Tag Archives: Customer Satisfaction

How To Keep Commercial Insurance Customers Satisfied

A survey of more than 1,400 risk professionals at large organizations in the U.S. or Canada that have purchased a commercial insurance policy from one of the profiled insurers or brokers throws up some interesting results.

It finds that as rates across the U.S. commercial property/casualty insurance market continue to decline, the key variables in driving overall commercial insurance customer satisfaction are insurer profitability and broker expertise.

The J.D. Power study, conducted in conjunction with RIMS (the risk management society), found a distinct correlation between customer satisfaction and insurer profitability, as measured by total commercial combined financial ratios.

Among large commercial insurers, the highest performing companies in overall satisfaction—XL Catlin (773 on a 1,000-point scale); CNA (767); and Chubb (765)—are also found to have some of the strongest combined ratios in the industry.

This suggests that the most profitable insurers are able to support more flexible underwriting standards to meet customer needs more effectively, according to J.D. Power.

The study found an overall correlation between customer satisfaction and insurer profitability of 0.67, suggesting the more profitable the book of business an insurer has, the greater the likelihood the insurer will also have high levels of satisfaction.

Among commercial insurance brokers, the most significant single attribute driving that performance is quality of advice/guidance provided, with the highest-performing firms, Lockton (863) and Arthur J. Gallagher & Co. (823), outperforming larger rivals by a large margin.

This demonstrates that brokers with in-depth expertise and who have a hands-on, consultative relationship with their clients are consistently driving the highest levels of customer satisfaction, J.D. Power says.

The inverse also appears to be true, as the study shows customer satisfaction declines by an average of 136 points among the 20 percent of customers who indicate their broker does not completely understand their business needs.

Industry-wide, brokers received an average rating of 8.34 on a 10-point scale for the quality of advice/guidance provided metric.

In addition to quality of advice/guidance, satisfaction with brokers was based on the following attributes: reasonableness of fees; ease of the renewal process; effectiveness of risk control services; variety of program offerings; effectiveness of program review; price, given services received; billing and payment process; and claims process.

Satisfaction with commercial insurers is based on five factors: service interaction; program offerings; price; billing process; and claims.

Organizations included in the J.D. Power 2016 Large Commercial Insurance Study have at least $100 million in annual revenue or operating budget.

The Insurance Information Institute provides some useful facts and statistics on the commercial insurance market here.

Spreading Awareness of Insurance to Small Businesses

A couple of new studies appear to shed light on the continuing need to communicate the importance of insurance for small business owners.

First, a Nationwide-sponsored survey found that 66 percent of small businesses do not have business interruption insurance (hat tip to Insurance Journal for its report here). This is despite the fact that an estimated 25 percent of businesses do not reopen following a major disaster.

Most small business owners are at risk of disaster, Nationwide noted. Some 75 percent of small businesses do not have a disaster recovery plan in place, even while 52 percent say it would take at least three months to recover from disaster.

Nationwide commissioned the survey from Harris Interactive, which polled 500 U.S. small business owners with fewer than 300 employees from June 8-19, 2015.

In a press release, Mark Pizzi, president and chief operating officer of Nationwide Direct and Member Solutions, said:

Small businesses are least likely to have disaster recovery insurance. And yet they are the ones most affected by a disaster. That’s why it’s essential for small businesses to have a disaster recovery plan.”

Meanwhile, a J.D. Power study found that many small business owners are unaware that insurers even provide commercial insurance.

Less than one-fourth of small business owners said they were aware that nine of the 17 insurance providers included in the study offer insurance for business customers.

Only six insurers had awareness rates above 40 percent for their commercial insurance offerings, and five of these are among the largest personal lines insurers, J.D. Power said.

While advertising is important to spread brand awareness, the study suggested that commercial insurers have better success when they develop awareness through agents/brokers, trade groups and word of mouth from other businesses.

The proportion of customers who considered/shopped an insurer among all potential prospects is 61 percent when awareness comes from an agent/broker or trade group, compared with just 38 percent when awareness is attributed solely to advertising.

Still, the study–now in its third year–found that small business customers are increasingly satisfied with their insurance providers. Overall satisfaction was up 10 points at 793 on a 1,000-point scale in 2015, due primarily to improvements in price and policy offerings.

The 2015 U.S. Small Business Commercial Insurance study is based on 3,292 responses from insurance decision-makers in businesses with 50 or fewer employees that purchase general liability and/or property insurance and was fielded from April through June 2015.

The Insurance Information Institute’s excellent online resource for business insurance is available here.

Millennials Are Happy With Their Auto Insurance

Gen Y customers—or Millennials—have expressed a sharp increase in satisfaction with their car insurance compared to other generations, according to the just-released J.D. Power 2015 U.S. Auto Insurance Study.

