J.D. Power: Homeowners Want Carriers to Offer Identity Theft

More than 40 percent of consumers would like their homeowners insurance carrier to offer coverage for identity theft, according to a study released by J.D. Power and Associates.

The 2006 Homeowners Insurance Study reported that identity theft insurance is second only to auto insurance in the list of products homeowners say they would like their insurance provider to offer.

“As personal information breaches by large corporations and government agencies frequently develop into high-profile news, privacy issues have become incredibly close to the consumer consciousness,” said Jeremy Bowler, senior director of the insurance practice at J.D. Power and Associates. “Consumers increasingly feel compelled to protect themselves from the damage caused by identity theft, representing a growth opportunity for insurance providers.”

The study also finds that a large proportion of homeowners do not carry enough insurance to rebuild their homes if destroyed, with more than 25 percent of homeowners believing they are underinsured. Homeowners who reevaluate their coverage limits on a regular basis to address issues such as increasing building materials and labor costs are significantly more satisfied with their insurer.

Twenty-six percent of homeowners think they have a guaranteed replacement cost policy, while 25 percent do not know what kind of policy they have. Approximately 50 percent of homeowners incorrectly believe the insurance company or their agent — not themselves — bear the responsibility for determining the replacement cost of their home and its contents, down from 59 percent in 2005.

“Natural disasters that have devastated communities in the past few years have highlighted the fact that many consumers expose themselves to financial hardship or even ruin by not fully insuring their single-most-valuable asset,” said Bowler. “Agents are sometimes reluctant to discuss coverage limit policy changes with customers because they believe associated premium increases could cause homeowners to shop for another provider. This year’s data reinforces that these kinds of discussions with homeowners have a strong positive impact on customer satisfaction.”

While premium increases impact customer satisfaction, the study finds that the effects can be dramatically minimized when the insurance provider notifies customers ahead of time and offers an explanation of alternatives. In fact, customer satisfaction scores provided by homeowners who received a price increase but were given an opportunity to discuss coverage options are 25 points higher than among those who received a price decrease. Approximately one-half of customers show little price sensitivity, indicating a willingness to remain with their insurance provider at any price.

Satisfaction ratings
Amica Mutual ranks highest in satisfying homeowner insurance customers for a fifth consecutive year. Amica lead the survey results with high marks in all five factors contributing to overall customer satisfaction: policy offerings; price; billing and payment; interaction; and claims.

Following Amica was Erie, State Farm, Auto Club of Southern California (ACSC) and American Family, respectively. USAA achieved a higher satisfaction score than Amica, but is not included in the rankings because it is only open to the U.S. military community and their families.

“Amica and USAA both set benchmarks that are very tough to compare against their competitors,” Bowler told Insurance Journal. “I sense a real commitment to do what’s right for the customer. … At Amica they don’t have to hang banners to tell their employees to make sure customers are satisfied.”

Overall Satisfaction Ranking
(Based on a 1,000-point scale)
Amica Mutual (838)
Erie (801)
State Farm (789)
Auto Club of Southern California (782)
American Family (777)
CSAA (774)
Farmers (765)
Industry Average (761)
Encompass (760)
Allstate (760)
The Hartford (759)
MetLife (757)
ACG (755)
Nationwide (751)
Safeco (750)
Allied (745)
St. Paul Travelers (739)
Liberty Mutual (731)
Other* (728)

USAA** (896)

* “Other” is an aggregate of smaller insurance companies.
** USAA is an insurance provider open only to the U.S. military community and their families and therefore is not included in the rankings.

The 2006 Homeowners Insurance Study is based on responses from 9,045 homeowners insurance policy holders across the country.

J.D. Power and Associates surveys consumers and business customers by mail, telephone, and e-mail. At least 300 completed survey interviews must be received for J.D. Power to publish the carrier brand’s score and collectively carrier’s total DPW (dollar-premium- written) must represent a minimum of two-thirds of the marketplace, according to Bowler.