The Smaller the Small Business, the Bigger the Insurance Discontent: J.D. Power

August 7, 2017

Not all small businesses are the same when it comes to customer satisfaction with their commercial insurance. There are actually widening satisfaction gaps among small businesses of different sizes, according to the J.D. Power 2017 U.S. Small Commercial Insurance Study.

The study found that the gaps in overall satisfaction among micro- (fewer than five employees) or smaller-size (five-10 employees) small businesses and larger-size (11-50) small businesses have never been wider. While there has been significant year-over-year improvement in overall satisfaction among customers in the larger-size group, there have been sharp declines in satisfaction among customers in both smaller-size groups.

“The small business market has been the best growth area for property and casualty insurance carriers in a stagnant, soft cycle marketplace,” said Greg Hoeg, vice president of U.S. insurance operations at J.D. Power. “Our data shows that the small commercial market is still ripe for competition. While looking at the small business market in aggregate shows relatively steady levels of customer satisfaction year over year, the serious gap between very small businesses and larger small businesses could present an opportunity for those carriers that get the small business formula just right.”

The study, now in its fifth year, examines overall customer satisfaction among small business commercial insurance customers with 50 or fewer employees. Overall satisfaction is comprised of five factors (in order of importance): interaction; policy offerings; price; billing and payment; and claims. Satisfaction is calculated on a 1,000-point scale.

Following are some of the findings of the study:

  • Overall satisfaction scores belie discontent: Overall customer satisfaction in the small commercial insurance market has increased by two index points in 2017 to an all-time high of 825. Satisfaction improves 13 index points among larger businesses (11-50 employees), but declines 18 points among smaller businesses (five-10 employees) and remains steady among the smallest businesses (fewer than five employees).
  • Service interactions drive rift: Service interactions, which are the most significant driver of overall customer satisfaction, saw the sharpest declines this year, driven by customer dissatisfaction with agent/broker interactions. Conversely, the claims factor has the greatest year-over-year improvement in satisfaction.
  • Multi-channel approach to servicing is key to small business market: The preferred service interaction channels for small business insurance customers are split relatively evenly between agent in-person/phone (61%) and website (57%). These are followed by agent e-mail/text (39%); customer service e-mail/text (27%); customer service phone (26%); and mobile app (9%).
  • Demand for self-service grows and outpaces actual usage: The preference for self-service has grown by 28% since 2015 (61% in 2017 vs. 48% in 2015), and continues to outpace actual usage (43%) by a significant margin. Notably, micro businesses have the greatest disparity between preference and usage; their preference for self-service is nearly twice the rate of their actual usage (60% vs. 36%, respectively).

“There is a notable opportunity for insurers of companies in the very small business segment, which are clearly not being serviced at the same level as their slightly larger counterparts,” said Colleen Cairns, senior analyst in the insurance practice at J.D. Power. “The key to effective growth in that slice of the market is a focus on strong agent interactions and smart use of digital and self-service tools designed for the unique needs of businesses where the target customer is often the time-pressed owner of the business.”

J.D. Power Rankings

Farmers ranks highest among small commercial insurers with a score of 838, a 20-point improvement from 2016. Allstate ranks second with a score of 833, up 6 points from last year. Chubb and Erie Insurance rank third, in a tie, with a score of 830, up 20 points and 1 point, respectively, from 2016.

The 2017 U.S. Small Commercial Insurance Study is based on 3,312 responses from insurance decision-makers in businesses with 50 or fewer employees who purchase general liability and/or property insurance. The study was fielded from April through June 2017.

Study Rankings

Overall Customer Satisfaction Index Scores J.D. Power.com Power Circle Ratings
(Based on a 1,000-point scale) For Consumers
Farmers 838 5
Allstate 833 4
Chubb 830 4
Erie Insurance 830 4
AIG 828 3
State Farm 827 3
Auto-Owners Insurance 826 3
Industry Average 825
Zurich 820 3
American Family 819 3
Liberty Mutual 817 2
The Hartford 814 2
Nationwide 813 2
Travelers 813 2
CNA 807 2

Power Circle Ratings Legend
5 – Among the best
4 – Better than most
3 – About average
2 – The rest

Award-Eligible Insurance Providers Included in the Study

Company CEO Name Company Location
AIG Brian Duperreault New York, N.Y.
Allstate Thomas Wilson II Northbrook, Ill.
American Family Jack Salzwedel Madison, Wisc.
Auto-Owners Insurance Jeffrey Harrold Lansing, Mich.
Chubb Evan G. Greenberg Warren, N.J.
CNA Insurance Dino E. Robusto Chicago, Ill.
Erie Insurance Timothy NeCastro Erie, Pa.
Farmers Jeffrey Dailey Woodland Hills, Calif.
Liberty Mutual David Long Boston, Mass.
Nationwide Stephen Rasmussen Columbus, Ohio
State Farm Michael Tipsord Bloomington, Ill.
The Hartford Christopher Swift Hartford, Conn.
Travelers Alan Schnitzer New York, N.Y.
Zurich Mario Greco Schaumburg, Ill.

Source: J.D. Power, a portfolio company of XIO Group, a global alternative investments and private equity firm headquartered in London.

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Latest Comments

  • August 24, 2017 at 2:39 pm
    Jane Fix says:
    AS an agent for one of the top carriers, I would suggest that the "dissatisfaction" is not actually with the carrier, but because so many artisan/small business contractors/co... read more
  • August 15, 2017 at 2:07 pm
    Andrew G. Simpson says:
    You have alleged this in the past and it remains false. IJ does not "promote" direct access. We report insurance-related news, trends, opinions and research. Running a story o... read more
  • August 15, 2017 at 12:09 pm
    Agent says:
    We have seen IJ promoting direct access for many years and the Independent Agents continue to do very well. There is still plenty of business to go around for many markets.
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