Smaller North American brokerages outperform larger ones in overall satisfaction: J.D. Power study

Smaller brokers outperform their large counterparts in overall satisfaction, according to the J.D. Power 2015 Large Commercial Insurance Study, released on Wednesday.

The study, conducted in association with RIMS, the risk management society, also found that brokers that outperform their peers in overall satisfaction emphasize quality advice and guidance as well as reasonable fees. Based on responses from nearly 1,300 risk professionals in Canada and the United States, the study measures customer satisfaction with commercial insurance brokers based on eight attributes: quality of advice and guidance provided; reasonableness of fees; ease of the renewal process; effectiveness of risk control services; variety of program offerings; effectiveness of program review; billing and payment process; and claims process.

According to the survey, smaller firms (brokerages with US$2.1 billion or less in annual revenue) not only score above the industry average of 808 on a 1,000 point scale in overall satisfaction, but they also outperform their larger counterparts (defined as those with US$5 billion or more in annual revenue) by 24 points (819 vs. 795, respectively). This is primarily due to smaller brokers receiving significantly higher satisfaction ratings than larger brokers in two primary drivers of customer satisfaction: quality of advice and guidance provided (8.46 vs. 8.27, respectively, on a 10-point scale) and reasonableness of fees (8.27 vs. 7.69), J.D. Power said in a press release.

“That finding underscores the importance of establishing a consultative relationship with customers and going beyond simply understanding their business by providing value-added recommendations based on specialty services and trends in the industry, as well as demonstrating the value of the services provided to customers in order to overcome price sensitivity headwinds associated with fees,” the release said.

“Reinforcing the concept that bigger is not always better, smaller brokers are meeting the needs of customers more effectively than their larger counterparts,” added Greg Hoeg, vice president of the U.S. insurance practice at J.D. Power. “The ability to perform well across the various aspects of the customer experience – especially imparting quality advice and guidance and charging reasonable fees – leads to higher satisfaction. Focusing on providing a quality experience by investing time to listen to customers and understand their needs when advising and guiding them positively impacts satisfaction with smaller firms that deliver on quality rather than quantity.”

The study also measures commercial property insurers and workers’ compensation insurers based on five factors: interaction; program offerings; price; billing and payment; and claims. For property insurance, interaction (845) is the highest-scoring factor and billing and payment (761) is the lowest. “In commercial property, activities that occur at the front end of the business – service interactions and program offerings – tend to be more satisfying than the back-end processes – billing and payment and claims,” said Hoeg.

Other study findings include:

• A majority (85%) of customers say their broker “completely” understands their business needs, resulting in an overall satisfaction score of 851;

• Among property insurance customers who are “delighted” (overall satisfaction scores of 900 or higher), 88% say they “definitely will” recommend their insurance provider and 69% say they “definitely will” renew their policy with their insurer. In contrast, only 28% of customers who are indifferent/displeased (scores below 750) say they “definitely will” recommend and 27% say they “definitely will” renew with their insurer; and

• Among property insurance customers who experience no billing errors, overall satisfaction averages 811 compared with 773 among those who experience one or more billing errors – a difference of 38 points.