Home insurers face loyalty challenges – report

Home insurers are facing customer loyalty challenges as boomers flock to the rental market, according to a new study from J.D. Power.

About two-thirds of all rental housing growth between 2004 and 2019 was driven by people age 55 and older. That group now accounts for about 30% of the rental market. According to J.D. Power’s 2021 U.S. Home Insurance Study, home insurers have faced difficulty navigating that transition.

“The generational shift from homeownership to renting represents a significant customer retention risk unless insurers figure out a better way to maintain customer loyalty throughout this critical life phase,” said Robert M. Lajdziak, senior consultant of insurance intelligence at J.D. Power. “So far, most insurers are missing that mark.

“Consider the stats: 44% of combined boomers and pre-boomers who are renters today had homeowners insurance in the past, but only 52% of them now have their renters policy with the same carrier. Recognizing that annual retention for homeowners is 91.7%, there is a huge opportunity out there for insurers that get the life-stage transition formula right, but the scale of this generational movement will likely drive a great deal of switching activity in the future.”

Key findings of the study include:

• Insurers struggle with the transition from homeowners to renters policies: Only 52% of boomers and pre-boomers who transition from homeowners to renters stay with the same insurer. That share drops to 44% among Gen-X insureds and 36% for Millenials and Gen-Y insureds. Compared to the industry average, USAA< State Farm and Amica Mutual have high retention rates as their customers transition to renters insurance.
• Service experience – not price – is key to retention: Among renters who stay with their previous homeowners insurance brand, the most common reasons for staying are good service experience, brand reputation, bundled products and convenience. Price is fifth on the list.
• Bundling builds loyalty, but legacy systems can limit cross-product visibility: Among renters who previously had a homeowners policy, those who bundle insurance products with their renters products are twice as likely to stay with the same carrier. Insureds interacting with agents are the most likely to have their household’s bundled products acknowledged. This suggests the legacy systems used by many insurers aren’t designed to enable customers to be treated as a household rather than a policy number, J.D. Power said.
• Trust has a significant influence on retention: Customers who have a strong perception that their insurer is trustworthy are four times more likely to say they “definitely will” renew with their insurer than those who don’t have a favorable perception of their insurer’s trustworthiness.
• Smart-home technology creates opportunity: 59% of homeowners with a smart-home product installed in their home – such as a doorbell camera or automatic water shutoff valve – say that having a smart-home feature has helped prevent or mitigate property damage. This presents an opportunity for insurers to increase preventive service offerings, J.D. Power said.

Read next: J.D. Power: Pandemic gave auto insurers “breathing room” ro refine customer experience

Study rankings

Amica Mutual ranked highest in customer satisfaction in the study’s homeowners insurance segment with a score of 854 on a 1,000-point scale. Automobile Club of Southern California placed second with 840 points, while Erie Insurance and State Farm tied for third with 835 points.

Lemonade ranked highest in the renters insurance segment with a score of 870. State Farm took second place with a score of 866.