Direct-to-Consumer Auto Insurers Grabbing Market Share

April 25, 2019

Direct-to-consumer auto insurers appear to be gaining serious market traction, according to a report from J.D. Power.

The firm reports that auto insurance revenue hit $245 billion in 2018, reflecting industrywide growth of 6.2 percent. But 54 percent of those gains ($7.8 billion in direct written premium) came from only Progressive Insurance and GEICO—two leaders in the direct-to-consumer space. The top 10 largest insurance carriers in the space carried 72.5 percent of the total premium.

J.D. Power said that consumers drove these results as they sought more digital/direct-to-consumer auto insurance purchasing options.

“The shift in consumer behavior in the auto insurance industry is quickly moving from face-to-face to digital as large, well-capitalized insurers give consumers the tools to shop as they would for any other consumer product,” J.D. Power found in its April 2019 P&C Insurance Industry Insight report. “Those insurers who get that consumer model right are the ones who will dominate the market.”

Progressive and GEICO offer two different direct-to-consumer approaches that consumers are responding to, J.D. Power said. In GEICO’s case, its heavy advertising and continued release of digital shopping options has helped it grow.

Progressive offers a different twist, however, as it has focused on its independent agent and direct-to-consumer distribution channels in equal measure.

Progressive’s “2018 financial performance was as much about independent agents as it was about direct-to-consumer business,” J.D. Power said. “Progressive’s direct business reported growth of 17 percent, supported by an equally impressive showing within the independent agent channel at 15 percent growth year-over-year.”

J.D. Power noted that the direct-to-consumer model has had higher customer satisfaction scores but added that the independent agent model is still doing well overall. The reason: It is more popular with customers these days than exclusive agents.

Helping to fuel this switch is the reality that customers can make price comparisons with independent agents as well as direct-to-consumer channels.

“In our insurance shopper satisfaction study, the largest performance gap among the different channels is with ‘flexible product offers,'” J.D. Power said. “This is an area where independent agents thrive based on their ability to place clients among several different brands compared to a tied agent that lacks flexibility.”

Source: J.D. Power: P&C Insurance Industry Insight Brief

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