Usage-Based Auto Insurance Becomes More Popular, Plus Top 3 Insurers By Region

With the prices of many things going up this year in the current economy,  this news likely won't come as a surprise. Auto insurance premiums are on the rise in 2022.   Bankrate reports that across the nation auto insurers are filing for rate changes - with the average rate increase filing about 4.9% according to cited S&P Global Market Intelligence data.  (Rate changes typically don't effect everyone equally. Read more about the process in the Bankrate report.)

This brings us to J.D. Power's new 2022 U.S. Auto Insurance Study. J.D. Power researchers say insurers are being forced to raise rates - else go out of business. Researchers cite a number of factors for this: a record high number of serious collisions, skyrocketing used-vehicle prices and surging repair costs.  As a result, the study finds a sharp decline in customer satisfaction with the price of auto insurance. Still, somehow overall customer satisfaction overall remains at a similar level year over year. Something J.D. Power attributes to the industry's "notable" efforts to improve customer engagement. 

User-Based Insurance Grows In Popularity

The study of more than 36,000 motorists also found that most satisfied insurance customers according to the study were those with usage-based insurance  (UBI). UBI is insurance that requires you to allow your car to transmit telematics data, like mileage and driving behavior, directly to your insurer which in turn helps determine much you pay.  (Toyota and Ford participate in usage-based insurance plans.)

“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,” said Robert Lajdziak, director of insurance intelligence at J.D. Power. “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.”

Key Findings

Here are some of the key findings of the 2022 study, as outlined in J.D. Power's press release:

• Rising prices stifle customer satisfaction: Overall customer satisfaction with auto insurance providers is 834 (on a 1,000-point scale), down from 835 a year ago. However, customer satisfaction with the price of their policies is 769, down a significant 5 points from 2021.
• Usage-based insurance sees record adoption: Participation in usage-based insurance programs, which use telematics technology to monitor driving habits and assign risk and pricing accordingly, has doubled since 2016, with 16% of auto insurance customers now participating in such programs. Price satisfaction among customers participating in these programs is 59 points higher, on average, than among customers overall.
• It pays to get out in front of bad news: Premium increases do not bode well for customer satisfaction, but insurers that are proactive about such increases and notify customers in advance are able to mitigate the negative effects they generate. In the past year, 59% of customers experiencing a price increase were notified in advance by their insurer—up from 44% in 2016—and overall satisfaction scores are 37 points higher, on average, among those pre-notified customers. The phone is the most effective channel for this type of notification.
• Agents benefit when customers use online self-service tools:  When customers engage with their insurer via both digital channels and live channels—such as agents or customer service representatives (CSRs)—satisfaction with the live channel increases. The reason is efficiency, as customers can handle transactions quickly while spending more valuable time with an agent or CSR. A multi-channel strategy is a successful approach, and the same is true when live channels are added for customers who primarily take a digital-first approach.

Regional Takeaways

The study also looked at customer satisfaction of auto insurance in 11 geographic regions. We've listed the three highest-ranking auto insurers by region as calculated by J.D. Power in its study.

California: 

1. Wawanesa  (for a third consecutive year)
2. Automobile Club of Southern California (AAA)
3. CONNECT by American Family

Texas: 

1. Texas Farm Bureau  (for an 11^th consecutive year) 
2. State Farm
3. GEICO (Below Region Average)

Central: 

1. Shelter  (for a second consecutive year)
2. American Family
3. GEICO

Florida: 

1. The Hartford  
2. Allstate
3. Automobile Group Club (AAA)

Mid-Atlantic: 

1. Erie Insurance
2. Travelers
3. State Farm

New England: 

1. Amica Mutual (for a 10^th consecutive year)
2. State Farm
3. Plymouth Rock Assurance

New York: 

1. New York Central Mutual 
2. State Farm
3. GEICO

North Central: 

• Erie Insurance (for a second consecutive year)
• COUNTRY Financial
• State Farm

Northwest: 

1. The Hartford 
2. State Farm  
3. GEICO

Southeast: 

1. Farm Bureau Insurance - Tennessee  (for an 11^th consecutive year)
   
2. Auto-Owners Insurance'
3. Erie Insurance

Southwest: 

1. State Farm 
   
2. The Hartford
3. American Family

For complete geographical rankings click here.

For CarPro advice on how to shop for car insurance click here.

About the Study

The 2022 J.D. Power U.S. Auto Insurance Study, now in its 23^rd year, examines customer satisfaction in five factors (in alphabetical order): billing process and policy information; claims; interaction; policy offerings; and price. The study is based on responses from 36,935 auto insurance customers and was fielded from January through April 2022.