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Online Insurance Quote Applications Now Initiate a Majority of New Policy Sales

J.D. Power and Associates U.S. Insurance Shopping: Online insurance quote applications now initiate a majority of new policy sales, 54 percent of auto insurance shoppers report getting their quotes online.

As the play and movie Glengarry Glen Ross emphasized, success in sales is all about the leads. And in insurance, those leads increasingly are coming through the online channel. For the first time, a majority of new buyers of auto insurance initiated their policy purchase by applying for a rate quote online, according to the new J.D. Power and Associates (Westlake Village, Calif.) 2011 U.S. Insurance Shopping Study. The study, now in its fifth year, examines consumer shopping and purchasing behaviors and overall satisfaction among buyers who recently purchased from an auto insurance provider across three factors (in order of importance): distribution channel; policy offerings; and price.

Within the distribution channel factor, an insurer's website now accounts for more than one-fourth of the importance weight, second to the local agent, according to the J.D. Power research. In addition, the study found, more than half (54 percent) of insurance shoppers report getting their quote online.

"This transition to websites as the dominant lead-generation channel is an important shift for insurers to recognize and address in their marketing and sales strategies," said Jeremy Bowler, senior director of the global insurance practice at J.D. Power and Associates, in a press release. "While nearly one-half of all accepted Web quotes are closed by either an agent or call center representative, customers are clearly more often looking to insurers' sites or third-party sites in the early stages of the shopping process, and this behavior is blurring the lines of how we traditionally think about the discrete sales channels."

The study also found that the rate of policy churn in the U.S. market has increased during the past two years, returning to levels not experienced since 2008. According to J.D. Power, this has been driven both by an increase in the rate of shopping among insurance customers, which averages 33 percent in 2011 (compared with 27 percent in 2009 and 30 percent in 2010), as well as an increase in the rate of switching companies among shoppers. Among insurance customers who indicate shopping for insurance in 2011, 40 percent said they switched to a new insurer -- up from 33 percent in 2010.

To a great extent this churn has been driven by increasingly aggressive marketing and advertising initiatives on the part of auto insurance companies. "In 2010, the insurance industry spent $5 billion on marketing and advertising, with the top four companies alone spending more than $2.6 billion," said Bowler. "As a result, the rate of shopping has increased significantly year over year, as has the policy defection rate. A majority of the customers shopping for a new insurer are doing so either because of a life event that has changed their insurance needs, or because they are looking for a better deal. However, no group is more interested in switching than customers who are displeased with the service provided by their incumbent insurance company."

With a score of 864 on a 1,000-point scale, American Family Insurance ranks highest among auto insurance companies in satisfying new buyers with the purchase experience. American Family performs particularly well in the policy offerings and distribution channel factors, primarily driven by the performance of their exclusive agents. Rounding out the top three are Auto-Owners Insurance with an overall average satisfaction score of 860, and Erie Insurance with 857. For the full ranking, click here.

J.D. Power's 2011 U.S. Insurance Shopping Study is based on responses from more than 15,500 shoppers who requested an auto insurance price quote from at least one competitive insurer in the past 12 months and includes more than 75,500 unique insurer evaluations. The study was fielded from March to April 2011.

Katherine Burger is Editorial Director of Bank Systems & Technology and Insurance & Technology, members of UBM TechWeb's InformationWeek Financial Services. She assumed leadership of Bank Systems & Technology in 2003 and of Insurance & Technology in 1991. In addition to ... View Full Bio

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