping, J.D. Power’s latest Loyalty Indicator & Shopping Trends (LIST) report states that during Q2, saw a record high as consumers sought out lower premiums.
Q3 started with a steep drop in shopping in July but increased in both August and September reaching a record high of 13.8% in the latter.
“Overall, this led to a slight drop in the quarterly rate but with shopping accelerating on a monthly basis, Q4 could break with trend and show elevated shopping for auto insurance,” J.D. Power said in the report.
Shoppers were evidently able to find better premiums in Q3 based on the switch rate increasing to 4.2% during that time, setting a new quarterly high in the LIST data series, according to the report.
August saw 4.6% of respondents switch auto insurers during the 30 days before they were surveyed, setting a new monthly record high.
“In this environment of increased switching/defection, a few carriers stand out as having higher loyalty with their customers: NJM Insurance, Erie Insurance, CSAA, Amica, and ACSC,” J.D. Power said.
Nationwide, SafeCo, Auto-Owners, Farmers, and Allstate saw lower loyalty among those surveyed.
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Featured stock image credit: Jinda Noipho/iStock
Graphs provided by J.D. Power