Rapidly rising auto insurance premiums are largely to blame for the breakup of the home and auto insurance bundle, according to the J.D. Power “2022 U.S. Home Insurance Study^SM" released this week.

The future of home and auto bundles, once a mainstay of property-casualty insurance, is being brought into question as legions of customers have started to break up their polices, the study found. 

“Sky-high auto loss costs and resultant auto premium increases are creating ripple effects throughout the insurance industry and, as a result, one area that is being severely disrupted is the home and auto insurance bundle," said Robert M. Lajdziak, director, global insurance intelligence, J.D. Power.

“Homeowners, and particularly bundlers, have traditionally been less price-motivated than the typical monoline auto customer, but we are beginning to see cracks in that foundation," Lajdziak said. “That puts the focus for insurers squarely on the overall brand experience their customers are receiving—across all lines—and on understanding how changes in one area, such as telematics adoption in an auto policy, can affect the entire customer journey."

The study examines overall customer satisfaction with homeowners and renters insurance, including: policy offerings; price; billing process and policy information; and claims. The results show that the increase in auto premiums is dragging down the overall satisfaction of policyholders and hurting retention rates of bundles. And it may get worse if rates continue to rise, according to the report.

Four of the key findings from the study include:

1) Overall satisfaction declines, led by home and auto bundlers. Overall homeowner satisfaction decreases 6 points and renter satisfaction decreases 7 points this year. The declines among homeowners are driven by a sharp drop in price satisfaction, which is most pronounced among auto bundlers, where customers experience a 10-point decline in price satisfaction. Non-bundlers only saw a 1-point decline.

2) Retention rates are still significantly lower among non-bundlers. The average homeowners insurance customer retention rate among policyholders who bundle their auto and home policies is 95%. Among non-bundlers, that rate drops to 85%. Similarly, among renters, bundlers have a 95% retention rate and non-bundlers have an 82% retention rate.

3) Auto premium increases put bundled home policies at risk. Nearly one-third (31%) of bundlers say they “definitely will" switch their home insurer if they switch their auto insurer after an insurer-initiated auto premium increase. Insurer-initiated auto premium increases also negatively affect home insurance retention and advocacy, regardless of bundling status.

4) Direct-to-consumer carrier awareness on the rise. Overall, nearly one-fourth (23%) of home insurance customers are aware of direct-to-consumer offerings from companies like Lemonade, Hippo, Kin, Openly, Jetty and Trove. Among homeowners not currently insured by Lemonade but are aware of the brand, 34% say they “definitely will" or “probably will" purchase from Lemonade if it is available in their state.

The study also ranks carriers on overall customer satisfaction with homeowners and renters coverage, with Amica Mutual ranking the highest in the homeowners insurance segment for a second consecutive year, with a score of 849. American Family (842) ranks second and The Hartford (839) ranks third. Nationwide ranks highest in the renters insurance segment with a score of 859. Lemonade (853) ranks second and Automobile Club of Southern California (852) ranks third.

Olivia Overman is IA content editor.