The profitability of an insurance company and the quality of advice given by an insurance broker makes the most difference when it comes to customer satisfaction for commercial insurance, a new industry study revealed.
According to the J.D. Power 2016 Large Commercial Insurance Study, the key variables driving overall commercial insurance customer satisfaction are insurer profitability and broker expertise.
The most significant single attribute driving that performance is quality of advice/guidance provided. “Brokers who have an in-depth expertise and establish a hands-on, consultative relationship with their clients are consistently driving the highest levels of customer satisfaction,” the study found.
Among large commercial insurers, a distinct correlation is found between customer satisfaction and insurer profitability, as measured by total commercial combined financial ratios.
The study, now in its third year, measures customer satisfaction with commercial insurers and insurance brokers.
Commercial insurer satisfaction is based on five factors: service interaction; program offerings; price; billing process; and claims.
Satisfaction with commercial insurance brokers is based on nine attributes: quality of advice and guidance provided; reasonableness of fees; ease of the renewal process; effectiveness of risk control services; variety of program offerings; effectiveness of program review; price, given services received; billing and payment process; and claims process.
The study also found that among the 20 percent of customers who indicate their broker does not completely understand their business needs, satisfaction declines by an average of 136 points.
The study was conducted in conjunction with RIMS, a global not-for-profit organization with a membership of more than 11,000 risk management professionals located in more than 60 countries.
“As rates across the U.S. commercial property and casualty insurance market continue to decline, delivering an exceptional customer experience has become the x factor that levels the playing field and opens up new growth opportunities for commercial insurers and brokers,” said Greg Hoeg, vice president of the U.S. insurance practice at J.D. Power. “With the potential for rate volatility in 2017 and beyond now increasing, keeping a laser focus on customer satisfaction will be a critical driver of success.”
“The key for risk professionals to effectively manage uncertainties is knowledge,” said Mary Roth, RIMS CEO. “Gaining the perspectives of their peers through this J.D Power and RIMS study arms practitioners with the insight to make informed strategic decisions regarding the future of their organizations’ insurance programs.”
The highest-performing insurance broker in this year’s study is Lockton, while the highest-performing insurer is XL Catlin, J.D. Power said.
The highest-performing companies in overall satisfaction—XL Catlin (773 on a 1,000-point scale); CNA (767); and Chubb (765)—are also found to have among the industry’s strongest combined ratios, suggesting that the most profitable insurers are able to support more flexible underwriting standards to meet customer needs more effectively, J.D. Power said. Overall, J.D. Power finds a 0.67 correlation between customer satisfaction and insurer profitability.
Among commercial insurance brokers, the highest-performing firms, Lockton (863) and Arthur J. Gallagher & Co. (823), outperform larger rivals by a large margin.
The best performers included:
- Lockton ranked highest with a score of 863
- Arthur J. Gallagher & Co. ranked second with a score of 823
- XL Catlin ranked highest with a score of 773
- CNA ranked second with a score of 767
- Chubb ranked third with a score of 765
- Domain Expertise, Sage Counsel Drive Satisfaction: The single most critical touch point between a customer and an insurance broker is the quality of advice/guidance provided. Industry-wide, brokers receive an average rating of 8.34 on a 10-point scale for this metric. Customers of highest-performing broker Lockton provide the firm a rating of 8.89, a key factor driving its overall 40-point lead over the second-ranked broker in the study.
- Satisfaction Linked to Profitability: J.D. Power finds a 0.67 correlation between insurer profitability and overall customer satisfaction, suggesting that the more profitable the book of business an insurer has, the greater the likelihood that the insurer will also have high levels of satisfaction.
- Flexible Program Design Impacts Satisfaction: Providing flexible program design and implementation is the most impactful single key performance indicator (KPI) for commercial insurers. However, the study finds that is not a standard practice—the rate at which insurers deliver on this KPI is only 47 percent.
Source: J.D. Power