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Driving Change in Auto Insurance

December 1, 2020

Auto-Insurers Looked Out for Their Consumers at the Onset of the Pandemic

A bright spot for consumers early in the COVID-19 crisis came from an unlikely place – auto-insurers. With shelter-in-place restrictions, millions of drivers received rebates for reductions in time spent on the road with carriers returning an estimated $18 billion in premiums to American households. The industry shone a bright light on itself, doing the right thing to deliver on its collective promise to protect the financial health of its customers in a time of need. But, where are we six months later?

A recent Big Village CARAVAN study found that 50% of vehicle owners continue to drive less with 54% of those who report driving less posting at least a 50% decrease in miles driven. And, while 39% report having received a rebate from their auto insurer, nearly half (43%) reported the rebate as being less than they expected.

Two areas of note here. The first being the low levels of realization among customers that they received a rebate – with the majority of insureds receiving between 10-15% back on their premiums, it’s surprising that so few recall rebate communications from their insurer. And secondly, for those who do recall receiving their rebate, the notion that consumers feel it just wasn’t enough compared to their reductions in driving.

Unfortunately, it appears as though the COVID rebate program fell flat in terms of elevating insurance brands and, certainly, in generating loyalty. In fact, JD Power reports that post-rebate overall satisfaction with auto insurers is down, flattening out through June at a nearly 10 point drop when compared to pre-rebate levels, while shopping has modestly increased. The rebate program generated a lot of mass market buzz, setting expectations for consumers to feel good about an upcoming interaction with their auto insurer, and remember – interactions with your auto insurer are few and far between! However, rebates quietly landed alongside polite service communications in mailboxes and checking accounts and, if noticed, felt a bit like “my rebate must not be as good as the Joneses!”.

Let’s consider where consumers are today and where auto insurance shopping may go. Households are shifting priorities to manage through the unforeseen longevity of the pandemic and, perhaps, a second period of quarantine. While early on, auto insurance took a back seat to more pressing health and safety concerns, it’s fair to say that consumers are now looking for places to reduce monthly expenses, including auto insurance, while also managing fundamental needs. TransUnion lists industry marketing spend and life events as significant drivers of auto insurance shopping and, presumably, the macroeconomic environment is shaping up to drive both factors upward, as carriers work to make up for the slowdown presented by the early cooling effect of COVID and consumers make deferred life decisions based on the “new normal” the pandemic has unfolded in their day-to-day.

So, beyond increased marketing spend, how do auto insurers differentiate with consumers on the hunt? It’s time for carriers to invest in and accelerate the initiatives they have at play that acknowledge a shift in the balance of power to consumers – meaning drivers have never been more aware of the correlation between miles driven and premium paid and they’ll want the value equation to be balanced. So; educate consumers on the financial benefits of usage-based-insurance, talk about the advantages telematics technology can safely and privately deliver for consumers, push your organization’s thinking about on-demand-insurance to innovate access and breadth of coverage that brings the option to the mainstream and, at the very least to aid retention, proactively communicate the notion that premiums are being reconsidered for the “new normal”, knowing that the foreseeable future has Americans driving less and comparison shopping their auto insurance more.

Written by Jim Nelson, SVP at Big Village Insights.