Can Home Insurers Keep Customers as Happy as Insurtechs?

September 17, 2018

Homeowners insurance companies are faring rather well when it comes to customer satisfaction. Consultants at J.D Power think the carriers’ investments in improved digital channels and bundled products that combine are paying off the highest levels of customer satisfaction in the history of their study.

However, whether insurers can maintain these high levels of customer satisfaction will continue to be tested by the growing crop of “insurtech” start-ups capitalizing on digital-only offerings, according to the J.D. Power 2018 U.S. Home Insurance Study.

“Despite experiencing record property losses due to severe hurricanes, floods and fires, home insurers have managed to win the hearts and minds of their customers through superior service and access to information,” said Robert Lajdziak, business consultant for the North American Insurance Practice at J.D. Power. “But insurers should note that the preference for digital channel interaction has notably increased for several years, across all types of interactions and all generations of customers. That evolving consumer preference could provide an opening for digital-native insurtech companies.”

According to an earlier J.D. Power survey, one-in-five consumers say they would use Amazon or Google for their home insurance. most of those who took the survey (80 percent) already have insurance with a large national carrier.

Both Google and Amazon have been previously pegged as potential insurance market entrants. Amazon is reported to be feeling out Europe’s top insurance firms to see if they would contribute to a U.K. price comparison website for as-of-yet unnamed products.

While all of that may be an ongoing challenge, right now the survey shows record-high customer satisfaction. Overall customer satisfaction scores have reached an all-time high of 818 (on a 1,000-point scale) among homeowners (+10 points from 2017) and 839 among renters (+5 from 2017). J.D. Power says this is driven by an increase in the proportion of customers who bundle policies and improvements in digital interaction channels.

The report also says there is a growing consumer preference for doing business digitally. Preference for using digital channels for interaction has increased significantly from 2017, across a wide range of interaction types ranging from payment verification and billing inquiries to policy renewals and price quotes. While the increased digital preference is evident in all generational groups of home insurance customers, it is most preferred by Gen Y1 and Gen Z homeowners.

Bundling remains a winner, according to the survey. Customers who have multiple policies with a single home insurer have higher satisfaction and are more likely to advocate on behalf of their carrier. Overall satisfaction among customers with six or more bundled insurance products averages 863, which is 111 points higher than among those who have just one home insurance product. Likewise, the average Net Promoter ScoreĀ®2 among customers with six or more bundled products is 58, which is 52 points higher than among those who only have one home insurance product.

J.D. Power says auto insurance represents bundling opportunity: While products related to the home, such as secondary residence insurance, umbrella policies, and valuable possessions insurance, are frequently bundled with home insurance policies, auto insurance remains an outlier. Presently, 20% of home insurance customers who also have auto insurance do not bundle their auto policy with a home policy, representing a growth opportunity for home insurers.

The U.S. Home Insurance Study examines overall customer satisfaction with two distinct personal insurance product lines: homeowners and renters. Satisfaction in the homeowners and renters insurance segments is measured by examining five factors: interaction; policy offerings; price; billing process and policy information; and claims. The study is based on responses from 14,122 homeowners and renters via online interviews conducted in June-July 2018.

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