The Home Insurance Customer Experience Leader portfolio outperformed the industry, establishing a total return which was 42 points greater than the Dow Jones Property & Casualty Market Index.
While several home insurance carriers made it into the Leader category many times, just one achieved that distinction for each year of the study: Erie Insurance.
The industry's Customer Experience Laggards again trailed behind, posting an overall total return which was 15 points less than those of the broader P/C market.
The Laggard category, too, was generally consistent year-to-year, though only one company placed in those ranks every year from the study, and that was Travelers.
To again illustrate the wide gap in Leader/Laggard performance, consider this: The Home Insurance Customer Experience Leaders generated an average annual return that was double that of the Laggards.
Interpreting the Results
Let's start with exactly what the results don't mean.
A great customer experience does not guarantee carrier success. There's a number of factors that influence insurer performance, such as underwriting discipline and regulatory compliance. Customer experience is really a necessary although not sufficient ingredient for carrier success.
Despite that caveat, there is no denying this study's results-reflecting over half ten years of carrier performance-are intriguing, as you would expect.
The findings imply that the much theorized connection between customer experience and financial performance isn't a purely academic concept and can actually be observed inside the insurance industry.
The results point to the advantages enjoyed by carriers that invest in, and effectively execute on, a person experience strategy: higher revenues (because of better retention, less price sensitivity, greater wallet share and positive word-of-mouth) minimizing expenses (due to reduced acquisition costs, fewer complaints and also the lower service requirements of happy, loyal customers).
Conversely, the research offers a sober reminder of how customer dissatisfaction saps business value by depressing revenues and inflating expenses.
The bottom-line implication would be that the marketplace believes carriers that generate a great customer experience over the long term are merely worth more compared to those that do not-and this is a discovering that ought to be of great interest to private and public insurers alike.
Takeaways for Insurance Carriers
Perhaps the most crucial takeaway from this study is that insurance firms shouldn't resign themselves to delivering just a mediocre customer experience (at best).
The results suggest there is competitive benefit to be gained by differentiating along this axis, however it requires that carriers embrace some key realizations before setting a path forward:
- Retention is not a good proxy for loyalty.
Insurance providers often depend on retention to gauge the quality of their customer experience. While retention is a valuable metric, it's really a misleading indicator of customer perception (in the end, a retained policyowner might not necessarily be considered a loyal one). Consequently, many firms have a tendency to overrate the quality of their customer experience.
- Insurance can be greater than a “grudge” purchase.
Some question the viability of the customer-focused business strategy in insurance, given it's an intangible product which people must buy, never knowing if they'll have any benefit in exchange. Smart carriers overcome this perception by engaging customers with value-added services that transcend traditional insurance coverage.
- It's essential to focus on not only claims.
As the ultimate moment-of-truth in insurance, it's vital the customer claims experience be exceptional. However, most insureds won't experience a claim in any given year. For this reason, it is important that have improvement programs exceed claims-targeting other, more prevalent customer touchpoints.
- The mundane things matter.
Insurance is really a low-interaction business, which amplifies the impact of routine, recurring transactions on customer perceptions. Firms often treat these interactions (policy delivery, billing, renewal, etc.) as mundane administrative tasks-and it shows within the resulting experience. However, for many insureds, these mundane touchpoints are the whole experience, which is why these routine interactions deserve close attention from carriers.
Insurance companies are struggling to set themselves apart in a marketplace that increasingly views many as commodities.
As the Insurance Leaders within this study demonstrate, the easiest method to break out of that “sea of sameness” is to deliver an end-to-end customer experience that turns everyday policyholders into true raving fans.
