When it comes to an agency’s satisfaction with its personal lines insurance companies, commissions do not rank as tops. Nor do commissions rank second. In fact, out of six satisfaction factors, compensation from an insurer ranks dead last, according to a new industry study.
Kara Steslicki, senior research manager for J.D. Power and Associates, who helped conduct the study, said the fact that compensation ranked last as a factor that determines agency satisfaction was a bit surprising.
“We thought that compensation would be a little more important especially given the independent agency channel,” Steslicki said. “We thought that compensation might be a way that carriers could entice agents to send business their way.” But Steslicki says the survey revealed that what agencies are most interested in is satisfying their policyholders, especially in today’s tough economic times. Customers are looking at how much money they want to spend on insurance, and their agents are trying to help them by adjusting their coverage in order to save money, she said.
What the survey found is that what agents want most is a variety of policy offerings and continuous contact with their insurers, Steslicki said.
Offering various types of insurance policies that meet diverse customer needs and ensuring that efficient, courteous and knowledgeable contacts are available have a particularly strong impact on overall agent satisfaction with insurance companies, according to the study.
The inaugural “Insurance Agency Satisfaction Study” measures the satisfaction of independent insurance agents and agency staff with the personal property and casualty insurance companies they represent. Agent satisfaction is examined across six factors. In order of importance, they are: key carrier contacts (32%), policy offering (23%); claims (16%); technology (13%); price (10%); and compensation (5%).
The study found that agent satisfaction typically increases the more often agents interact with the business contact from their insurance company. Agents prefer to receive business contacts via phone or e-mail at least once or twice a month. However, satisfaction levels are particularly high when the business contact visits more than once per month. In 2009, fewer than 15 percent of agents report receiving such frequent visits.
“Contacting agents on a regular basis to provide support is critical for an insurance company, particularly when it comes to business growth,” Jeremy Bowler, senior director of the insurance practice at J.D. Power and Associates. “Agent satisfaction is very closely linked to the overall business growth of an insurer, as agents have tremendous influence over policyholders when it comes to switching providers. In fact, 60 percent of consumers report that they would follow their agent recommendation to switch to a new insurance company. Clearly, agent satisfaction can have a major impact on policy growth for an insurance company.”
As agent satisfaction increases, the likelihood of agents increasing their premium business with an insurance company also rises, the study found.
In 2009, nearly 70 percent of agents with satisfaction scores averaging more than 800 points on a 1,000-point scale indicate they intend to increase business with the insurance company. In contrast, only 28 percent of agents with scores averaging 600 points or less indicate the same, the study reported.
“Agents are obviously really interested in working with insurers that are supporting them and that was common theme throughout the entire study,” Steslicki said.
Offering a marketing or advertising budget also greatly impacts agent satisfaction, according to the study. In 2009, nearly 60 percent of agents report that they did not receive any budget for local marketing or advertising. However, among those agents who received and used all of the funds provided by the insurer for advertising and marketing purposes, satisfaction scores average 808, compared with an average of 692 among those agents who were offered no funds for such endeavors.
“The more agencies use those dollars to promote their agency the more satisfied they are,” Steslicki said.
Steslicki also said while few agencies reported their insurers gave them business leads, those that did, had higher satisfaction rates.
“About 20 percent of the agencies studied said that they did receive leads from their insurers and obviously the more qualified that those leads were the more satisfied that they were,” she said. “But even providing leads at all definitely impacted satisfaction.”
The study also finds that satisfaction declines considerably as the amount of time it takes for insurance companies to notify agents of a customer-filed claim increases.
When agents are notified on the same day that a claim is filed by a customer, satisfaction averages 781. When notification takes place within one or two days, satisfaction declines to 724, on average. Satisfaction declines further, to an average of 638, when insurers wait more than five days before issuing notification.
“Whatever the insurer can do to support the agency is definitely recognized,” Steslicki said. “Those agencies that are more satisfied are more likely to send their business to those types of insurers.”
While this was J.D. Power & Associates’ inaugural “Insurance Agency Satisfaction Study,” Steslicki says they hope to do another study next year and plan to replicate the study for commercial lines insurers writing business owner policies.
The 2009 Insurance Agency Satisfaction Study is based on responses from 1,589 insurance agents evaluating more than 10 insurance companies across the industry, including AIG, Allied, Chubb, Erie Insurance, Farmers/Foremost, Fireman’s Fund, The Hartford, Liberty Mutual, Progressive and Travelers. The study was fielded in November 2008.
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