Lewis & Ellis Inc.

How do consumers feel about their auto insurance?

Property and Casualty Insurance
by Dave Palmer
How do consumers feel about their auto insurance?
How do consumers feel about their auto insurance?

There are very few laws about what kind of insurance people do or do not have to carry, but auto insurance is nearly universal. Only two states that do not mandate consumers to purchase coverage as a condition of being able to operate a vehicle, which translates to hundreds of millions of auto insurance customers across the United States. This is a big reason why auto insurers are so aggressive in their marketing efforts.

But the issue for many insurers is that, since it's mandatory, it's not always easy to differentiate yourself from the field of competitors large and small — and it's often just as difficult understand what consumers do or don't like about their specific coverage. Broadly speaking, though, consumers see the value of their auto insurance, and will increasingly rely upon it as the effects of the pandemic wind down.

It should be noted that as tens of millions of Americans stayed home from work (and therefore drove significantly less) for the majority of 2020, auto insurers provided discounted premiums, all of which added up to some $18 billion in savings for motorists, the J.D. Power 2021 U.S. Auto Insurance Study showed. Despite this fact, satisfaction with auto insurers among customers is unchanged from where it was in 2020, before the pandemic hit, with a rating of 835 out of 1,000. This marked the first year in the last five that there was no improvement in auto insurance customer satisfaction.

How will the post-pandemic world affect auto insurance?How will the post-pandemic world affect auto insurance?

Why? It seems as though communication was the key factor. People unsurprisingly enjoyed the discounts quite a bit (price satisfaction rose more sharply than any other consideration J.D. Power examined), but people felt as though they had a more difficult time communicating with insurers across most channels. That was especially true for chat and email contacts, but also call centers, websites and direct connections with agents. One salient fact underscores the significance of this communication problem: Nearly half of all respondents (48%) didn't know their insurers cut their premiums during the pandemic. Those people tended to have a dimmer view of their insurers than the 52% who knew about the COVID relief.

Back on the road
As the effects of the pandemic ease and restrictions loosen, 50% of Americans say they plan to travel this summer, according to a recent survey from Generali Global Assitance. While that number is down from the 68% who indicated such plans in 2019, it's certainly a step in the right direction. It's further believed that things will fully return to normal on this front next summer. In the meantime, Americans who have already made their summer travel plans heavily favor domestic travel to going abroad, typically looking to visit beaches. Often, that will entail driving to their preferred destinations.

"While travel numbers are down for this summer, budgets are remaining very close to pre-pandemic numbers and there is an optimism that the future is bright for Americans traveling both domestically and abroad," said Chris Carnicelli, CEO of Generali Global Assistance.

All of which means that many Americans will be coming together to hit the roads en masse once again this summer. This fact, as well as the reality that people are going back to in-person work in droves at the same time, will likely lead to more accidents (or at least more wear and tear on vehicles) that could result in people filing auto insurance claims in the second half of 2021 and beyond.

A big comeback
By most measures, the grip of the pandemic began to ease in many parts of the country around the start of the second quarter, and CNBC says the consumer price index reading for auto insurance reacted quickly. On an annual basis, there was a 6.4% increase in this measure over the course of April, and then a 16.9% spike in May, as nationwide driving activity rose roughly 19% for all purposes, whether it was vacation or just commuting to work.

The good news for consumers is that because of recent price cuts, even higher prices for their premiums in the near future potentially won't end up costing them more than they paid before the pandemic hit.

"It's still a good environment for consumers who are purchasing auto insurance," Elyse Greenspan, a managing director at Wells Fargo, told the network. "There's just a lot of headwinds from a severity and a frequency perspective."

What comes next?
It should be noted that while tens of millions of Americans largely stayed home during the pandemic, those who were on the road tended to be more reckless. Money.com points out that while the number of miles driven last year fell sharply, and the number of overall accidents was down, instances of deadly and injurious crashes spiked. Those incidents tend to be more costly for insurers.

As such, that new reality could, in turn, lead auto insurers to start raising prices more sharply when policies need to be renewed in the next few months and beyond. Some of those increases may be the result of insurers trying to make up some of the money they lost due to the increased risk, even if their overall costs might have been down somewhat because there were fewer accidents.

However, the real concern is that some of the newly learned driving behaviors that led to more accidents might continue as more Americans hit the road once again. If the number and severity of accidents rise at the same time, there could be an even more noticeable increase in rates in 2022.

With all of this in mind, one thing is clear: People are certainly going to drive more in the months ahead, and hearing from their auto insurers about what they can do to keep costs down and avoid risk could be key to keeping them happy. If communication is a driver of satisfaction overall, more outreach may go a long way toward ensuring a quality, long-term relationship between insurers and motorists.



Consultants to Contact