Insurer Performance Ranks Well on Average, But Many Could Improve on Key Factors
Ease of Doing Business (EDB) has been a bit like the weather–everybody talks about it, but doing something about it is another matter. While you can’t change the weather, you can equip yourself and your organization not only to cope with it, but to thrive within it.
Why it matters?
Think about it from an agent’s perspective. Like carriers, agents need business results such as profitability, growth and productivity. One of the most important variables in getting those results is how easy it is to do business with the carriers they represent.
Agents will choose what’s best for them. And what’s best for them are carriers that support their productivity by being easy to do business with. That is not to say that product, price, and commission are not important. Competitive products, prices and commissions are necessary or a carrier wouldn’t be worth representing. But they are not sufficient. EDB is the most powerful and sustainable way for a carrier to differentiate itself.
So the logic makes senseit even makes common sense. Is EDB considered to be a critical issue when agents choose where to place business? Is EDB important in the buying decision?
In a recent survey conducted by Deep Customer Solutions Inc., some 5,000 agents responded–more than 99.5% agreed that “EDB is critical in choosing which carrier gets the business.” Now there is a “barometer”–a national benchmark of more than 17,000 ratings by independent agents of property and casualty carriers’ EDB performance.
What factors are important?
It is clear that EDB is essential to winning business, according to agents. But what factors comprise EDB, and how important is each?
To find out, 10 EDB factors were developed and tested with agents and carriers. The 10 factors are: 1) Understands and acts on the needs of agency personnel. 2) Is responsive in underwriting. 3) Is flexible in underwriting. 4) Provides accurate, timely policy services. 5) Has effective, user-friendly technology. 6) Handles claims promptly. 7) Handles claims fairly. 8) Provides marketing support. 9) Provides insurance technical support. 10) Makes it easy for the insureds to do business with the agency.
Agents were asked in the survey to rate the importance of each factor. After rating the importance, respondents in the survey then rated up to five carriers’ performance against that factor. The results show the consolidated performance ratings for 140 property/casualty carriers, and the importance rating of each of the 10 EDBFactors (see Overall Results chart below). There were 17,529 ratings used in the results.
The performance gap
The survey results display a “performance gap”–the difference between importance, a proxy for expectations, and performance ratings.
In order to identify opportunities to improve performance more accurately, the Ease of Doing Business Index (EDB-I) was created to weigh the performance gap for each EDB Factor, which takes into account the importance of that factor. A perfect EDB-I of “100” means that performance matches expectations. Investing more to improve “perfect” performance would have low impact because the performance already meets the agents’ satisfaction.
A low EDB-Index comes from a larger performance gap in a more important Factor, thereby showing a Factor of greater opportunity. A carrier nvesting to improve performance in a Factor with a low EDB-Index would more likely be perceived by agents as being easier to do business with and, thereby, would receive more of their business.
Overall, the EDB-Index suggests that underwriting response, underwriting flexibility, IT, and agency needs all present greater opportunity to improve performance.
Interestingly, the highest EDB-Indices, solid “A” ratings, are the least important Factors–“Provides Marketing Support” and “Provides Insurance Technical Support.” By illustrating areas of highest impact–greatest opportunity–the EDB-I helps in setting organizational priorities and allocating resources.
Stacking up against the rest
On average, carriers rate well on most factors. But those averages mask the great diversity of individual carrier performance. To measure where an individual carrier might be, an assessment–completed from the perspective of the agent–is a useful place to begin. Each of the 10 EDB Factors can be turned into two questions.
For example: How important is underwriting responsiveness to agents? How would agents rate the carrier in terms of underwriting responsiveness? How important is handling claims promptly to agents? How would agents rate the carrier in terms of handling claims promptly?
The decision on which carrier gets a piece of business is largely made in the agency, not by the policyholder. It would be useful for carriers to think about what they could do to make doing business easier for their agents. Satisfying agents’ needs for EDB is the new and growing fundamental difference, and having a national EDB benchmark can help.
Nort Salz and Paul Croke are partners of DeepCustomer Connections Inc., a firm dedicated to helping P/C carriers improve agency relationships.
They can be reached at (781) 545-3086, or visit: www.deepcustomerconnections.com.
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