The study examines customer satisfaction in five factors: interaction; price; policy offerings; billing and payment; and claims.

Overall customer satisfaction with their auto insurer reached an all-time high of 818 on a 1,000-point scale, an improvement of 8 index points from 2014.

Satisfaction among Gen Y customers increased by 21 points–the biggest increase compared with the other generations. Satisfaction among Gen X customers was up 6 points, and among Boomers by 4 points, while Pre-Boomers were less satisfied (-3 points).

Improved interactions had the greatest impact on overall customer satisfaction and were also the largest contributor to the year-over-year improvement, the JD Power survey found.

Interaction satisfaction among Gen Y customers came in at 827, an increase of 20 points from 2014.

Customer interaction preferences are changing. Gen Y’s preference to interact exclusively via digital self-service (Web or mobile) increased to 27 percent in 2015, up from 21 percent in 2011.

A similar preference to interact via Web or mobile is true of other generations: Gen X (23 percent vs. 19 percent in 2011); Boomers (12 percent vs. 10 percent); and Pre-Boomers (6 percent vs. 4 percent).

However, auto insurers need to have their websites ready to resolve customer service issues.

The survey found that among the interaction channels, satisfaction with the website experience receives the lowest average score, most notably among Gen Y customers (816, compared with 826 for Gen X, 841 for Boomers and 861 for Pre-Boomers).

JD Power noted that while customers across all generations are able to use online self-service for basic tasks such as making a payment and gathering information about their account, they also need to be able to resolve more complex issues online.

Still, some activities are better performed through personal interactions, J.D. Power noted.

For example, when it comes to discussing price changes, one-quarter (25 percent) of Gen Y customers would rather talk to someone in person or over the phone, and 23 percent indicate they prefer in person or over the phone rather than the website channel when they have questions about their policy coverage.

The Insurance Information Institute (I.I.I.) has some  must-read facts and statistics on auto insurance here.

Price Optimization: What it is and what it isn’t

I.I.I. Florida representative Lynne McChristian sheds light on the topic of price optimization in this post which  first appeared @InsuringFLA blog.

Florida regulators issued a memorandum to insurers recently to eliminate the use of something called price optimization. That’s probably an unfamiliar term to most people. It’s interesting that the memo had to define what “price optimization” is in order for insurers to stop doing it. Simply, the memo from the Florida Office of Insurance Regulation was to stop a practice that few insurers are using in the first place and that may actually help lower insurance costs.

Price optimization is a tool that other industries have used for years, specifically the retail and travel industries. It is a new tool for insurers, and it’s one that is designed to add sophisticated computer analysis to the final polishing of insurance prices.

At the very end of setting rates, insurers have always adjusted prices, almost always slightly lower, to reflect the industry’s competitive nature. It used to be a seat-of-the-pants guess by a real, live actuary; now, a computer helps give the final nudge.

That takes human guesswork out of it, yet the computer does the same thing.

Some critics have turned this equation upside down, stating instead that an insurance company is looking only to increase profits. Florida is one of four states that is prohibiting the practice of price optimization before there is a clear understanding of its consumer benefits. Most other states are carefully studying the practice and awaiting a white paper being developed by a special task force established by the National Association of Insurance Commissioners.

Insurers use all types of data to establish individual insurance rates. The concern critics have about price optimization is that it is not based on commonly used risk factors for auto insurance. Price optimization gave insurers one more tool to employ more sophisticated computer algorithms to give better prices to consumers. But that won’t be the case for Floridians.

Everyone cares about what they pay for insurance, and there are lots of choices for those shopping for auto insurance. So, if you think you’re not getting the best price, use these tips to shop around for auto insurance. To learn more, check out this Q&A on price optimization.

Homeowners More Satisfied Than Ever With Property Claims Experience

Overall satisfaction among homeowners who have filed a property insurance claim increased for the third consecutive year, according to the JD Power 2015 Property Claims Satisfaction Study.

Insurers have been able to increase property claims satisfaction to 851 (on a 1,000 point scale) in 2015, up from 840 in 2014.

JD Power said the higher satisfaction among customers reflected the fact that insurers have applied the lessons learned while handling CAT claims to non-CAT claims and put renewed focus on their property insurance business.

In the words of Jeremy Bowler, senior director of the insurance practice at JD Power:

The study shows the significant gains insurers have made in customer satisfaction by applying the lessons learned while handling prior catastrophic losses to all claim processes.

The big storms masked the steady progress the industry has also been making in recent years on routine claims, but we’re really seeing that shine now.”

The study, now in its eighth year, measures satisfaction with the property claims experience among insurance customers who have filed a claim for damages by examining five factors: settlement; first notice of loss; estimation process; service interaction; and repair process.

Overall satisfaction improved in each of the five factors in 2015, with greatest year-over-year improvements seen in settlement and service interaction, JD Power noted.

