In 2019, the rate of switching among insurance shoppers increased from 31% to 35%, helping to drive down overall insurance customer retention by two percentage points to 88%, according to the J.D. Power 2019 U.S. Insurance Shopping Study.
One of the factors behind consumers’ willingness to shop their auto coverage is the fact that the average cost of auto insurance has risen at twice the rate of median household income across the U.S. over the past decade, according to the J.D. Power study.
Amidst seemingly inexplicable rate differences from household to household, the heavy marketing presence of major insurance players and direct writers, and the availability of price comparison websites, it is unsurprising that consumers are more inclined to abandon their incumbent and make a switch.
In an increasingly complicated market where insurance needs vary from an individual using or renting their car to participate in the sharing economy, to a college student using the family-owned car on weekends, switching auto insurance providers can land drivers in hot water, especially if they’re driven to do so by price.
For independent agents, the solution to protecting prospects and clients relies on a combination of education and personalization.
“Knowing a driver’s actual driving behaviors and patterns remains one of the most powerful rating variables,” says Diana Palinski-Roberts, distribution manager, North Central Region, Progressive Insurance. “At a minimum, agents should understand the gig economy and transportation networks, like Uber and Lyft, and which carriers have endorsements available and the impact to customers.”
“Agents need to have their fingers on the pulse of the industry,” she says. “That way they can be ahead of customers asking questions like: Can I use my personal car for Uber trips and be covered under my current policy?”
For the family unit, there are a lot of coverage gaps that an insured needs to be aware of. For example, “if they have a nanny driving their car, especially with carpool situations, that’s something that a lot of people don’t think about,” says Laura Sherman, founding partner of Baldwin Krystyn Sherman Partners in Tampa, Florida.
Also, for clients whose kids go away to college, “they don’t think about the fact that insurance follows the vehicles and a lot of times college kids are loaning out their cars,’” she adds. “We had quite a few clients who’ve had lawsuits as a result of their children’s friends driving their child’s car.”
To stay up to date with clients’ changing lifestyles and look for any uncovered risk, Baldwin Krystyn Sherman Partners stay in touch with clients throughout the year by sending an annual self-audit email.
“If they’ve started driving for Uber or DoorDash, they’re now renting out their car or have a child at college, the audit uncovers potential risks,” Sherman says. “It also reinforces your value by making sure your clients understand their risk and how their policy can respond in the event of a loss.”
Understanding a client’s lifestyle and family dynamic can also provide a benefit beyond auto insurance. “Most carriers offer some form of bundling discounts or enhanced coverage when the auto and home are packaged, which can increase retention for the agency and drive up the lifetime value of a customer,” says Dan Halsey, president, personal lines at The Hanover Insurance Group, Inc.
“Many clients are interested in having the right coverage, which may not necessarily be the cheapest,” he says. “We live in a comparative rater world with over $7 billion of advertising focused on cheaper pricing. Helping customers to understand the coverages and added benefits of an auto insurance option, beyond price alone, can guide them to a policy that fits their lifestyle.”
The doorway to personalized insurance is education. “There are so many great resources out there,” Sherman says. “I get a lot of videos and brochures from numerous sources, such as the Insurance Institute for Highway Safety. And a lot of insurers even have teen driver contracts, so we put together a kit whenever we have a teen driver added to a policy.”
Furthermore, Sherman stresses that agents will not be given the opportunity to personalize their client’s coverage if their customer service isn’t up to scratch. As consumers frequently go online to compare prices between insurers, “they’re comparing their insurance provider to their last great client experience,” Sherman explains.
“It could even be the pizza shop that remembers your order and asks to reuse the card details on file that’s being compared with their independent agent experience where insurance agencies often rely on the client to provide all information time and time again, ‘What’s your policy number? What’s your name?’” she says. “Historically, independent agents aren’t leading the charge on being client-centric. But the more we can customize our service, education and policies, we will thrive.”
Will Jones is IA senior editor.