Study links high satisfaction and retention rates

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By: Wise Marketer Staff |

Posted on September 6, 2006

Auto insurance companies that record high levels of customer satisfaction benefit from customer behaviours that have positive financial implications, according to the J.D. Power and Associates 2006 National Auto Insurance Study.

The study identified and tracked performance on a number of specific, measurable behaviours on the part of the insurer where there are clear break-points in customer satisfaction levels. For example, auto insurance customers are more satisfied when they only have to contact their insurer once to resolve an issue, and satisfaction declines significantly with each additional contact.

Customers who had their call resolved on the same day recorded average satisfaction scores of 862 on a 1,000-point scale. But that score dropped to 816 among those who had to wait one to three days for their issue to be resolved and to 727 for those who had to wait four or more days. When a call back is required, those who receive a call back when promised rate their insurer 135 points higher than those who do not.

Satisfaction linked to loyalty
According to Jeremy Bowler, senior director of the insurance practice at J.D. Power and Associates, "There are certainly financial performance rewards associated with satisfying customers, principally increased renewals and recommendations. Carriers achieving high levels of satisfaction retain 90% of their customers compared to those carriers with the lowest satisfaction levels who retain an average of only 78% of customers."

"Every customer lost to a competitor has a real impact on an insurer's bottom line. However, in many cases, it takes little or no investment to improve customer satisfaction. It's important to invest in the areas that truly resonate with customers. Often this means investing in developing the skills and empathy of the front-line employees and agents who serve customers day to day," Bowler explained.

Behaviours impacting loyalty
Other behaviours that directly impact customer satisfaction and loyalty include:

  • Bundling
    Auto insurance customers who bundle other policies with the same insurer, such as homeowner's insurance, are more likely than non-bundlers to be satisfied with their auto insurer's policy offerings and renew their policies at an 11% higher rate. Customers who understand the discounts they receive are also more likely to be satisfied with policy offerings overall.
  • Claims
    For customers who file a physical damage claim with their auto insurer, time is critical. Same-day response to the first notice of the accident, followed by a settlement within a week and repairs completed within two weeks, represents the best practice. Satisfaction with claim handling drives 44% of the overall impression of their insurer for customers who filed a recent auto claim.
  • Annual policy reviews
    On average, customers who have their policy needs reviewed each year report satisfaction scores that are nearly 80 index points higher than those who did not. Currently, only one-half of auto insurance customers report being offered an annual policy review. Unless a customer files a claim, offering to review a policy holder's insurance needs is one of only a few opportunities an insurer has to build trust with the customer, who otherwise would only interact with their carrier by paying their bill and periodically changing their policy to update drivers, vehicles or address.

Less likely to switch
Bowler concluded that one of the clearest indicators of the value insurers gain by delivering good service is that satisfied customers are much less likely to shop for a new provider: "Customers who shop because of poor service are twice as likely to switch than those who switch for lower prices. The 2006 study also found that auto insurers can limit shopping behaviour triggered by price increases by proactively engaging the customer in discussion concerning the options available to them."

Overall customer satisfaction with auto insurers improved for the fourth consecutive year, although the rate of improvement was slower than in previous years. Overall satisfaction was measured based on performance in five areas (listed here in order of importance): interaction, billing and payment, policy offerings, price, and claims.

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