Managing Consumer Satisfaction

J.D. Power and Associates has been measuring home insurance customer experience in Canada for the past four years, providing insurers with a benchmark to help improve their services and to help consumers make purchase decisions.

In 2011, our survey shows it is vital for insurers to share information with customers effectively. A good starting point for insurers is to examine their billing statements, which are sometimes the primary touch point with their policyholders. Four out of our Top 10 key performance indicators (KPIs) centre on this critical process. The most important is to make sure customers understand their bill. Including helpful information on the bill is one of our key KPIs. Our reading of this key metric indicates there is much room for improvement: only 40% of customers report receiving helpful information on their bills. This KPI also has a wide range of performance among the regions – from 33% in Western Canada to nearly 66% in Quebec.

Although a majority of homeowner policies is currently being sold through the agent/broker channel, many customers rely on call centres to service their policies. Thus it is imperative customers feel they can easily communicate with call centre representatives, and that all parties acting on behalf of the insurer are following up with them when expected. Both of these practices have the highest compliance rates in the industry (93% and 95%), and will lead to steep decline in satisfaction when they are missed.

KPIs and Industry Performance

In addition to assessing customer satisfaction, the annual industry benchmark study identifies and measures insurers’ performance against several KPIs. These KPIs connect the specific behaviours insurers can influence throughout various customer-facing activities with the ultimate customer experience metrics, including their commitment, loyalty and advocacy. KPIs also provide industry best practices that insurers can leverage to align their current customer service processes and standards, identify performance gaps against such best practices, and set improvement priorities that are highly actionable and quantifiable.

Figure 1 shows the Top 10 KPIs, including a comparison of the industry performance on each KPI. We also look at the impact of not implementing the KPI on our Customer Satisfaction Index (CSI), which is measured in 1,000-point scale.

Impact of KPI on Customer Satisfaction

As shown in Figure 2, a customer can miss experiencing one of the KPIs and still have a high overall satisfaction with their insurer. CSI scores average nearly 840 when one KPI is missed.  When two KPIs are missed, the score declines to 803; as each additional KPI is missed, satisfaction further declines by approximately 40 points. Satisfaction is considerably lower (640 points and below) among customers who say that their insurer failed to deliver on five or more of these KPIs. This score is nearly 200 points lower than among customers whose insurer missed one KPI or none.

Regional Effects and KPI

While these KPIs represent key drivers for the industry overall, they do not necessarily have the same impact across all three regions. Insurers need to tailor their services to meet the unique needs of customers within their own market. To provide an example of how service practices differ between the regions, in Figure 3, the KPIs are displayed for each region in order of importance. Not unexpectedly, the KPIs in each region focus on similar issues, but have a different order of importance.

Many billing KPIs are consistent in importance across all three regions. Being offered multiple discounts is the only other KPI to be included across all three regions. This KPI is met less than 50% of the time, indicating insurers have an opportunity to better communicate the value of each policy to their customers.

KPIs unique to the Western region focus on servicing issues, such as limiting the information customers may have to repeat when contacting their insurer. These customers also place more importance on their insurer’s ability to limit overall problems experienced.

Problem incidence is fairly low in Western Canada. Customers in the other two regions place more importance on insurers executing other service practices. For example, customers in the Atlantic/Ontario place more importance on receiving online access to policy information – a KPI that is met for only one in six customers. Customers in Quebec place more importance on avoiding difficulty understanding the CSR when contacting the call centre. A representative speaking with an accent is a frequent complaint among those experiencing problems, although this KPI is met at a very high compliance rate.   

KPI Delivery by Region

Not only do the most important KPIs influencing customer satisfaction differ by region, but also the compliance rates of insurers executing these KPIs differ widely among the regions (Please see Figure 4). Insurers in Quebec are the most successful in delivering these KPIs, which might be expected given the much higher overall satisfaction scores in this region. Thirty per cent of customers in Quebec report receiving all of the KPIs, or that they are missing only one. That is three times the rate measured in the Atlantic/Ontario region (10%). Furthermore, insurers in both the Western and Atlantic/Ontario regions have much higher rates of missing five or more KPIs, which results in extremely low satisfaction scores – a finding consistent across all three regions.

Given that lower satisfaction leads to higher policy lapse rates and lower customer referral rates, insurers should be highly motivated to optimize their service to match the expectations of their customers. Insurers must adapt their processes to maintain a competitive edge, and deliver a superior customer experience through consistent services across all channels and all touch points.