The study findings are good news for insurers as they often realize a return on their investment in customer satisfaction in the form of loyalty.

Only 3 percent of customers who were delighted (satisfaction scores 900 or higher) and 7 percent of those who were pleased (scores 750-899) with their insurer during the claims process have switched carriers since their claim closed, according to JD Power.

But, 9 percent of indifferent (scores 550-749) and 11 percent of displeased (scores 549 or lower) customers have switched to a different insurer. And 23 percent of indifferent customers and 42 percent of displeased customers say they will shop for a new provider during the next 12 months.

The study is based on more than 6,100 responses from homeowners insurance customers who filed a property claim between January 2013 and December 2014.

Check out this I.I.I. video for steps for filing a homeowners claim.

Higher Satisfaction With Auto Insurance Claims Process

Despite an increase in the number of more complex physical damage claims, auto insurers are doing a better job of handling these types of claims.

The just-released J.D. Power 2014 U.S. Auto Claims Satisfaction Study finds that overall customer satisfaction with the auto insurance claims process has improved steadily during the past five years to 857 on a 1,000-point scale in 2014, up from 842 in 2010.

What’s more, customer satisfaction with more complex claims — those in which vehicles have significant structural damage and need to be towed — has also increased.

Satisfaction with total loss claims in 2014 averages 829, while satisfaction for towed vehicle claims averages 851. Satisfaction with each claim type was up 12 points from 2013.

J.D. Power notes:

Those improvements in satisfaction with insurers’ handling of complex claims are largely due to insurers managing customer expectations with respect to the timing of the claim and moving the claim along more quickly–key metrics of communicating the settlement, repair time, and paying the customer (if applicable) are all performed faster in 2014.”

The fact that customer satisfaction continues to rise is even more noteworthy when you consider that auto insurers are handling a growing number of more complex claims.

Total loss claims and claims in which vehicles have significant structural damage and need to be towed accounted for 37 percent of all auto claims in 2014, up 5 percentage points from 2011 when complex claims accounted for 32 percent of the total.

However, the study finds the rise in more complex claims has pushed up the average severity of claims (based on the dollar amount of loss) for the third consecutive year.

Check out I.I.I. facts and statistics on auto insurance.

Poor Service, Not Price Drives Auto Insurance Customers to Shop

Big savings are not all they seem, at least when it comes to buying auto insurance.

The just-released J.D. Power 2014 U.S. Insurance Shopping Study finds that poor service is a leading reason why customers shop for and switch to a new auto insurer, rather than price.

Declining satisfaction with new price is also the primary reason customers are less satisfied when they do switch insurer, according to the study findings.

J.D. Power notes that some 30 percent of auto customers shopped for a new insurance provider in 2013, of which 36 percent ultimately switched insurers.

Perhaps surprisingly, increases in premiums do not drive shopping as much as poor experience.

Customers who have a poor experience with their insurer shop at a rate of 28 percent – more than double the rate of shopping among those who experience a premium increase (13 percent).

Another key takeaway is that customers are tolerant of rate increases at a certain level. However, rate hikes of more than $200 can triple the rate of customers who switch insurers.

A press release quotes Jeremy Bowler, senior director of the insurance practice at J.D. Power:

The insurance industry spends billions of dollars each year on advertising, and over the last seven years many of those ads have tried to entice customers with big savings. While switching to a new insurer usually results in savings, the ads make promises of savings that a growing number of new customers don’t believe they’ve received.†

Price, however, is still important in the selection process with eight in 10 customers selecting the lowest-price insurer.

Price is also an increasingly important driver of new-buyer purchase experience satisfaction once customers have selected a new insurer. Overall new buyer satisfaction with the auto insurance buying experience averages 821 (on a 1,000-point scale), down significantly from 828 in 2013.

J.D. Power notes that the decline in satisfaction is driven by a 17-point drop in the price factor, which has the greatest impact on customer satisfaction.

Check out I.I.I. facts and statistics on auto insurance.

Property Claims Satisfaction Improves For Second Year

Overall satisfaction among homeowners insurance customers who filed a property claim has improved for the second consecutive year.

According to the J.D. Power 2014 Property Claims Satisfaction Study, satisfaction among homeowners insurance customers who filed a property claim between April 2012 and January 2014 averages 840 (on a 1,000-point scale) – up from 836 in the 2013 study.

Overall satisfaction with non-catastrophic claims increased by 11 index points in 2014, compared with 2013 (843 vs. 832, respectively).

However, satisfaction among those homeowners who filed a claim for damage caused by Superstorm Sandy averages just 830 in 2014, down from 846 among Sandy-related claimants surveyed shortly after the October 2012 storm.

At this point, we should note that Sandy caused $18.75 billion in insured property losses across 15 states and the District of Columbia, not including National Flood Insurance Program (NFIP) losses, according to Property Claim Services (PCS). This makes it the third costliest U.S. hurricane topped only by Hurricane Katrina in 2005 and Hurricane Andrew in 1992.

