In a changing housing market, home insurers are fighting for customer loyalty: study

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Home insurers have struggled to develop products and services designed to maximize customer lifetime value for the growing baby boomer population migrating from property to rental, new study from JD Power, 2021 US Home Insurance reveals .

About two-thirds of all rental housing growth between 2004 and 2019 was attributable to adults aged 55 and over, and this group now accounts for about 30% of the total rental market, according to a study by the Joint Center for Housing Studies. from Harvard. University.

This generational shift from homeownership to rental represents a significant risk to customer retention, unless insurers find a better way to retain customers throughout this critical phase of life.

“So far, most insurers miss this mark,” said Robert M. Lajdziak, senior insurance intelligence consultant at JD Power.

“Look at the statistics: 44% of baby boomers and pre-boomers who are renters today had home insurance in the past, but only 52% of them now have their renters policies with the same insurer,” “Recognizing that annual owner retention is 91.7%, there is a huge opportunity for insurers who have mastered the life-stage transition formula, but the scale of this generational movement is will likely lead to a lot of change activities in the future. ”

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Main conclusions

  • Insurers are struggling to switch policies from landlords to tenants. Just over half (52%) of Baby Boomers and Pre-Boomers combined who have switched from a landlord policy to a tenant policy remain with the same insurer. This number drops to 44% among Gen X policyholders and 36% among Gen Y and Z policyholders. Compared to the industry average, USAA, State Farm and Amica Mutual have particularly high retention rates while their home insurance customers switch to tenant insurance customers. .
  • The service experience, not the price, is the key to lifetime value. Among renters who remain loyal to their old home insurance brand, the most common reasons to stay with the same insurer are good service experience, brand reputation, bundled products, and convenience. The price is fifth on the list.
  • Bundling builds loyalty, but legacy systems often limit visibility between products. Among renters who previously had a home insurance policy, those who bundle insurance products with their tenant insurance policy are twice as likely to stay with the same insurer. Policyholders interacting with agents are the most likely to have their household bundled products recognized, suggesting that the legacy systems used by many insurers are not designed to allow customers to be treated as a household but rather as a household. a policy number.
  • Confidence has a significant influence on retention. Homeowners who have a strong perception that their insurer is trustworthy are four times more likely to say that they will renew “definitely” with their insurer than those who do not have a favorable perception of the reliability of their insurer.
  • Smart home technologies create opportunities. More than half (59%) of homeowners who have a smart home product installed in their home, such as a doorbell camera or automatic water shutoff valve, say having a home function smart has helped prevent or reduce property damage. This presents a clear opportunity for insurers to increase preventative service offerings, which is a major shift in the value proposition by focusing on loss prevention rather than post-loss protection.
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Amica Mutual ranks first in the home insurance segment, with a score of 854 (on a scale of 1,000 points). The Automobile Club of Southern California (840) is second, while Erie Insurance (835) and State Farm (835) are tied for third. Lemonade ranks first in the tenant insurance segment with a score of 870. State Farm (866) ranks second.

The US Home Insurance Study examines overall customer satisfaction with two distinct lines of personal insurance products: homeowners and renters. Satisfaction in the home and tenant insurance segments is measured by examining five factors: interaction; policy offers; the price; billing process and policy information; and claims. The study is based on responses from 11,828 landlords and tenants via online interviews conducted from May to July 2021.

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JD Power is a global consumer information, consulting, and data and analytics company with offices in North America, Europe and Asia-Pacific.

Source: JD Power

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