Winning Share and Customer Loyalty in Auto Insurance

The $175-billion U.S. auto insurance industry could be spending its marketing dollars in more effective ways: targeting consumers based on needs rather than behavior; finding the optimal balance between retention and acquisition; and reaching shoppers with the right message at the right moment in their decision journey.

These are among the insights from recent McKinsey auto insurance research surveying more than 16,500 consumers on both their shopping behavior and the needs that drive their decisions. The broad scope of this research allowed us to examine whether assumptions about how consumers choose an auto insurance policy really hold water.

The “window” for influencing auto insurance shoppers is open for longer than ever, increasing marketing options for carriers. Conventional wisdom based on the marketing “funnel” has long stated that, for carriers, being a part of the initial consideration set is all-important — their one big chance with insurance shoppers. However, this is not necessarily the case.

As they move from gathering information through the quote and purchase phases of their journey (and beyond to post-purchase support), auto insurance shoppers are more open than ever to considering new brands and dropping considered brands at each step. This news is particularly relevant for carriers that have neither the resources nor the appetite to match the marketing spend of the leading brands to secure a place in the initial consideration set.

Blurred Lines

Channel distinctions are blurring. We know that auto insurance shopping is a multichannel experience. But the degree to which shoppers are switching channels — even during the same step in the decision journey — points to a significant opportunity. Carriers that can deliver a seamless cross-channel experience throughout the consumer decision journey will have a distinct advantage.

There is more than one kind of loyalty. McKinsey’s research shows that loyal policyholders are not a monolithic group of satisfied customers. A subset of loyalists does fit this description, but another subset is identified by the survey as “loyal” in name only. That is, they remain with their carrier more out of inertia than out of satisfaction. Members of this significant minority of “passive” loyalists can, however, be dislodged and represent significant value hiding in plain sight. Some 18 percent of consumers are only passively loyal, and they are worth roughly $30 billion in direct written premiums.

Consumer needs trump demographics and behavioral attributes for segmenting the market. Consumer behaviors may shed light on where opportunities exist, but needs provide richer insights into what it takes to actually win share. While the need for a strong brand is the most potent differentiator of consumer segments, other important factors include the propensity to shop, preference for a personal relationship and access to a local agent. Low price, it turns out, is a more modest differentiator.

Consumer Segments

There are several distinct auto insurance consumer segments. Among these are active shoppers (who actively research options and shop around frequently) and low-price experts (who make decisions based on the ability to get the lowest price). Others include the “uninvolveds” (who are largely indifferent toward insurance), independent advice seekers (who prefer advice from a local independent agent), and affinity-oriented brand buyers (who want well-known brands and aren’t looking for assistance from a local agent).

To maximize marketing impact, carriers must consider what to say to target consumers, how to say it, where to say it, and when to say it.