Fair vs. Cheap: Balancing Pricing and Trust

Trust is a critical element of a lasting relationship with customers. Brands with the highest levels of trust also see the highest levels of loyalty. 

When we look at auto insurance brands that perform significantly above average in the trust dimension, we tend to see customers indicating that they believe these brands care about them and have a good reputation. These brands also perform better across most dimensions, particularly those related to product offerings and problem resolution, than brands with lower trust scores.

How does price relate to trust?

What we also see for high trust brands is that they tend to have lower ratings when it comes to being seen as affordable. Despite the lower “affordable” ratings, these brands actually receive higher ratings for price for their coverage. They also see higher ratings for reasonableness of payment fees, fairness of claim settlement and the degree to which their policy meets their needs.

Source: J.D. Power 2024 U.S. Auto Insurance Study

In this hard market where everyone is paying more for auto insurance, we can see that affordability does not always equate to trustworthiness. Brands see better performance in the trust dimension when their prices are seen as fair and reasonable than when they are seen as cheap.

How does raising premiums influence trust?

Affordability is just one piece of the puzzle when it comes to the relationship between price and trust. Once a customer is onboarded, during the life of their policy, as we’ve seen more recently, premiums may increase. These increases, however, don’t have to drive down the customer’s trust in their carrier.  In fact, when customers experience an insurer-initiated rate increase, both of the two most important dimensions (trust and price) are significantly higher when customers both expect the increase and understand the reasons for the increase. For premium increases, communication and transparency are critical to maintaining trust.

Source: J.D. Power 2024 U.S. Auto Insurance Study

Key Questions for Carriers

With trust heavily influencing loyalty and price relating to trust, brands looking to retain customers must answer critical questions including:

• How can they influence the perception of fair and reasonable pricing?  
• How can they best communicate the value proposition of their products?
• What “moments of truth” have the biggest impact on trust?
• Good pricing may bring people in the door, but what keeps them as a customer?

Subscribers to the 2024 U.S. Auto Insurance Study can start exploring answers to these questions now. Not yet a subscriber? Contact our team today for subscription details.  

About the Author: Breanne Armstrong is Director of Insurance Intelligence at J.D. Power. Her area of focus is on the customer experience in auto, property, and individual life insurance and annuities. She has over 15 years of research and consulting experience and 7 combined years at J.D. Power working within the Insurance Practice. 

Key Contributor: Amy Feeman is a senior consumer insights analyst at J.D. Power. Her area of focus is on the auto, small business, and independent agent insurance studies. She has over 15 years of research experience in the P&C insurance industry.

Where to find more insights like this:
This blog post will be featured in the Insurance Insights monthly newsletter. Make sure you're signed up to get the latest insurance intelligence >