Category Archives: Auto Insurance

Poor Service, Not Price Drives Auto Insurance Customers to Shop

Big savings are not all they seem, at least when it comes to buying auto insurance.

The just-released J.D. Power 2014 U.S. Insurance Shopping Study finds that poor service is a leading reason why customers shop for and switch to a new auto insurer, rather than price.

Declining satisfaction with new price is also the primary reason customers are less satisfied when they do switch insurer, according to the study findings.

J.D. Power notes that some 30 percent of auto customers shopped for a new insurance provider in 2013, of which 36 percent ultimately switched insurers.

Perhaps surprisingly, increases in premiums do not drive shopping as much as poor experience.

Customers who have a poor experience with their insurer shop at a rate of 28 percent – more than double the rate of shopping among those who experience a premium increase (13 percent).

Another key takeaway is that customers are tolerant of rate increases at a certain level. However, rate hikes of more than $200 can triple the rate of customers who switch insurers.

A press release quotes Jeremy Bowler, senior director of the insurance practice at J.D. Power:

The insurance industry spends billions of dollars each year on advertising, and over the last seven years many of those ads have tried to entice customers with big savings. While switching to a new insurer usually results in savings, the ads make promises of savings that a growing number of new customers don’t believe they’ve received.†

Price, however, is still important in the selection process with eight in 10 customers selecting the lowest-price insurer.

Price is also an increasingly important driver of new-buyer purchase experience satisfaction once customers have selected a new insurer. Overall new buyer satisfaction with the auto insurance buying experience averages 821 (on a 1,000-point scale), down significantly from 828 in 2013.

J.D. Power notes that the decline in satisfaction is driven by a 17-point drop in the price factor, which has the greatest impact on customer satisfaction.

Check out I.I.I. facts and statistics on auto insurance.

IRC: P/C Insurers Not Immune to Effects of Affordable Care Act

The Insurance Research Council (IRC) has taken a closer look at the potential effects of the Affordable Care Act (ACA) for property/casualty insurers.

Its analysis – which doesn’t make any specific estimates of the potential cost implications for the P/C industry – identifies the possible ways in which P/C insurance claim costs will be affected by the Act.

The upshot is that the IRC believes the most significant impact will be cost shifting by hospitals and other providers from public and private health insurers to p/c insurers.

According to the report:

Cost shifting will occur in response to increased cost containment efforts by public and private health insurers, and will appear in the form of higher charges and a higher volume of billed services.†


Cost shifting will be particularly severe in state jurisdictions and with coverages where the differences between public and private health insurance reimbursement levels and property-casualty reimbursement levels are greatest.†

The potential magnitude of the cost-shifting is likely to be major, the IRC notes.

To mitigate this potential impact, the IRC suggests that P/C insurers should consider options to ensure that the prices paid as reimbursement for medical services are consistent with prices paid by public and private health insurers.

While market-based fee schedules and bill review authority are among the tools often applied to address medical pricing issues, the IRC says P/C insurers should also consider alternatives to ensure that only medically necessary and appropriate treatment is provided to P/C insurance claimants and reimbursed by insurers.

Utilization review authority, evidence-based treatment guidelines, and the authority to deny reimbursement for unnecessary or inappropriate treatment are among the tools that P/C insurers should consider, the IRC suggests.

PC360 reports on the IRC analysis here.

Health Care Reform and Potential Impact on P/C Industry

The Affordable Care Act (ACA) will have both potential positive and negative effects on the property/casualty insurance industry, according to a recently published paper by Travelers.

In the paper, Travelers notes that medical trends impact workers compensation, general liability, and auto insurance costs, which make up about 5 percent of health care revenue.

Key ACA components expected to affect the P/C industry are:

— Extended healthcare coverage – a 15 percent increase in demand for a fixed supply of healthcare services

— Black lung presumptions – any miner (or surviving spouse) with 15 or more years of underground coal mine employment and a totally disabling respiratory or pulmonary impairment is presumed to be disabled due to pneumoconiosis and eligible for Black Lung benefits.

— Pharmacy and durable medical equipment (DME) taxes and assessments – the potential to increase costs 1.5 percent and 2.3 percent, respectively.

— Medical data – enhanced electronic record-keeping and sharing of data among providers.

Some of the potential positive effects of the ACA on P/C insurers include increased wellness – a healthier and better conditioned population – and a decreased incentive to file questionable P/C claims, Travelers says.

However, on the negative side, the ACA could result in decreased access to care, increasing indemnity costs as prompt access to physicians is reduced and return to work is delayed, the paper notes.

Travelers also cautions that there could be increased cost shifting from Medicare to P/C payers by physicians and hospitals due to declining Medicare reimbursement rates.

Hat tip to Claims Journal for its report on P/C insurer impacts of the ACA here.