Consumers prefer advance warning about auto rate increases

Consumer satisfaction declines substantially among auto insurance policyholders who are not notified in advance of rate increases, according to the J.D. Power and Associates 2009 Canadian Home and Auto Insurance Customer Satisfaction Study.
The study, released on Sept. 23, finds that 38% of auto insurance policyholders reported experiencing a rate increase in 2009, up from 33% in 2008.
Policyholders reported premium increases of Cdn$200 per vehicle, on average, in 2009 when compared with their 2008 premiums.
Among the 58% of policyholders who were notified of a rate increase in advance, satisfaction averaged 723 on a 1,000-point scale.
Satisfaction scores averaged only 659 points among policyholders who didn’t receive any advance notification of a rate increase.
“A rate increase tends to be a moment of truth for insurance policyholders and their providers,” said Lubo Li, senior director and practice leader of Canadian financial services and insurance at J.D. Power and Associates. “Insurers that take proactive measures to notify policyholders in advance may help to minimize the negative impact of a rate increase.”
Following premium adjustments in Ontario adopted by many insurers earlier this year, 43% of auto insurance customers in the province experienced a rate increase, Li went on to note. However, only 59% of those customers were notified in advance.
This lack of notification led to a substantial decline in consumer satisfaction scores in Ontario, J.D. Power and Associates says.
“As these [auto insurance] rate increases occur in other provinces, proactive communication to policyholders may mitigate the negative impact as seen in Ontario,” Li said.