High Auto Insurance Premiums Hurting Product Bundling

The future of the home and auto insurance bundle, once a mainstay of property and casualty (P&C) insurance customer retention and lifetime value strategies, is in doubt as legions of customers begin to split their policies. Rapidly rising auto insurance premiums, according to the J.D. Power 2022 U.S. Home Insurance StudySM, are largely to blame for potential defection among bundlers.

Source: J.D. Power | Published on October 10, 2022

home auto insurance bundle

"Sky-high auto loss costs and resulting auto premium increases are causing ripple effects throughout the insurance industry, and as a result, the home and auto insurance bundle is being severely disrupted."

"Sky-high auto loss costs and resulting auto premium increases are causing ripple effects throughout the insurance industry," said Robert M. Lajdziak, director, global insurance intelligence at J.D. Power. "Traditionally, homeowners, and especially bundlers, have been less price-motivated than the typical monoline auto customer, but we are beginning to see cracks in that foundation." This focuses insurers on the overall brand experience their customers are receiving across all channels, as well as understanding how changes in one area, such as telematics adoption in an auto policy, can affect the entire customer journey."

The following are some of the study's key findings:

Overall satisfaction falls, led by home and auto bundlers: Overall homeowner satisfaction falls 6 points (on a 1,000-point scale) this year, while renter satisfaction falls 7 points. The declines among homeowners are being driven by a sharp drop in price satisfaction, which is most pronounced among auto bundlers, where customers experience a 10-point drop in price satisfaction while non-bundlers only experience a 1-point drop.

Non-bundlers have significantly lower retention rates: The average customer retention rate for homeowners who bundle their auto and home policies is 95%. That figure falls to 85% among non-bundlers. Similarly, bundlers have a 95% retention rate among renters, while non-bundlers have an 82% retention rate.

Auto premium increases jeopardize bundled home policies: Almost one-third (31%) of bundlers say they "definitely will" switch their home insurer if they switch their auto insurer following an insurer-initiated increase in auto premiums. Increases in auto premiums initiated by insurers have a negative impact on home insurance retention and advocacy, regardless of bundling status.

Insurtech awareness is growing: Almost one-fourth (23%) of home insurance customers are aware of insurtech offerings from companies such as Lemonade, Hippo, Kin, Openly, Jetty, and Trove. 34% of homeowners who are not currently insured by Lemonade but are aware of the brand say they will "definitely" or "probably" purchase from Lemonade if it is available in their state.