If you live in the United States, you must have an active car-insurance policy to legally drive a vehicle. As a result, auto-insurance is one of the most common types of insurance policies in the country. Knowing that, it would not be unreasonable to assume that most people tend to stick with their auto insurer for long periods of time. While that may have been true in the past, a recent analysis has found that customer loyalty is declining in today’s market.
Given the competitive market of the auto-insurance industry, many insurers turned to marketing in an effort to up their customer retention. Approximately $6 billion were spent by insurers on advertising in 2018 alone. Unfortunately, that advertising was focused on encouraging consumers to shop around, and that’s just what they have been doing.
A recent analysis by J.D. Power found that the total number of “at risk” consumers, meaning the number of consumers who are likely to switch providers, is at the highest it’s ever been since the industry starting tracking that metric two decades ago.
The Insurance Journal pulled some of the key metrics from this report. “The rate of auto insurance loyalty, as measured by those customers who will “definitely renew” their policy with their incumbent carrier, has fallen to 48% today from 59% in 2004 – constituting a 27% drop in auto insurance consumer loyalty,” writes the Journal. “Over the past year, the rate of switching among insurance shoppers has increased to 35% from 31%, helping to drive down overall insurance customer retention by two percentage points to 88%.”
The steady decline of brand loyalty is helpful for larger insurers that have fully optimized their acquisition strategies. However, this trend can be a significant roadblock for smaller insurers who are still trying to get their feet in the door. As acquisition costs grow higher, so to will the burden on small insurers.
For now, this is an interesting trend to keep an eye on. The reality is that Americans need car insurance now just as much as they did 20 years ago. What’s changing is where these consumers decided to get their policies and how quick they are to switch insurers if a better deal comes along.