Bundling Discounts Improve Homeowners Insurance Satisfaction, but Claim Costs Rise for Insurers

Though consumers report high satisfaction with insurance carriers that allow them to bundle their homeowners coverage -- and save money on their premium -- other industry research finds more claims losses in the line of business.

As it has in the past 11 studies, Boston-based Amica Mutual took the top spot in J.D. Power & Associates' 2012 U.S. National Homeowners Insurance Study.

The survey of more than 12,000 homeowners policyholders found that overall satisfaction with the line is high -- an average score of 785 out of 1000 for all carriers represents a 16-point increase over 2011. Amica's leading score was 859; rounding out the top five were ACSC (AAA), 824; Erie Insurance, 822; American Family, 815; and Shelter, 810. Travelers came in last among the 25 insurers studied with a score of 752. USAA's 910 wasn't included in the rankings due to its target market only including military personnel.

Amica also took the top spot in homeowners claims satisfaction survey earlier this year.

The gains are more pronounced among customers who bundle their auto and homeowners coverage with one insurer. Competitiveness of discounts and the variety of coverage options emerged as key differentiators among those who bundle.

"The increase in satisfaction with policy offerings is directly related to customer perceptions that insurers are doing a better job in offering the right coverage options at competitive prices when policies are bundled," said Jeremy Bowler, senior director of the insurance practice at J.D. Power and Associates, in a statement. "Bundled policies not only may provide a reduced premium for customers, but may also be advantageous to both parties, as it allows customers to interact with a single insurer, potentially streamlining both billing and payment."

But there is reason to believe insurers might not be able to offer such a robust suite of discounts for much longer. The Malvern, Pa.-based Insurance Research Council (IRC) reports that from 1997 to 2011, the average claim payment per insured home countrywide rose 173%, from $229 to $626. In 2011 alone, homeowners claim costs per home increased 27%.

"Insurance companies face significant challenges in responding effectively to rapid growth in claim severity and increases in claim frequency, and in managing the volatility attributable to catastrophe-related claims," Elizabeth Sprinkel, SVP of the IRC, says in a statement. "In addition, consumers will find it increasingly important to consider steps to control their personal exposure to risk and to mitigate the damages and costs associated with severe weather events."

Catastrophe claims are driving the increase, according to the IRC: The amount of homeowners claims related to catastrophes made up 39% of all claims from 2004 to 2011, compared to a quarter of all claims from 1997 to 2003.

Nathan Golia is senior editor of Insurance & Technology. He joined the publication in 2010 as associate editor and covers all aspects of the nexus between insurance and information technology, including mobility, distribution, core systems, customer interaction, and risk ... View Full Bio