Customer Satisfaction on Decline with Homeowners Insurance Companies

A recent study from .D. Power and Associates points out that overall customer satisfaction with homeowners’ insurance companies has fallen to the lowest level in five years, mostly due to considerable declines in satisfaction with policy offerings and service interactions.

The study, “2010 U.S. National Homeowners’ Insurance Study,” looks at customer satisfaction with homeowners’ insurance companies through examining five prime factors: policy offerings, price, billing and payment, interaction, and claims.

Overall satisfaction with homeowners’ insurers averages 750 on a 1,000-point scale in 2010, declining by 23 points from 2009. While satisfaction has dropped in four of the five factors from the previous year (all except claims), the biggest drops are in the policy offerings and interaction factors.

As the report notes, negative perceptions of homeowners’ insurance policy offerings may originate from a pair of issues in particular – an abundance of advertising from insurance companies promoting discounts on auto insurance and policyholders’ overall inability to understand their homeowners’ insurance policies and how premiums are decided.

According to a spokesperson for J.D. Power and Associates, homeowners’ insurance policyholders are already price sensitive as a result of the challenged economy.

As it stands, nearly half of all customers do not have a clear understanding of how much coverage or what form of coverage they have on their home, and may have erroneously expected their premiums to fall just as home values have dropped since 2008. As a result, a large number of customers feel their policies are not in tune with their property values and express dissatisfaction.

Close to one-third of policyholders note they recently reached out to their homeowners’ insurer regarding their policy coverage or renewals during the last year. However, satisfaction with these contacts has dropped from 2009, due to declining perceptions of the insurer’s timeliness in solving customer issues.

According to the poll results, Amica Mutual came in highest for a nine straight year among homeowners’ insurance companies and does especially well in all five factors that contribute to overall customer satisfaction.

Next in the rankings were Auto-Owners Insurance, Erie Insurance and Cincinnati Insurance, respectively.

The study notes that across all generational age groups, customers who combine auto and homeowners insurance policies are much more satisfied and more apt to renew with their insurance company, compared with consumers who do not bundle their policies.

Keep in mind, however, that bundling has the most notable positive outcome on retention for those customers in the Gen Y demographic group (those born between 1977 and 1994), compared with other generational groups.

Retention rates for those Gen Y auto insurance customers who choose not to bundle average 72 percent, while retention among Gen Y customers who bundle their auto and homeowners’ policies averages 92 percent, which is a 20 percentage-point gain.

For customers in the Gen X (those born between 1965 and 1976) and Baby Boomer (those born between 1946 and 1964) generational groups, the gains average 11 percentage points and nine percentage points, respectively.

A spokesperson for J.D. Power notes that, “Currently, nearly 40 percent of Gen Y consumers own a home. Insurers that can successfully convince Gen Y home insurance policyholders to bundle their home and auto policies may be positioning themselves for the financial benefits of retaining this growing generation.”

The study goes on to note that bundling rates among Gen Y customers differ widely among insurers, with the largest rate averaging 86 percent, compared with a low of only 38 percent. Insurers that perform especially well in this regard include American Family, CSAA, Erie Insurance, State Farm and USAA.

Also, there is a wide variation among insurance companies in the proportion of Gen Y customers they capture, relative to their market share. Insurance companies that perform particularly well in capturing high proportions of Gen Y customers include American Family, Country and USAA.