According to a new report from J.D. Power, which measures insurance customer satisfaction on a 1000-point scale, the average score among those born between 1977 and 1994 was just 819. That’s in direct contrast to Pre-Boomers (those born before 1946), whose average score was a healthy 911. Baby Boomers (born 1946-1964) and Gen Xers (born 1965-1976) ranked in between those two groups with scores of 876 and 847, respectively.
Technology is clearly a two-edged sword when it comes to keeping customers happy. On the one hand, investments in technology are clearly paying off for providers. Customers who engage with their insurance companies via digital channels such as email, text and smartphone apps registered higher satisfaction scores than their less digitally enabled peers. And those given multiple choices regarding how they got their claim updates outscored those who weren’t by 887 to 798.
On the other hand, as reflected in the low scores for Millennials, insurance company technology rollouts are not keeping pace with customer expectations. In fact, just 24 percent of customers report receiving email updates on their claims. While that’s up substantially from just 15 percent in 2011, it still is less than a quarter of survey respondents. This digital shortfall may not bother Pre-Boomers, but Millennials obviously find it problematic.
Technology is also helping accelerate the resolution of certain types of claims—another factor in customer satisfaction. In the case of claims involving a tow, for example, insurers have managed to cut more than a day and a half from the time a customer reports a loss to the time the vehicle is repaired (16.6 days in 2013 vs. 15.0 days in 2014).
Overall, however, insurance companies are not resolving claims much faster than they did a year ago. In part this is due to the continued rise in the dollar amount of the average auto claim, along with the complexity of that claim as determined by the extent of the damage, the need for a tow and other factors.
Satisfaction as Strategy
Customer satisfaction can be an important differentiator in the highly competitive auto insurance market, especially when it comes to customer retention and word-of-mouth advertising. The J.D. Power survey revealed that 79 percent of customers with a score of 900 or higher say they will definitely renew their policy and recommend their insurer to others. But only 13 percent of customers with a score of 549 or below say they will definitely renew with their current insurer—and a mere 7 percent of these will recommend that insurer to others.
All this is good news for Amica Mutual, which topped all measured companies with a score of 900, but that might be less so for those that find themselves at the bottom of the J.D. Powers rankings.
At first blush, there doesn’t seem to be a direct correlation between customer satisfaction and gross premium growth. Auto Owners Insurance, for instance, took second place in the J.D. Powers rankings but was seriously outpaced in premium growth by CSAA Insurance Exchange, which was ranked much closer to the bottom.
Mark Garrett, director of insurance industry analytics at J.D. Power, however, cautions against drawing the wrong conclusions from this lack of correlation. “While many factors besides customer satisfaction can impact an insurance company’s growth, companies with higher customer satisfaction scores have a demonstrably lower cost of customer acquisition and a demonstrably higher rate of customer retention,” he notes. “So while you may certainly be able to grow your business while providing mediocre customer care, it is equally certain that your operating margins will suffer if you fail to up your game.”
Bowler also notes that the gap between auto insurers who “get” digital engagement and those that don’t is significant. Top performers, for example, proactively update about 40 percent of their customers about open claims via email. Among the lowest performers, that percentage is as low as 6 percent.
“Everybody talks about digital engagement, but some companies really struggle to get solutions rolled out into production,” he says. “That is clearly going to cost them profits as digital natives continue to make up a growing percentage of the driving public.”
The J.D. Powers 2014 U.S. Auto Claims Satisfaction Study was based on responses from 10,891 auto insurance customers between November 2013 and August 2014, who had settled a claim within the previous six months, and measured their experience with first notice of loss, service interaction, appraisal, the repair process, their rental experience, and ultimate settlement. It excluded claimants who incurred only glass/windshield damage, whose vehicle was stolen, or who only filed roadside assistance claims.
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