NU Online News Service, April 22, 1:37 p.m.EDT

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While the majority of auto insurance customers stick with theircarrier, many customers shop for insurance, and keeping currentcustomers is critical to the long-term health of insurers, a J.D.Power and Associates survey finds.

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The Westlake Village, Calif.-based marketing information servicereleased the findings of its "2009 Personal Insurance RetentionSpecial Report" today, finding that income and demographics playcritical roles in customer retention, even though the vast majorityof people remain with their carrier.

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"While 90 percent of customers overall stayed with theirinsurance carrier during the past 12 months, those households thatare potentially more impacted by the recession present a realchallenge for insurance carriers," said Jeremy Bowler, seniordirector of the insurance practice at J.D. Power andAssociates.

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He observed, "Although several carriers in theindustry--including Auto-Owners, GEICO, Liberty Mutual, Progressiveand Travelers--have managed to grow their customer base in thischallenging economic climate, their growth comes at the expense ofother insurers in the mature U.S. personal auto insurance market.As such, keeping customers on board is absolutely critical for thelong-term profitability of an insurance carrier."

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The survey found that those with incomes of $100,000 or more ayear are more likely to stick with their carrier--a total of 92percent according to the survey. The retention rate drops slightlyto 90 percent for those with income between $50,000 and $99,999.The retention rate dropped to 86 percent for those with income ofless than $50,000.

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The results are based on surveys of 275,000 auto insurancecustomers evaluating more than 30 insurance carriers across theindustry.

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J.D. Power said the survey found 30 percent of households withannual incomes below $50,000 shopped for a new carrier, and 45percent of those customers eventually switched. By contrast, only26 percent of those making $100,000 or more shopped for a newcarrier, with only 31 percent making a switch.

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The survey found that those who bundle their insurance witheither homeowners or rental insurance policy were high. Retentionrates averaged 95 percent among those customers who bundled theirhome and auto polices and 92 percent among those who bundled theirauto and rental policies. The retention rate was lower formono-line auto customers at 83 percent and 85 percent for those whochose not to bundle.

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The difference in gender appears to play a minor role inretention rates, with 90 percent of males retaining the samecarrier and 89 percent of females deciding not to changecarriers.

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Married insurance buyers (91 percent) were more apt to stickwith the same carrier as opposed to single people (87 percent).Divorced people fell in middle at 89 percent.

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Mr. Bowler noted that retention rates are important to carriersbecause a 1 percent improvement can amount to tens of millions ofdollars over a period of time.

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According to HighlineData, a unit of Summit Business Media, theparent company of National Underwriter, the top personallines auto insurer is State Farm with 18 percent of the market,followed by Allstate at 11 percent. Berkshire Hathaway (GEICO) isthird at 8 percent, and Progressive is fourth at 7 percent.

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Rounding out the top 10 in order are Zurich (Farmers GroupInc.), Nationwide, Liberty Mutual, USAA, American InternationalGroup and American Family Insurance. Travelers is ranked11th and the Hartford is ranked 12th.

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Recently, AIG sold its personal lines auto insurance division,21st Century, to Zurich's Farmers Group.

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Responding to the survey results, Leonard C. Brevik, executivevice president and chief executive officer of the NationalAssociation of Professional Insurance Agents, commented in ane-mail: "These survey results identify another compelling businessopportunity for main street agents. As carriers seek to improvetheir retention rates in this increasingly competitive environment,the independent agent system provides the most effective andefficient distribution channel for their products. And when timesget tough, consumers seeking the best value for their insurancedollar can find it by consulting a main street insuranceagent."

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Dave Evans, senior vice president for the Independent InsuranceAgents & Brokers of America, responded in an e-mail saying:"The J.D. Powers study validates the presumption that during tougheconomic times, consumers are more likely to switch carriers tosave money. It also demonstrates the value of the independentagency distribution channel to carriers because of therelationships they have with their customers."

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