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As Insurers Advertise More, Drivers Switch Less

Date posted: 02/12/2013

by Ryan Looney on
in Insurance Center

7508 As Insurers Advertise More, Drivers Switch LessA recent article in the Wall Street Journal reported that only 9% of drivers switched insurers in 2011, a decrease of 3% compared to 2009 and 2010. At the same time, the car insurance industry was dedicating more and more money to advertising, spending $5.1 billion in 2010 and then $5.9 billion in 2011.

These numbers suggest that in spite of the astronomic advertising expenses, drivers are less inclined to switch than they were in the midst of the economic recession. When it was time to tighten our collective belts, we were more susceptible to bottom-line advertising, asking ourselves: “Wait…I could save how much?”

But I suspect there’s one more factor at play, and it’s one worth calling out and celebrating just a bit: as shoppers, we’re getting smarter.

The advertising may get us in the door, but when we start shopping and comparing car insurance policies side by side, the bells and whistles make way for the nuts and bolts of a policy’s price and coverage options and a company’s independent reputation.

The evolution of online car insurance

In its 2012 insurance shopping study, J.D. Power and Associates reported that 25% of customers shopped for a new car insurance policy in the previous year. This was the lowest percentage in the past 5 years.

While this number was down, the percentage of drivers who shopped and actually switched insurance carriers increased to 43%. J.D. Power’s study chalks this up to the efficiency of competitive online quotes and the convenience of the “self-service” shopping style. More than half of those who shopped started their quotes online for the second straight year, a trend unlikely to reverse itself.

It’s no surprise that traditional advertising grows less effective as shoppers embrace the Internet. Shopping online is increasingly sophisticated. You can easily research car insurance companies, get a better understanding of your policy needs, and shop and compare several different quotes and policies at the same time. And if you have unanswered questions, you know where to look: 1.5 million googlers search for “car insurance” every month.

How car insurance companies need to walk the walk

The Wall Street Journal article and the J.D. Power study make it clear that excess advertising isn’t having its intended effect. Being the loudest one in the room can increase brand awareness, but savvy shoppers are turning to independent, online shopping sites and forums that make it easy for customers to interact and get a better picture of a company and its community before making the big decision to switch.

Smart shoppers look beyond the lowest price. Clever advertising takes a backseat to an easy claims experience, a useful website, cutting-edge mobile apps, 24/7 customer service, and good old-fashioned word of mouth. (Having the lowest rates never hurt, either.)

Why this is good for you, the potential switcher

You win when car insurance companies compete. And right now it’s a driver’s market, as evidenced by the millions and sometimes billions of dollars spent on ads vying for your attention.

While it may seem counterintuitive amidst the bombardment of television and radio ads, highway billboards, online banners, and the occasional skywriter overhead, you’re in control of how and when you decide to shop. All these companies want is a chance to offer you a free quote (“so you’re telling me there’s a chance?!”).

When the time does come, take advantage of the free tools readily available. Compare real car insurance quotes from multiple companies. Look for a reliable provider that offers the right coverage at the right price. Make sure you’re comfortable with the coverage options, deductibles, and limits on your new policy. And before you buy, do some independent research to make sure you’re not in for any surprises. You can visit the company’s Facebook page to see how they interact with their community and check your state’s DOI website for consumer complaint ratios. The more you know, the easier it is to make a smart decision.

If you shop around and don’t see anything you like, fear not. Jingles, taglines, and stadium names will remind you when it’s time to give it another whirl.

(You can check out the full Wall Street Journal article, which is behind a paywall, here.)

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About Ryan Looney

Ryan does his best to make complicated topics a little more interesting and a lot easier to understand. He lives and works in Boston and shares an office with his always-hungry, never-professional dog named Jack. More articles by Ryan Looney

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