Insurer Focus on Customers, Unique Policies Boosts Satisfaction Among Small Business Owners

August 9, 2016

No longer able to compete primarily on price, insurers are now focusing their efforts on pleasing customers, with the payoff being a significant increase in satisfaction among their small business commercial customers, according to the recently released J.D. Power 2016 U.S. Small Commercial Insurance Study.

With insurance rates steadily declining for the past three years carriers are looking at other ways to differentiate themselves in a competitive market. Turning their attention to customer interactions and policy offerings has led to a 30-point improvement in overall satisfaction in 2016, to 823 on a 1,000-point scale, up from 793 in 2015.

“With few exceptions, insurers are dropping prices, so the best way for them to compete in a soft market is on customer satisfaction,” said Greg Hoeg, vice president of U.S. insurance operations at J.D. Power. “Small business owners are the beneficiaries of being in an attractive market segment of insurance where satisfaction is the key differentiator.”

The study, now in its fourth year, examines overall customer satisfaction and insurance shopping and purchasing behavior among 3,396 insurance decision-makers in businesses with 50 or fewer employees that purchase general liability and/or property insurance. The study was fielded from March through May 2016. Overall satisfaction is comprised of five factors (in order of importance): interaction; policy offerings; price; billing and payment; and claims.

This marks the third consecutive year satisfaction has improved, with a 46-point increase since the study launched in 2013. Satisfaction increases across all factors in 2016, with interaction and policy offerings contributing most to the year-over-year gain.

Customer Interaction Critical

Insurer interaction with their customers is vital when price competition is neutralized due to the shift to a soft market. The study finds that interaction improves the most among all study factors, increasing 32 index points from 2015. Satisfaction in all three interaction subfactors improves significantly in 2016, with website performance showing the largest jump year over year (+36 points), followed by agent/broker (+34) and call center (+28).

While interaction is driving the overall increase in satisfaction, it is having the greatest impact on satisfaction of Gen Y customers. J.D. Power defines the generational groups as Pre-Boomers (born before 1946); Boomers (1946-1964); Gen X (1965-1976); Gen Y (1977-1994); and Gen Z (1995-2004). Satisfaction among Gen Y customers improves 51 points—the largest rise among the generational groups—to 851. Overall satisfaction among Boomers is 820, followed by Gen X at 812 and Pre-Boomers at 809. This is the only J.D. Power insurance study in which Gen Y is the most satisfied generation.

“For young entrepreneurs, their business defines who they are, and they want to protect it,” said Hoeg. “Gen Y’s satisfaction with their insurance provider also reflects their social consciousness—they care about their business and their employees.”

Agents Drive Gen Y Business Owners’ Satisfaction

The key reasons for higher satisfaction among Gen Y customers are largely driven by interactions with their agent/broker. Not only do more Gen Y customers indicate having at least two interactions on an annual basis, compared with Gen X and Boomer customers, but they also have more in-person interactions with their agent/broker. In addition, these in-person interactions are typically more meaningful, as the study finds agents/brokers are nearly twice as likely to provide advice or recommend changes to Gen Y customers when compared with older cohorts.

“Gen Y wants the traditional values from their business insurer: good service, financial protection and good price,” said Hoeg. “The insurers— especially commercial-focused insurers—are providing that.”

Hoeg noted that as competition continues to increase in the small commercial space, it is important for insurers to understand the types of business customers they are dealing with and what those customers value most. Younger business customers have different needs than their older counterparts. As expected, Gen Y businesses have been operating for a much shorter time, but they typically have higher revenues than the businesses of their Boomer counterparts (51 percent of Gen Y business customers report annual revenue of more than $500,000, compared with 42 percent of Boomers).

Small Commercial Insurer Customer Satisfaction Rankings

American Family ranks highest among small commercial insurers, with a score of 839, a 73-point improvement from 2015. American Family performs particularly well in the policy offerings and billing and payment factors. Allied and Nationwide rank second in a tie with a score of 835.

(Overall Customer Satisfaction Index Scores
Based on a 1,000-point scale)
J.D. Power Circle Ratings
For Consumers
American Family 839 5
Allied 835 5
Nationwide 835 5
State Farm 831 4
Erie Insurance 829 4
Allstate 827 3
Auto-Owners Insurance 826 3
Industry Average 823 3
Liberty Mutual 821 3
Zurich 821 3
Farmers 818 3
AIG 816 3
The Hartford 814 3
Chubb 810 2
CNA Insurance 806 2
Travelers 793 2
Power Circle Ratings Legend
5 – Among the best
4 – Better than most
3 – About average
2 – The rest

Source: J.D. Power

Topics Carriers Agencies Commercial Lines Business Insurance Small Business

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