J.D. Power and Associates Reports: Customer Retention Varies Widely Among Personal Car Insurance Companies in the UK; Switching Represents Nearly 3.5 Billion pounds Sterling in Premiums at Stake Annually

LONDON, Nov. 16, 2010 /PRNewswire/ -- While 56 percent of personal car insurance customers overall indicate they have used the same insurance provider for the past year, policy retention rates vary widely between insurance companies — ranging from a high of more than 80 percent to a low of 35 percent, according to the J.D. Power and Associates 2010 UK Auto Insurance Customer Satisfaction Study(SM) released today.

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The inaugural study measures car insurance policyholder experiences with their primary insurer. Customer satisfaction, a primary driver of policy renewals, is measured across five factors (listed in order of importance): billing and payment; price/premium; interaction; policy offerings; and claims. Overall satisfaction averages 708 on a 1,000-point scale in 2010.

"While some of the highest performing car insurance companies in the UK market successfully renew more than eight in 10 policyholders, others manage to retain barely one-third of theirs, which means they have to invest in advertising and lead commissions to replace two-thirds of their customers annually," said Jeremy Bowler, senior director of the insurance practice at J.D. Power and Associates. "Furthermore, 44 percent of customers overall switched insurers during the past 12 months, which represents nearly 3.5 billion pounds in premiums that were up for bid. It's clear that focusing on customer retention can bring insurers substantial benefit in reducing costs and boosting profitability."

RSA ranks highest in customer satisfaction with car insurance providers with a score of 762 and performs particularly well in the price/premium and interaction factors. LV = (Liverpool Victoria) follows RSA in the rankings with a score of 755. LV = (Liverpool Victoria) ranks highest in the billing and payments and policy offerings factors. Rounding out the top five car insurers are Sheilas' Wheels (723), Diamond (722) and Swiftcover (721).

The study finds that bundling insurance policies has a notable positive effect on overall satisfaction and retention with car insurance providers. However, 62 percent of customers say they hold a car insurance policy, but no other policies, with their insurer. Satisfaction among these customers averages 705 — slightly lower than the industry average. Overall satisfaction is considerably higher among customers that hold three or more policies with their car insurance provider — 728, on average. However, only 9 percent of policyholders indicate bundling three or more policies with their insurer. Among customers who bundle, roadside assistance/breakdown cover and home insurance are the most commonly added policies.

"Some insurance providers are beginning to promote significant discounts to customers who bundle their car insurance with other policies, which will likely drive an increase in this practice," said Bowler. "Bundling brings benefits for both consumers and insurance providers. Consumers may receive lower premiums and the added convenience of dealing with just one provider for multiple insurance policies, while insurance providers may achieve higher customer satisfaction levels and as a result, higher customer retention and advocacy, as well as financial profitability."

According to Bowler, there is ample opportunity for car insurance providers to improve communication efforts regarding the benefits of bundling. Only 28 percent of policyholders indicate they recall their insurance provider informing them of other product and/or service offerings, reflecting missed opportunities to promote bundling. In addition, relatively low proportions of policyholders indicate they receive information from their insurance provider about policy reviews and discount offerings.

The study also finds that policyholders who interact with their insurance provider through a local broker are much more satisfied (752, on average) than policyholders who use other contact methods such as call centres (722), websites (721), e-mail (662) or automated phone systems (649). Among policyholders who seek car insurance information via websites, those who use a comparison website to select an insurer are considerably less likely to renew with their insurer, compared with those who use an insurer website.

"When shopping for insurance coverage, consumers may find it beneficial not to limit their search efforts to only comparison sites, as our results suggest that insurer tend to provide their shoppers with more comprehensive information about coverage options and supplemental services, in addition to price quotes," said Bowler. "Also, consumers should consider requesting quotes for bundled policies while comparison shopping, as this may yield additional discounts."

High levels of satisfaction with car insurance providers have a particularly strong positive effect on customer renewal and retention rates. Among the most highly satisfied policyholders (satisfaction averaging 901 or higher), 86 percent say they "definitely will" or "probably will" renew their policy, while 96 percent say they "definitely will" or "probably will" recommend their insurer to others. Among the least satisfied customers (satisfaction averaging 550 or less), only 39 percent indicate they are likely to renew and only 44 percent say are likely recommend their insurer.

The study findings also include the following key trends:

• Satisfaction with car insurers tends to decline considerably during the first year of service, then gradually recovers over time. It takes an average of four years for satisfaction to return to initial levels. Customer retention also increases significantly following the first year of service, with more than three-fourths of policyholders with tenure of three years indicating they are likely to renew their current policy.
• Approximately 9 percent of policyholders have filed a claim within the past 12 months. Seventy-five percent of customers who indicated they filed a recent claim subsequently renewed their car insurance policy.
• Satisfaction among policyholders who filed a claim for physical damage to their vehicle averages 733 — 25 points higher than the industry average.

The 2010 UK Auto Insurance Customer Satisfaction Study is based on responses from 5,036 auto insurance policyholders. The study was fielded in October 2010.

About J.D. Power and Associates

The European headquarters of J.D. Power and Associates is located in Munich, Germany.  With world headquarters in Westlake Village, California, U.S.A., J.D. Power and Associates is a global marketing information services company operating in key business sectors including market research, forecasting, performance improvement, Web intelligence and customer satisfaction.  J.D. Power and Associates is a business unit of The McGraw-Hill Companies.

About The McGraw-Hill Companies:

Founded in 1888, The McGraw-Hill Companies (NYSE: MHP) is a global information and education company providing knowledge, insights and analysis in the financial, education and business information sectors through leading brands including Standard & Poor's, McGraw-Hill Education, Platts, and J.D. Power and Associates. The Corporation has more than 280 offices in 40 countries. Sales in 2009 were $5.95 billion. Additional information is available at http://www.mcgraw-hill.com/.  

Media Relations Contacts:

Hannah Smith; Ruder Finn UK; London, England; (44) 207-462-8949; [email protected]

John Tews; J.D. Power and Associates; Troy, Mich.; (248) 312-4119; [email protected]

No advertising or other promotional use can be made of the information in this release without the express prior written consent of J.D. Power and Associates. www.jdpower.com/corporate

SOURCE J.D. Power and Associates