Shopping for car insurance is an activity driven by several factors. To learn more about what goes into the car insurance purchasing equation for consumers, we worked with YouGov, a leading survey provider whose opinion data taps into more than 40 markets and a panel of 8 million individuals to better understand consumer behaviors and attitudes.
The questions we asked consumers included:
- How frequently do people shop for car insurance?
- What factors cause users to shop around for car insurance?
- What loyalty benefits matter most for existing car insurance customers?
- What myths are out there about shopping for car insurance?
- Which factors matter most for car insurance shoppers?
We surveyed 1,292 Americans who own different types of motor vehicles ranging from passenger cars (63%), trucks (22%), commercial vehicles, motorcycles and even motorhomes.
Our aim with this research was to look at factors beyond price that influence purchasing decisions, the frequency of the buying decision, what insurance companies can do to retain or acquire customers and misleading misconceptions about the buying process.
Our top 3 findings
1. 36% of adults who own a car don’t compare rates or shop around at all
This finding is important because of the implications it has for insurance providers. This finding suggests the majority of consumers are open-minded and brand loyalty doesn’t figure too heavily into the equation when it comes to factors that motivate consumers in their search for car insurance, which means every provider has a chance to win over customers.
From the consumer’s perspective, it’s no surprise that roughly two-thirds of auto insurance buyers consider more than one insurance provider at least some of the time. Shopping around enables consumers to ensure they’re getting the best price and discover discounts they may not have been aware of.
The chart depicting responses to our second question (“Which, if any, of the following factors would prompt you to compare/shop around for auto insurance?”) provides some insight as to why some consumers don’t ever shop around. The second and third-most common responses were “getting a new vehicle” and “moving.” For a consumer whose life events are relatively static—they never move and stick with the same vehicle—there may not be any motivation to look for new coverage. Unfortunately, those consumers often miss out on great deals.
2. The top 3 factors (outside of price) for choosing an insurer are: 1) reputation, 2) discounts and 3) 24/7 customer service
This result, again, should be a clear indicator to insurance providers about where their focus needs to be. A major contributor to any company’s reputation is its advertising. Commercials, print ads and other mediums serve as an effective tool for generating buzz among consumers and driving traffic toward a brand and its offerings.
As proof of this, a 2018 Statista study that ranked insurance companies based on advertising spending revealed Geico, Progressive, and State Farm hold the top three spots, spending $1.55 billion, $1.05 billion, and $629 million in ad expenditures respectively. Incidentally, State Farm, Geico, and Progressive are the three largest providers in the auto insurance industry, controlling 17.05%, 13.44%, and 10.99% of market share in the private passenger auto insurance sector. For insurance providers looking for more market share, advertising would be a great place to start.
3. The two primary motivators for shopping around for a new insurer are 1) receiving a discount offer and 2) purchasing a new vehicle
New data from the consumer intelligence firm Resonate indicates that 25 million auto insurance consumers are considering switching providers next year. Though 5.4 million of those consumers have reported they will definitely switch next year, the rest have said they could be persuaded to remain with their current provider. This presents a huge opportunity for auto insurance companies to hold on to their existing customers while pulling a few away from their largest competitors.
One way insurance providers can do this is by offering discounts to customers thinking about changing. Our survey findings revealed that nearly 60% of consumers value enticing discounts when considering which insurance company to go with. By homing in on the demographics most likely to change providers and creating discount options that appeal to their needs and interests, insurance providers will have a better chance to attract new policyholders.
How frequently do people shop for car insurance?
Frequency of comparing/shopping around for auto insurance
- Never: 36.1%
- Every 1 to 2 years: 18.4%
- Every 2 to 3 years: 15.8%
According to our findings, 64% of consumers shop for car insurance at least once every five years. Within that range, it’s most common to see consumers compare insurance options roughly every one to two years, as 18% of respondents reported insurance shopping at this rate. When you take into account the fact that purchasing a new car is the most significant contributor to consumers seeking new insurance, these figures seem about right.
On average, drivers purchase roughly 10 cars over the course of their lives, which gives insurers plenty of opportunities to attract new policyholders. If you’re a car insurance shopper, this is great news. Because the car insurance market has so much movement, you have the upper-hand on a provider interested in bringing you on board. Use this leverage to get a policy loaded with discounts and perfect for your needs.
What factors cause users to shop around for car insurance?
Factors that prompt comparing/shopping around
- Receiving a discount/promotion from a competitor: 38.3%
- Getting a new vehicle: 33.6%
- None of the factors featured in the survey: 25.7%
As noted in the previous section, our survey indicates that getting a new vehicle is one of the most common factors causing a user to shop around for new car insurance. While the 33% of consumers that indicated this being an important factor is eye-opening, it’s still fewer than the 38% of respondents who reported being motivated by discounts or enticing offers from a competing insurance provider. People are also motivated by life changes such as moving (16%) or getting married or divorced (7%).
Interestingly, though many consumers report shopping for a new provider, few switch. A 2015 J.D. Power study revealed that only 29% of auto insurance consumers who were shopping for a new provider switched. This affects the conversion rate—an insurance agent’s ability to convert an interested user into a new policyholder—of providers everywhere and makes it more likely that an agent will be willing to work with you to bring you on board.
