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Outcry Auto Insurance ‘Too High’

eai-4For years, the only thing harder to do than unseat an incumbent in Congress was to get a claim free insurance customer to switch auto insurance. For most people, the semi-annual renewal notice was a bill. Bills are to be paid. Auto insurance was something that was rarely even considered, but a public outcry has developed over car insurance being too high.

Statistics bore this out. Surveys of American insurance customers routinely resulted in a satisfaction rating of anywhere from 94-96%. Renewal rates paralleled the satisfaction numbers. This isn’t the case anymore. In fact, customer satisfaction has fallen to 79% in 2013. That reflects a whopping 12% decline in just one year! WiseInsuranceQuotes.com sees a startling trend afoot. We wanted to find out why.

Rate Increases were the top complaint. No surprise. What does surprise, though, is the number of people surveyed by J.D. Power and Associates who felt that the rate increases were both too large and not satisfactorily explained by their carrier.

“In 2013, there is a sharp rise in the number of customers who have experienced premium increases,” said Jeremy Bowler, J.D. Power’s senior director of global insurance studies. “The dollar amount of those increases is also larger, averaging $153 in 2013, compared with an average rate increase of $113 reported in the 2012 study.” Save 50% on Car Insurance. Search for Rates.

Of course profit margins for auto insurers have usually been tied to a factor that has nothing to do with premiums and claims. Most large carriers make their large profits with investment income. Under-performing and low return investments have caused insurers to apply for new rating structures (read that, raise your rates) in many states. This factor has always been considered too arcane to pass on to the insurance customer.

But the consumer revolt that is bubbling in the auto insurance world isn’t just about dollars and cents. Insurance companies would do well to heed the second reason for dissatisfaction cited above. Customers feel like the rate increases are being forced on them without explanation. Folks get frustrated when they feel like a bill is presented as an arbitrary number.

Buried in some of these negative numbers is a possible solution to the perceived communication gap. Customers, who were given prior notice of a rate hike, a reasonable explanation, and some options for lessening the blow, gave an 87% satisfied score to their current auto insurance carrier.

Remember when your Dad said, “Tell me the truth and you won’t get in trouble?” While it may or may not have turned out to be true back then, apparently it’s a good policy for an insurance company in today’s market.

It’s just common sense — and good business sense — for insurers to open up more, says Pete Moraga, a spokesperson for the Insurance Information Network of California.

“It’s important that insurers and agents offer the best guidance on how to minimize risk and costs,” he says. “There has to be a direct discussion of the factors, so that consumers can make smart decisions.”