Customer loyalty among small commercial insurance policyholders has fallen to its lowest level in years, with only 55% saying they “definitely will” renew with their current insurer, according to a new study released today.
The J.D. Power 2025 US Small Commercial Insurance Study found a six-percentage-point decline from 2024, representing a significant shift after several years of improvement and stability in customer retention rates.
“As premiums have risen to cover the cost of claims, it stands to reason that more customers would be willing to shop their policies,” said Stephen Crewdson, managing director of global insurance intelligence at J.D. Power. “Interestingly, however, the drop in retention is not solely attributable to higher premiums.”
The study reveals that effective communication and superior service can help insurers retain customers despite premium increases. Researchers found that customer satisfaction levels remain identical between those who completely understand why their premiums increased and those whose premiums stayed flat.
“In fact, insurers that communicate well and provide a higher level of service can make huge inroads toward keeping customers,” Crewdson said. “Remarkably, satisfaction is at an identical level among customers who understand why their premium is increasing as among those whose premiums are not increasing at all, which puts a huge onus on insurers to bolster their outreach around rate increases.”
The retention decline affects customers across virtually all demographic groups, with Millennials experiencing the steepest drop at 12 percentage points. The study examined responses from 2,848 small commercial insurance customers with 50 or fewer employees from March through May 2025.
Service quality proves equally important as competitive pricing for keeping clients. The research shows that 16% of customers identify good service experience as the most common driver of retention, surpassing price, coverage options, and reputation.
However, fewer customers report understanding their rate increases. The number who say they completely understand why their premiums increased dropped by five percentage points since 2024, suggesting a communication gap.
The study identified key retention drivers: insurers’ ability to demonstrate complete understanding of a customer's business drives a 37 percentage point improvement in renewal intent, followed by customers’ understanding of their policy (33 points), understanding premium increases (26 points), and resolving problems through the insurer’s website (23 points).
Erie Insurance achieved the highest overall customer satisfaction score of 723 on a 1,000-point scale. Cincinnati Insurance and Philadelphia Insurance tied for second place, each earning scores of 714.
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