Study Says Few Insurers Write Customers They Quote

Only 2 percent of auto insurance shoppers who receive a quote are successfully signed by auto insurance companies, and online selling is not as successful as direct contact, according to a J.D. Power and Associates study.

The Westlake Village, Calif., consumer research firm released its inaugural “2008 Insurance Escaped Shopper Study” examining the behaviors of auto insurance customers who recently shopped for a new insurance company. The study, done in April, was based on the responses from more than 8,400 auto insurance shoppers.

J.D. Power said the study aims to better understand why shoppers either avoid, ignore or consider but do not purchase from insurance companies.

“While it is surprising to learn that most auto insurance companies only capture 2 percent of shoppers, the reality is that the majority of shoppers in the market are either unaware of a particular insurance company or choose to ignore them for one reason or another,” said Jeremy Bowler, senior director of the insurance practice at J.D. Power. “Unwillingness to consider a brand is generally caused by a previous experience with a company, a lack of bundled or desired options, or feedback from friends and family. In particular, the impact of recommendations and referrals is critical to whether or not a prospective customer will even consider an insurance company.”

The study found that 36 percent of auto insurance customers have actively shopped for a new insurer in the past year. On average, 38 percent of shoppers do not recognize various insurance companies examined in the study, while an additional 39 percent of shoppers ignore and exclude certain companies during their shopping process.

Additionally, 6 percent of shoppers avoid one of the top 26 auto insurance companies examined in the survey and indicate that they would never consider them for their insurance needs. Overall, only 18 percent of prospective customers consider any given insurance company when they shop.

“What's most significant is that less than one-half of all shoppers who investigate or research an insurance company never ask for a quote,” said Mr. Bowler. “Since most insurance companies only gather personal information as part of the quote process, they have a very narrow view of the marketplace. Insurers have no way to measure how many more prospects escaped earlier in the shopping process–whether they were driven away by a cumbersome quote process, a nonresponsive agent, or misconceptions about price or service quality.”

The study found that most prospective customers who consider an insurance company, but do not request a quote, gather information by the Internet. More than 60 percent visit an insurance company's Web site or respond to an Internet advertisement or blog posting.

Insurance companies lose more prospective customers, on average, through the Web channel compared with telephone and in-person sales channels. The traditional phone and in-person sales channels achieve a 52 percent close rate, on average, while online channels successfully close sales less than 20 percent of the time.

“One interesting competitive tactic being implemented in the industry is for one insurer to offer quotes for multiple competitors,” noted Mr. Bowler. “One in three shoppers who receive a competitor quote from the company they are currently investigating don't bother to call or visit that competing company directly to obtain a real quote from them. This suggests that those insurance companies who implement this strategy are successfully directing shoppers away from their competition before these competitors even know they were being considered by a consumer.”