Canada’s property and casualty industry has experienced dramatic changes in the past decade, with the emergence of direct insurers and growing consumer willingness to purchase and service their insurance policies online. Increasingly, the industry is shedding its commodity business mentality and adopting a customer-oriented philosophy. Customer experience is not only featured prominently in many insurers’ brand promises, but it is also embedded in their business processes at every “touch point,” a term used to describe ways in which customers interact with their policy providers. Examples of touch points would be consumer contact with brokers, agents, call centres, claims departments or the statements consumers receive from their insurers and/or brokers.
This transformation is certainly yielding positive results, according to two studies J.D. Power and Associates released in August and September — the 2010 Canadian Auto Insurance Customer Satisfaction Study and Canadian Home Insurance Customer Satisfaction Study.
IMPROVING CUSTOMER SATISFACTION LEVELS
Since 2008, when J.D. Power began conducting these studies in Canada, customer satisfaction with Canadian property and casualty insurers has steadily improved. Table 1 (please see Page 48) shows customer satisfaction, measured as a Customer Satisfaction Index (CSI) score that ranges from 100 to 1,000 points. Auto insurance CSI has achieved steady improvement each year, and across each of the three segments — Quebec Private, Crown Insurers and Private Full Coverage (which includes insurers in Alberta, Ontario and Atlantic Canada).The biggest improvement is in the Quebec private segment, followed by Crown insurers. Private full coverage has experienced slower improvement relative to other segments.
These results are quite impressive considering the premium increase in most jurisdictions, particularly in Ontario, where auto premiums have increased by double digits on average in the past two years. It also provides further proof that the industry’s investment in upgrading its technology and customer-facing processes and service standards have resulted in a system-wide improvement in customer experience.
It is interesting to note that although customer experience has improved across all segments, a notable gap remains among the three auto insurance segments. Companies in the Quebec private segment lead the industry, while Crown insurers trail by a sizeable margin.
Furthermore, J.D. Power industry benchmark studies indicate that customer satisfaction with property and casualty insurance still lags that of many other industries, including vehicle sales and service and retail banking. Although insurers typically benchmark against each other within their own industry, customers do not necessarily do so. The other customer experiences of policyholders — in industries such as banks, hotels and vehicle dealerships — shape their expectations of what good customer service with their insurance provider should include. These expectations influence their interaction with their insurer.
Customer satisfaction is a moving target. It is the sum of customers’ experiences minus their pre-existing expectations. To meet and exceed these expectations, insurers not only must continuously improve their products and services, but also learn from the best practices of customer-oriented organizations both within and outside their own industry.
KEY DRIVERS OF CUSTOMER SATISFACTION
J.D. Power and Associates’ customer satisfaction measurement operates on two fundamental premises. First, it must measure an insurer’s individual performance in a competitive context. Second, it must reflect what is important to the customer. Evaluating specific customer experience at various touch points and their impact on driving overall satisfaction helps determine the relative importance of such drivers.
Based on survey responses from more than 40,000 auto and home insurance policyholders for the 2010 studies, five key factors or drivers of customer satisfaction have been identified:
• interaction;
• price/premium;
• policy offerings;
• billing/payment; and
• claims.
As Table 2 (please see Page 48) shows, interaction is the most important factor in customer satisfaction. The local agent or broker accounts for nearly half of customers’ interaction, while call centre service representatives account for another 40%. Given the relatively low incidence of online policy servicing, the Web site has a lower impact relative to the other two channels.
In addition to interaction, the other top factors or drivers include price/ premium and policy offerings.
Claims have the least impact on satisfaction among the five drivers. Although claims represent the biggest expense of any insurer and determine where resources will be dedicated, it is still a low-incidence activity — nearly 10% of customers file an auto-related claim with their primary insurer. Although insurers need to take care of claimants, they also need to ensure the other 90% of their customers also receive the best service possible.
Among claimants, the claims factor is indeed the most important driver. This pattern is the same for both auto and home insurance customers.
INDUSTRY PERFORMANCE ON KEY DRIVERS
The industry’s success in moving to a customer-centric philosophy is evident in its performance on the key drivers identified earlier. As Table 3 shows, not only has the industry improved on every key driver, but it also scores the highest on interaction, the most important of the five drivers.
The year-over-year improvement is most significant in interaction, price/ premium and claims, all critical factors relative to a policyholder’s relationship with their insurer.
One key insight J.D. Power has shared with the industry in the past few years is the need to be proactive in communicating premium changes. Ideally, this should be done through personalized means such as contacting customers by phone or via e-mail. Many insurers have made this communication practice part of their agent/broker or call centre customer outreach program requirements. These efforts are paying off: customers are more satisfied with their premium levels, even though more of them have received premium increases, particularly in Ontario.
Customer satisfaction is a continuous journey. Results here suggest the property and casualty industry overall has achieved significant progress along this journey. But it still has a long way to go to match that of many other industries and, most importantly, to meet and exceed their customers’ expectations.