Knowing that the market is tough for insurance agents, you can feel comfortable asking for wiggle room on a premium or discounts that an appealing insurer can throw in. Worst case scenario: you stay with your current provider
What loyalty benefits matter most for existing car insurance customers?
- Discount for safe driving: 68.4%
- Discount based on how long I’ve had continued insurance with them: 64.9%
- Discount for paying on time: 61.5%
Our survey revealed that 68% of consumers place a high value on discounts associated with safe driving. Though these can vary from one provider to the next, they all generally entail going a certain amount of time without an accident, a pay-per-mile insurance policy or in-car technology to encourage avoiding speeding or hard braking.
Consumers aren’t the only ones who like safe driving discounts, however. Of the 10 largest private passenger auto insurers by market share, all of them offer their policyholders some form of a safe driving discount. This is great news for you, the consumer. With so many major auto insurers offering discounts for policyholders who drive safely, you have an apples-to-apples metric that you can compare that can help you keep as much money in your pocket as possible.
Look around and see whose discounts catch your eye. A car insurance by the mile policy is perfect for people who don’t drive often, and student discounts can help parents with teens. Find which discounts are most relevant to you.
Which factors matter most when choosing a car insurance company?
Important factors when choosing an auto insurance company
- The reputation of the company: 62%
- Potential discounts available: 59.4%
- 24/7 customer service: 52.8%
As mentioned, reputation is huge in the minds of car insurance shoppers. Our research revealed that 62% of users value an insurance provider’s reputation—the most important factor of any we measured. The next most important factors were having the potential of discounts (59%), 24/7 customer service (52%), having a local agent (39%) and online options (38%).
A factor that got buried deep in our research, however, was company size. Consumers don’t seem to care too much about it. Of the 1,000 Americans we surveyed, only 13% reported giving any consideration to the size of the insurance provider when performing a search. For example, J.D. Power’s 2019 Auto Claims Satisfaction Study rated Amica Insurance as the top provider in the industry based on scores provided by customers. Interestingly, though, Amica ranks 14th in the auto insurance industry in terms of market share.
Look past size—and by virtue of size, reputation—on occasion when looking for an insurance provider. Sometimes the best options are also the best-kept secrets.
What myths are out there about shopping for car insurance?
Myth 1: You can negotiate rates with your insurance company: False
It would be nice if you could haggle with your insurance provider, but insurance doesn’t work that way. Because each provider calculates your premium by applying a different degree of importance to different factors, it wouldn’t be feasible or even possible for them to change the rates they quote you. Your age is your age, your vehicle is your vehicle and your driving history is your driving history.
This myth is often debated for two reasons. For one, there are a lot of providers available in the market. Any driver who is unsatisfied with their policy can go to another provider, which can put pressure on an insurance company to make their rates more attractive. Second, while providers can’t adjust your rate at will, they can provide discounts to your policy. This can feel like negotiation and drives down the amount that you pay each month.
Myth 2: The color of your car affects insurance rates: False
Insurance providers do not take the color of your car into consideration when calculating your rates. They do consider the type of car that you drive, though. Someone driving a sports car might be tempted to drive faster. Driving fast carries added risk with it, which would make the driver of that car more likely to get into an accident and thus, more likely to file a claim.
Myth 3: Parking tickets affect rates: False
Parking tickets alone will not affect your rates because they are not considered moving violations. However, failure to pay a parking ticket can affect your rates because it can be considered a minor infraction. Stay on top of any parking tickets you have to avoid an increase in your rates.
Myth 4: You have to wait for your policy to end to switch insurance companies: False
All standard auto insurance policies allow you to cancel whenever you want after you give notice to the coverage provider. Often, people are wary about doing this because having gaps in your auto insurance is frowned upon both by states and insurance providers. As long as you sign up for a new policy before canceling your old one, however, there’s no problem.
Myth 5: It costs more to insure your car when you get older: True and False
The “cost-to-age” debate about car insurance is all relative. You can think of the relationship between the average premiums that drivers pay and their age as an inverted bell curve.
Younger drivers usually pay high premiums because they tend to take more risks and because they are inexperienced. These two factors together increase the likelihood of an accident, which coverage providers need to account for.
Middle-aged adults, though older than teen drivers, see their premiums decrease because they have significantly more experience, which makes them less likely to get into a collision.
Finally, senior drivers generally see their premiums increase relative to those of middle-aged adults due to the fact that declines in health, such as vision impairment, make them more prone to driver error and, as a result, accidents.
Thus, while some policyholders do see an increase in their premiums as they get older, others enjoy a dip in their rates. Discounts are also available to help avoid increases. For example, senior drivers might benefit from a pay per mile car insurance policy as the amount of driving they do decreases.
Myth 6: If another person drives your car in an accident, his or her auto insurance will cover the damages: False
Typically, if a friend or family member gets in an accident while driving your car, your insurance will cover most of the damages. Auto insurance insures cars and not people. Under an auto insurance policy, we pay for collision and comprehensive coverage, which means that the insurance provider providing the policy on the car that gets damaged will be the provider that pays. However, the driver’s insurance may cover some personal injury expenses in these cases.