New York – The sub-prime crisis has had a larger impact on consumer confidence than previously thought, but insurers appear to be holding their own. So says Boston-based Forrester Research Inc., in its fifth annual customer advocacy scorecard.

Forrester describes customer advocacy as the perception on the part of customers that the firm does what’s best for them, not just for the firm’s own bottom line. According to the report, customer advocacy drives real loyalty—a willingness to buy, borrow, save and invest more with a firm that a consumer already uses.

Based on a survey of 5,000 U.S. consumers, the rankings evaluated 41 U.S. banks, brokerages and insurers. Citing this year’s consumer ratings of financial institutions being down across the board (falling to their lowest levels since Forrester began surveying customer advocacy five years ago), Forrester draws the conclusion that overall, fewer consumers think their financial services providers have their best interests at heart.

“Each year, our models show that customers who rate their firms high on customer advocacy are more likely to consider their firms for additional financial products,” Bill Doyle, VP and principal analyst at Forrester, tells INN. “Likewise, customers who rate their firms low on customer advocacy are least likely to consider their firms for a future financial purchase.”

Most insurers received relatively similar marks to last year’s ranking. Highlights from the Forrester report include:

United Services Automobile Association (USAA), a San Antonio financial services company that provides auto insurance, banking and investment services, retains the top spot. USAA customers continue to give their firm the highest ratings, just as they have for each of the past four years. Other customer-owned organizations continue to score well, including credit unions and Valley Forge, Pa.-based The Vanguard Group Inc.

Property/casualty insurers continue their strong showing. Of the top 10 organizations, five are property/casualty companies. Another one of the top 10 is “independent insurance agents.”

Doyle says Forrester’s research included a rigorous statistical analysis that correlated corporate attributes with customer advocacy. For example, the strong customer advocacy scores of two top P&C firms, USAA and State Farm, Bloomington, Ill., are highly correlated to simplicity. Customers of USAA and State Farm say that each firm simplifies their life rather than complicating things unnecessarily. How? One-call problem resolution, straightforward product explanations and streamlined claims processing are all examples. For both firms, simplicity is correlated to customer advocacy.

Benevolence also is important. For USAA members, customer advocacy is linked to the perception that “USAA is always on my side for any problems or concerns I have.” USAA instills empathy for its members—all of whom are in the military or have a family connection—by having new hires taste MREs (the military’s “meals, ready-to-eat”) and read personal letters written by troops stationed away from home. Finally, trustworthiness is a key element that contributes to a customer’s sense of advocacy.

“State Farm and USAA customers trust their firms to do what’s right, whether or not regulations such as privacy laws require it,” says Doyle. “And they trust their firm to offer fair price and rate comparisons.”

New York-based AIG and New York Life dropped the most among life insurers. Life insurers fared worse than property/casualty i surers as s uggish stock markets hurt equity-based policies like annuities. AIG’s perception in the marketplace also may be related to its highly publicized charges of mismanagement, says the Forrester report.

National City Bank, also in New York, tumbled. Only 31% of National City’s customers rated the bank high on customer advocacy, compared with 40% last year. In the second half of last year, National City emerged as one of the nation’s biggest subprime lenders.

A.G. Edwards fell farthest among brokerages. Late last year, A.G. Edwards, St. Louis, Mo., was absorbed by Wachovia Securities, Charlotte, N.C. Investors who identified themselves as A.G. Edwards’ customers rated the firm lower than Wachovia Securities customers rated their firm. It was the first time in years that A.G. Edwards ranked lower than Wachovia Securities.

Forrester attributes this year’s overall drop in ratings to a broad decline in consumer confidence due to economic events such as the subprime mortgage crisis. “The mortgage crisis, sagging stock markets and falling rates of return on everything from savings accounts to real estate have left consumers feeling less confident about their financial positions and about the firms they use,” Doyle says. “Financial companies need to raise the bar on the customer experiences they provide in order to weather this storm and keep customers loyal.”

Going forward, says Doyle, insurers and other financial services companies can leverage technology to remedy their ranking. “Customer relationship management (CRM) is important now. To be able to provide an integrated view of the customer across content channels, serves many purposes. The customer who calls to have his address changed will have a better experience if that change can be made on all policies at once,” he says.

Call center style technologies also is key: the consumer believes that the “firm knows me.”

“This is important to customer advocacy, so if you have a good CRM plan in place that allows the rep to speak to the customer’s specific situation, that’s a huge lift,” Doyle says. “Awareness of the individual has been proven to increase the customer experience. And folks love the perception that the company is on their side.”

Finally, says Doyle, technologies that streamline claims also continue to be important. “Consumer expectations continue to rise and, when the insurer is able to respond faster and with less hassle to the customer, it’s a win,” adds Doyle. “It’s tough to compete on price or product, so the best way to compete and drive organic growth is by giving great experiences and the carriers that can differentiate themselves with improved customer experiences will continue to do well.”

The results of the report were released yesterday in New York at Forrester’s Financial Services Forum. For more information on the Forrester report, visit the Web site.

Sources: Forrester, Business Wire

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