Home Insurers Struggle To Retain Customers As Baby Boomers Flock To Rental Market, Says JD Power

TROY, Michigan – (COMMERCIAL THREAD) – The great migration of baby boomers from home ownership to rental is upon us. About two-thirds of all rental housing growth between 2004 and 2019 was attributable to adults aged 55 and over, and this group now accounts for about 30% of the total rental market.1 According to the JD Power 2021 study on home insurance in the United States,SM released today, home insurers have struggled to navigate this transition with products and services designed to maximize customer lifetime value.

“The generational shift from home ownership to rental represents a significant risk to customer loyalty, unless insurers find a better way to retain customers throughout this critical phase of life,” said Robert M. Lajdziak, Senior Insurance Intelligence Consultant at JD Power. “So far, most insurers are missing this mark. Consider the stats: 44% of baby boomers combined2 and pre-boomers who are renters today had home insurance in the past, but only 52% of them now have their renters policies with the same insurer. Recognizing that the annual owner retention is 91.7%, there is a huge opportunity for insurers who have mastered the life-stage transition formula, but the scale of this generational movement is likely to result in a lot of change activity to take place. the future.

Here are some of the key findings from the 2021 study:

  • Insurers are struggling to switch from owner-occupant policies to tenant policies: Just over half (52%) of Baby Boomers and Pre-Boomers combined who have switched from a landlord policy to a tenant policy remain with the same insurer. This number drops to 44% among Gen X policyholders and 36% among Gen Y and Z policyholders. Compared to the industry average, USAA, State Farm and Amica Mutual have particularly high retention rates while their home insurance customers switch to tenant insurance customers. .
  • The service experience, not the price, is the key to lifetime value: Among renters who remain loyal to their old home insurance brand, the most common reasons to stay with the same insurer are good service experience, brand reputation, bundled products, and convenience. The prize is fifth on the list.
  • Bundling enhances loyalty, but legacy systems often limit cross-product visibility: Among renters who previously had a home insurance policy, those who bundle insurance products with their tenant insurance policy are twice as likely to stay with the same insurer. Policyholders interacting with agents are the most likely to have their household bundled products recognized, suggesting that the existing systems used by many insurers are not designed to allow customers to be treated as a household but rather as a household. a policy number.
  • Confidence has a significant influence on retention: Homeowners who have a strong perception that their insurer is trustworthy are four times more likely to say that they will renew “definitely” with their insurer than those who do not have a favorable perception of the reliability of their insurer.
  • Smart home technologies create opportunities: More than half (59%) of homeowners who have a smart home product installed in their home, such as a doorbell camera or automatic water shutoff valve, say having a home function smart has helped prevent or reduce property damage. This presents a clear opportunity for insurers to increase preventative service offerings, which is a major shift in the value proposition by focusing on loss prevention rather than post-loss protection.

Ranking of studies

Mutual Amica ranks first in the home insurance segment, with a score of 854 (on a 1,000-point scale). Automobile Club of Southern California (840) ranks second, while Erie Insurance (835) and State Farm (835) is tied for third.

Lemonade ranks first in the tenant insurance segment with a score of 870. State Farm (866) ranks second.

The US Home Insurance Study examines overall customer satisfaction with two distinct lines of personal insurance products: homeowners and renters. Satisfaction in the home and tenant insurance segments is measured by examining five factors: interaction; policy offers; the price; billing process and policy information; and claims. The study is based on responses from 11,828 landlords and tenants via online interviews conducted from May to July 2021.

For more information on the United States Home Insurance Study, visit https://www.jdpower.com/business/insurance/us-home-insurance-study.

To view the press release online, please visit http://www.jdpower.com/pr-id/2021114.

About JD Power

JD Power is a global leader in consumer information, advisory services, data and analytics. A pioneer in the use of big data, artificial intelligence (AI) and algorithmic modeling capabilities to understand consumer behavior, JD Power has for more than 50 years provided incisive industrial intelligence on customer interactions with brands and products. The world’s largest companies in major industries trust JD Power to guide their customer-centric strategies.

JD Power has offices in North America, Europe and Asia-Pacific. To learn more about the company’s commercial offerings, visit JDPower.com/business. The JD Power automatic purchase tool is available at JDPower.com.

About JD Power and advertising / promotional rules: www.jdpower.com/business/about-us/press-release-info

1 “Housing Perspectives,” Harvard University Joint Center for Housing Studies, December 17, 2020 https://www.jchs.harvard.edu/blog/ten-insights-about-older-households-2020-state-nations-housing-report

2 JD Power defines generational groups as Pre-Boomers (born before 1946); baby boomers (1946-1964); Generation X (1965-1976); Generation Y (1977-1994); and Generation Z (1995-2004). Millennials (1982-1994) are a subset of Generation Y.

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