Agency Satisfaction With Insurers Not Driven by Price, Compensation

By | July 18, 2011

Insurance agents tend to give a greater share of their business to insurers with whom they are highly satisfied, according to a J.D. Power and Associates Insurance Agency Satisfaction Study-Personal Lines.

The study, based on responses from 2,316 insurance agents who evaluated more than 10 insurance companies, including American Modern, Chubb, Dairyland, Farmers/Foremost, Fireman’s Fund, Hanover, The Hartford, Liberty Mutual, Progressive and Travelers, found that there is a 150-point gap in agency satisfaction between insurers who receive 5 percent or less of an agency’s business and those who receive more than 60 percent of an agency’s business (661 versus 821 on a 1,000-point scale). Additionally, 77 percent of highly satisfied agents say they intend to increase business with an insurer, while only 24 percent of less-satisfied agents say the same.

“Individual policyholders are more likely to be loyal to their independent agent that writes their policy,” said Jeremy Bowler, senior director of the insurance practice at J.D. Power and Associates. “This strong bond between policyholders and insurance agents makes it essential for insurers to satisfy their appointed agents in order to grow their business.”

The study measured the satisfaction of independent insurance agents and agency staff with the personal property and casualty insurance companies they represent. Agency satisfaction was examined across six factors. Perhaps surprisingly, price and compensation were not the heaviest drivers of agent satisfaction. Agents ranked their satisfaction highest based on key carrier contacts (28 percent), followed by policy offering (20 percent); technology (17 percent); claims (14 percent); price (14 percent) and compensation (6 percent).

“Compensation is about the same from carrier to carrier, but just paying more doesn’t get you to the top,” Bowler said. He noted that because agents seemed to rank those factors the lowest, there is potential opportunity for insurers to stand apart from their peers by better addressing pricing and compensation. “To the extent compensation is tied to new business growth, some carriers are disappointing agents that have been with them through the years,” he said.

Additionally, he said it would behoove agents to give thought to the point of contact with an agency. While the contact an insurer has with an agency is the main driver of satisfaction, the level of satisfaction varies depending on the role the individual holds in the agency. Agent principals are less satisfied with insurers than are agents or producers, particularly in the area of key business contact (778 versus 808, respectively). Similarly, agent principals are less satisfied than their licensed customer service representatives with the technology interfaces offered by the insurers they work with (735 versus 764, respectively).

Bowler noted that both the contact who manages the strategic relationship with the agency principal, as well as the contact who is in touch with the agency on a day-to-day basis, affect the relationship, and overall satisfaction level.

“Frequent contact with the agents and staff is one of the best practices employed by insurance companies with high satisfaction levels,” he said. “Insurers that make it a priority to build relationships with their agents see direct results to their bottom line. However, with the difficult economic times, insurance companies are challenged to use their limited resources to maximize agency satisfaction. By understanding the different roles and responsibilities of personnel within an agency, insurers can better target their efforts to meet agent expectations and increase satisfaction.”

The study also found the following trends:

  • Fewer agents report being offered marketing dollars – only 23 percent in 2010, compared with 43 percent in 2009. Satisfaction is higher among agents who are offered marketing dollars (an average satisfaction level of 751), compared with 698 among those who were not offered marketing dollars. Bowler suggested insurers seek agents’ input in developing their marketing campaigns, to ensure buy-in, because the survey indicated 64 percent of agents didn’t spend all of the marketing dollars they were given by carriers, perhaps indicating that they don’t agree with the marketing strategy.
  • Agent satisfaction with compensation, an important component of the insurance-agent relationship, has increased to 671 in 2010, compared with 628 in 2009.
  • Agents report that commissions and cash rewards are the types of incentives that best motivate behavior at their agency.Only 35 percent of agents think carriers are doing a good job of listening to them. When insurers do seek agent input, it leads to an uptick in satisfaction.
  • While carriers often want to know about agency succession plans, only one-fifth of agents feel a high level of support from their carriers in succession planning. “The extent to which insurers can sit down with their agents can have a tremendous influence,” Bowler said.
  • Insurer should involve agencies in the claims handling process immediately, because agents are “fantastic on empathy,” and can be good representatives for the insurer during times of crisis, Bowler said.

While the J.D. Powers and Associates study concentrated on personal lines, Bowler said anecdotal information his company gathered indicates that key business contacts are much more pivotal in driving agent satisfaction, because of the highly customized nature of every transaction. Similar to personal lines, price and compensation ranked lowest in terms of factors affecting satisfaction. However, Bowler said there was more variance among those factors and thus insurers had a greater potential to change satisfaction levels with price and compensation than they do in personal lines.

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Insurance Journal West July 18, 2011
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