J.D. Power: Rate pressure, customer retention and digital engagement top 2026 insurance industry challenges
After five years of unprecedented volatility, insurers are beginning to see the consequences of gradual but consistent premium hikes, according to J.D. Power.
“Faced with bigger bills, customers have come to expect more from their insurers,” J.D. Power wrote in a recent article. “Now more than ever, insurers that fail to provide compelling offers to customers will send them rushing into the waiting arms of a company that will.”
J.D. Power found that the percentage of customers who shopped for auto insurance hit record-high levels at 57% in 2025, up from 49% in 2024.
“However, unlike past years — when switching lagged shopping — customers are finding better prices in the market, which will put further pressure on insurers in 2026,” the article states.
In addition, insurers are beginning to see customer attrition among their most valuable customers – those who are more likely to bundle products and are highly loyal. J.D. Power says the attrition is driven by premium hikes.
“With price volatility likely to remain a factor in 2026, insurers must find ways to focus their efforts on retaining these customers,” the article states.
J.D. Power also found that the use of digital channels and technology is vital to customer satisfaction.
Overall, 47% of all insurance policy buyers now purchase through digital channels compared to 35% through agents. Customers are forming new habits and opinions in their use of tech, which provides an opportunity for insurers to tailor their offerings, the article states.
J.D. Power’s new “Insurance Intelligence Report” found that premiums drive satisfaction, even among high-value customers.
“Insurers likely knew that rate hikes were building toward a tipping point,” the article states. “For years, the number of customers who were shopping for new policies continued to climb, but those who were actually willing to make the switch lagged. The reasons for this varied.
“All insurers were raising rates, so customers couldn’t find a lower premium when they were shopping. In fact, some insurers were not actively seeking new customers. But now that insurers are getting more aggressive, customers are on the move.”
While customer satisfaction held steady, 29% of insurance customers switched insurance companies last year.
“Of particular note, customers who had high rates of loyalty in the past – those who insurers deem ‘high-value’ customers due to their loyalty and willingness to bundle multiple products – now say they are the least likely to renew with their insurer,” the article states.
“In fact, just 51% of high-value customers say they will definitely renew with their insurer. Lack of understanding in pricing is key to this change in behavior. In fact, when customers understand why the price of their premiums is increasing, they are typically far more satisfied with their premium.”
J.D. Power added that, in the absence of insurers explaining hikes, some customers are turning to artificial intelligence.
“AI is playing a heavy role in the shopping process by helping customers understand the nuances of the industry, learn the insurance lexicon, and even shop quotes,” the article states. “This could spark the evolution of new customer habits and drive a wedge between customers and insurers.”
Usage-based insurance (UBI), which uses telematics software to monitor policyholders’ driving style and assign rates based on safety and mileage metrics, is increasingly important to shoppers, and insurers are responding in kind, J.D. Power said.
In 2025, 17% of insurers offered UBI programs to shoppers, up from 15% in 2024, but still down from 22% in 2023.
“While the trend toward UBI appears to be heating up again, the drop-off from two years ago reflects challenges insurers are still dealing with as they try to get the UBI formula right,” the article states. “Using a mobile app to collect driving info is the most common form of data collection in UBI programs, but it also correlates with the lowest levels of customer satisfaction among those who use these apps.
“Insurance app (628) trails vehicle system or an onboard computer (703), a device installed in the customer’s vehicle (656), or self-reported data (640).”
UBI is often used to entice customers to save money on their premiums, and with so many customers shopping their policies, this is an easy way to offer a reduced price, the article states.
“But customers will only find this attractive if they trust the data that is collected,” J.D. Power wrote. “Done properly, insurers can use UBI to bring down premiums, attract and retain clientele, and build loyalty in the process.”
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