Returning to J.D. Power’s findings it’s not surprising to learn that communication and timeliness are key to keeping homeowners insurance customers satisfied during the property claims process.

A press release quotes Jeremy Bowler, senior director of the insurance practice at J.D. Power:

Starting at the time of first notice of loss, it is crucial for insurers to keep claimants informed of their claim, the estimate of damages, the settlement amount, when work will begin and when it will be completed.†

The study, now in its seventh year, measures satisfaction with the property claims experience among insurance customers who filed a claim for damages covered under their homeowners’ policy by examining five factors: settlement; first notice of loss; estimation process; service interaction; and repair process.

The 2014 Property Claims Satisfaction Study is based on more than 5,500 responses from homeowners insurance customers who filed a property claim between April 2012 and January 2014.

Higher Levels of Customer Satisfaction with Property Claims

Homeowners insurance customers are more satisfied with the property claims experience overall, according to the J.D. Power 2014 Property Claims Satisfaction Study – Wave 2.

Overall claimant satisfaction increased to 848 (on a 1,000-point scale) in Wave 2 of the study, up from 832 in Wave 1.

J.D. Power says the improvement is due to insurers providing accurate timelines of the claims process length and helping claimants avoid settlement negotiations.

In a press release, Jeremy Bowler, senior director of the global insurance practice at J.D. Power, said:

Insurers are doing a better job of setting claimant expectations of the time it will take to settle their claim, which is a significant contributor to overall satisfaction. Based on feedback from claimants, it is evident that insurers also are more consistently taking time to explain the settlement, which results in fewer claimants negotiating their settlement.†

Higher levels of satisfaction were buoyed by improvements in the handling of first-time claimants and non-catastrophic claims, the study found.

Satisfaction among first-time claimants improved by 17 points to 842 in Wave 2, from 825 in Wave 1, as more insurers provided an accurate timeline of the claims process length (76 percent in Wave 2, versus 72 percent in Wave 1) and a greater percentage of claimants avoided a settlement negotiation (75 percent did not have to negotiate the settlement in Wave 2, versus 71 percent in Wave 1).

Satisfaction with non-catastrophic damage claims also increased to 840 from 829 in the 2013 study, and 833 in the 2012 study. This was due to significantly higher scores in the estimation process, repair process and settlement factors, J.D. Power said.

Interestingly, satisfaction with agent first notice of loss dropped to 853, from 875 in Wave 1. Customer satisfaction when reporting claims via a call center, website or other electronic method increased, however (up to 855 in Wave 2 from 829 in Wave 1).

The study measures satisfaction with the property claims experience among insurance customers who filed a claim for damages covered under their homeowners policy by examining five factors: settlement; first notice of loss; estimation process; service interaction; and repair process.

Wave 2 of the study is based on responses from 1,740 homeowners insurance customers who filed a property claim after June 1, 2012. The current wave of the 2014 study was fielded in the third quarter of 2013.

J.D. Power Reports on Auto Insurance Customer Satisfaction

Price is a key driver of satisfaction among auto insurance buyers, according to the J.D. Power 2014 U.S. Insurance Shopping Study – Wave 1.

The study examines insurance shopping and purchase behaviors and overall satisfaction among customers who recently purchased insurance across three factors (in order of importance): price, distribution channel, and policy offerings. Retention and shopping rates reflect Q2 2013 results.

J.D. Power reports that rate increases are driving more auto insurance customers to obtain competitive price quotes, while satisfaction with the purchase experience is trending downward among new buyers due to lower satisfaction with price.

Key findings of the study include:

— Price satisfaction declines to 808 (on a 1,000-point scale) in 2014, from 821 in 2013.

— Auto customer retention averages 97 percent, with 3 percent of auto insurance customers switching insurers, fueled by a shopping rate of 8 percent.

— More than 20 percent of new buyers purchased auto insurance online. Therefore, companies that lack a viable quote website are not well-positioned to acquire or sell to one in five customers.

— The average annual savings when switching to a new insurer is on par with 2013 ($387 vs. $386, respectively).

In a press release, Jeremy Bowler, senior director of the global insurance practice at J.D. Power, says:

As rate increases continue to drive customers to shop around for the best price, insurers need to provide a seamless shopping experience, including competitive websites with quote compatibilities and a satisfying on-boarding experience to acquire new customers.

Communicating new offerings and allowing customers to tailor their policies helps demonstrate the value of the policy and improve customer satisfaction.†

The 2014 U.S. Insurance Shopping Study – Wave 1, which for the first time is being conducted on a quarterly basis, is based on responses from more than 5,500 auto insurance shoppers.

Check out I.I.I. facts and statistics on auto insurance.