After improving in each of the past two years, a decline in satisfaction among the nation’s largest auto insurers is driving overall industry satisfaction downward as customers react negatively to the perception of price increases, according to the J.D. Power 2016 U.S. Auto Insurance Study.

The study examines customer satisfaction in five factors (in order of importance): interaction; policy offerings; price; billing process and policy information (formerly billing and payment); and claims. Satisfaction is measured on a 1,000-point scale.

Price Perception Drives Satisfaction Downward

Overall satisfaction declines by a significant seven points to 811 from 818 in 2015. The 17 largest insurers, among whom satisfaction drops by seven index points from 2015, are the primary drivers of the overall decline. Comparatively, satisfaction among the smaller insurers increases one point from 2015. The overall decline is largely influenced by a three-point decrease in price satisfaction, which is attributable to a year-over-year 2-percentage-point decline in the percentage of customers who say they have not experienced a premium increase in the past 12 months. However, the perception among some customers is that they have had an insurer-initiated increase, even though they have not experienced a specific incident or life change that could account for the price hike.

Small Insurers Pull Ahead of Large Insurers

According to the study, this year marks the first time in the past six years that small insurers achieve a higher satisfaction score than large insurers (815 vs. 814, respectively). More positive perceptions of price have helped drive the differing performances between the two groups, as the price factor is the largest advantage small insurers have over large insurers. In contrast, large insurers perform higher in digital interactions – website and assisted online – as they have greater resources to continuously invest in improving their websites and staffing for assisted online.

“Price perception among customers of smaller insurers is likely influenced by the fact that they frequently select their insurer with the help of an independent agent,” said Greg Hoeg, vice president of the U.S. insurance operations at J.D. Power. “Smaller insurers benefit from the personal interactions provided by their agency force, including their ability to educate customers about the value their policy provides.”

Interaction Still Problematic

Among the five factors measured in the study, interaction and policy offerings are the primary drivers of the overall decline in customer satisfaction. Lower levels of satisfaction with the call center representative (down six points to 839) and the local agent (down seven points to 864) drive the decline in satisfaction in the interaction factor. The decline in satisfaction with policy offerings (down by eight points to 809) is due in part to insurers’ failure to make it easy for customers to work with them.

Customers also provide lower ratings year over year for service elements, including the ease of making changes to an existing policy and ease of obtaining a new policy, suggesting that insurers haven’t been able to move the needle when it comes to making changes more convenient for their customers.

Assisted Online Interaction Improves

Notably, satisfaction with assisted online interactions improves across all elements of the customer experience, including the promptness in communicating with a representative and timely resolution of problems, questions or requests.

Additionally, the courtesy, knowledge, and overall concern for customer needs on the part of the representative assisting them also contribute to the improvement. Assisted online interactions consist of experiences in which a customer may have first visited their insurer’s website to resolve an issue or question and was later further assisted by a representative via a chat feature.

“Insurance customers want their billing problems, policy questions or claims resolved efficiently,” said Hoeg. “Today, more and more customers are interested in communicating via digital channels. Insurers should take note that the traditional call center representative may no longer be the most efficient and satisfying way to resolve an issue, even a complex one.”

Satisfaction Drives Loyalty

Among delighted auto insurance customers (overall satisfaction scores of 900 and above), 75 percent say they “definitely will” renew their policy, compared with just 12 percent of displeased customers (scores of 549 and lower).

Regional Overview

Satisfaction varies regionally, from a high of 825 in the Southeast region to a low of 795 in the New England region. Seven of the 11 study regions post significant decreases in overall satisfaction year over year, with the greatest declines occurring in the Southwest (-20 points) and Texas (-17) regions.

Following are the highest-ranked auto insurance brands by region:

• California: Ameriprise (846)
• Central: Shelter Insurance (819)
• Florida: The Hartford (834)
• Mid-Atlantic: Erie Insurance (829)
• New England: Amica Mutual (855)
• New York: GEICO (828)
• North Central: Auto-Owners Insurance (842)
• Northwest: PEMCO Insurance (847)
• Southeast: Farm Bureau Insurance – Tennessee (870)
• Southwest: The Hartford (829)
• Texas: Texas Farm Bureau Insurance (836)

New Jersey Manufacturers Insurance Company (NJM) and USAA also achieve high levels of customer satisfaction in the study, although they are not included in the rankings due to the closed nature of their respective memberships.

The 2016 U.S. Auto Insurance Study is based on responses from 44,681 auto insurance customers. The survey data was collected from January 29, 2016 to March 25, 2016.

For more information about the 2016 U.S. Auto Insurance Study, visit http://www.jdpower.com/resource/jd-power-us-auto-insurance-satisfaction-study.