Surprise! Insurers Are Popular, Study Shows

Here’s a “dog bites man” story: a new study by J.D. Power and Associates shows that homeowners are actually happy with their insurance companies.

For the first time in five years, overall satisfaction with homeowner insurance has increased “significantly,” according to the marketing research firm.

That’s a far cry from the abuse the insurers took following 2005’s Hurricane Katrina and her sisters, Hurricanes Rita and Wilma. That horrible fall season saw $80 billion worth of damage to Gulf States. Homeowners were justifiably angry when they found out they weren’t going to be paid because insurers claimed that floods and not high winds had knocked down their houses. The triple disasters spawned lawsuits, investigations, television shows and much bad publicity for insurers like Allstate, State Farm and Travelers.

Now, compared to banks about to foreclose and bill collectors out to dun them, insurers look pretty good, J.D. Power says. Overall satisfaction with these companies has improved by 21 points on a thousand-point scale, the first time there’s been a significant increase in perception in five years.

Is that good news for home insurers? Well, yes and no. It certainly makes these carriers less vulnerable to elected insurance commissioners who want to rise to governor by smearing them and forcing them to cut rates.

But there’s also a downside. J.D. Power says the reason home insurers are more popular is that they are giving deeper discounts. The percentage of policyholders who get discounts has increased to 84 percent this year from 81 percent in 2008. Of the 27 insurers in the study, 10 have had “notable” increases in the proportion of their customers getting discounts. And it goes without saying (but J.D. says it anyway) that customers who get discounts are happier than those who don’t.

So customers are happier, but what about shareholders? Discounts are another reflection of price wars, which are already on the horizon, and that doesn’t bode well for insurers. And, while it also goes without saying, the roof never leaks until it rains. Property insurers have had some excellent disaster-less years. But if that changes, no one will be happy.