Usage-based insurance sees record levels of adoption


 Usage-based automobile insurance programs have seen a dramatic increase in uptake since 2016, according to a new report by J.D. Power, the consumer data and analytics firm.

Such programs now account for 16% of all automotive insurance. Customers participating in these programs report feeling more satisfied with their deal (59 points higher, on average, than among customers overall).

The US Auto Insurance Study is based on responses from 36,935 auto insurance customers and was conducted between January and April 2022. The survey aims to examine customer satisfaction in five key areas: billing process and policy information, claims, interaction, policy offerings, and price.

The study also finds that the greatest fall in customer satisfaction is due to price increases. On a 1,000-point scale, customer satisfaction with the price of their policies is 769, down 5 points since the 2021 survey. Whereas overall customer satisfaction is down just 1 point in the same time period.

The researchers found that insurers that are proactive about informing customers of price increases are best able to mitigate their negative effects.

In the past year, 59% of customers experiencing a price increase were notified in advance (an increase of 15% since 2016) and overall satisfaction scores are 37 points higher among pre-notified customers. They found that a phone call was the most effective way to communicate a price increase.

Commenting on the study, Robert Lajdziak, director of insurance intelligence at J.D. Power, said: “The current situation is a tough one for auto insurers, but it is not impossible in the current inflationary environment to build customer satisfaction and retention.”

“J.D. Power finds two bright spots in the data for insurers. First, those insurers that are transparent and notify customers in advance of price increases can blunt the negative effects of a price increase. Second, usage-based insurance is growing quickly, with an all-time high number of customers adopting these programs and due to their experience using them, overall customer satisfaction levels have significantly risen.”

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