The profitability of an insurance company and the quality of advice given by an insured’s insurance broker make the most difference in customer satisfaction for commercial insurance, a new 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 attribute driving that performance is quality of advice/guidance provided. “Brokers who have 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 correlation was 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. Overall 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 highest-performing insurance broker in this year’s study was Lockton, while the highest-performing insurer was XL Catlin, J.D. Power said.
The highest-performing companies in overall satisfaction were XL Catlin (773 on a 1,000-point scale); CNA (767); and Chubb (765). They had among the industry’s strongest combined ratios, suggesting that the most profitable insurers can support more flexible underwriting standards to meet customer needs more effectively. J.D. Power found a 0.67 correlation between 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 study also found that among the 20 percent of customers who indicated their broker does not completely understand their business needs, satisfaction declined by an average of 136 points.
The study was conducted in conjunction with RIMS, a global nonprofit organization that has more than 11,000 risk management members 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 study arms practitioners with the insight to make informed strategic decisions regarding the future of their organizations’ insurance programs.”
The single most critical touch point between a customer and an insurance broker is the quality of advice/guidance provided, the study found. Industry-wide, brokers receive an average rating of 8.34 on a 10-point scale for this metric. Lockton customers rated the firm 8.89, driving its overall 40-point lead over the second-ranked broker in the study.
J.D. Power found a 0.67 correlation between insurer profitability and customer satisfaction, suggesting that the more profitable the book of business an insurer has, the more likely the insurer will also have high levels of satisfaction.
Providing flexible program design and implementation was the most impactful key performance indicator (KPI) for commercial insurers. However, the study found that is not a standard practice — the rate at which insurers deliver on this KPI is only 47 percent.