Filling the Gaps in Consumer Satisfaction

Consumers are at the heart of the life insurance industry and, in an industry first, the Beddoes Institute has looked at what expectations consumers have around life insurance and advice, and whether those expectations are currently being met.
In this article, Beddoes Institute Director, Dr Rebecca Sheils writes that consumers are generally satisfied with insurance and advice but more could be done at different stages to retain those levels of satisfaction.

Introduction

New research has shown that when a Life Company interacts with their policyholders or a financial adviser establishes ongoing engagement with their clients, they are given a high satisfaction rating.  These findings add to the evidence that insurers are working hard to respond to the needs of consumers in an increasingly difficult environment.

Beddoes Institute Director, Dr Rebecca Sheils, said the recent Life Insurance Industry Performance Barometer Policyholder and Claimant Studies conducted by the Institute were undertaken to build a large body of evidence to understand the experiences, needs and expectations of customers (both policyholders and claimants) throughout the length of their journey with their insurers.

This research shows that whenever a Life Company or an adviser interacts with their customers across multiple touch-points and channels, customers rate them higher than when there is minimal or no contact.

“We need to use reliable data to really understand policyholders’ and claimants’ needs at different stages of their journey so that life companies can develop tailored services and solutions that deliver better outcomes for people on claim. It’s all about giving the consumer a voice and placing them at the centre of new and improved models of service delivery,” Sheils said.

Research Findings

Policyholders

A basic segmentation of policyholders can be the key to better understanding the ratings that they give their insurers. Policyholders can be separated into two segments; new policyholders (consumers that have taken out insurance policies within the last two years) and established policyholders (those that have had their policy for two or more years).

This research shows that whenever a Life Company or an adviser interacts with their customers across multiple touch-points and channels, customers rate them higher than when there is minimal or no contact.

Independent financial advisers (i.e. those that are not bank-aligned or salaried planners) are rated relatively well by new policyholders, achieving an average overall rating of 78.2%.  New policyholder customers also rate their insurers relatively well, with life companies across the sector achieving an average rating of 73.6%.  This follows a time of high activity and engagement by both the adviser and insurer when setting up the policy.  Following this there is a dramatic fall-off in both activity and engagement, which translates into lower overall ratings of both insurers and advisers from established policyholders.

With consumers’ expectations of constant interaction set high, it is not surprising that a relative lack of communication by insurance companies during the later years of a policy is perceived negatively by policyholders.

In this digital age consumers expect ongoing and constant interaction with the product and service providers they engage with.  They increasingly experience this from banks, publishers and such companies as eBay, Facebook, and Amazon.  With consumers’ expectations of constant interaction set high, it is not surprising that a relative lack of communication by insurance companies during the later years of a policy is perceived negatively by policyholders.

The study showed that policyholders who have held their policy for more than two years gave their insurers an overall satisfaction rating of 60.6% (down 13.0% from new customer ratings) and gave their advisers an even lower overall satisfaction score of 56.8%, (down 21.6% from new customer ratings).

When asked about what they want from their insurer in terms of ongoing contact and engagement, the results are surprising. 80% of policyholders want contact at least every six months from their insurer (12% want monthly contact, 40% want quarterly contact and 28% want six-monthly contact).

In terms of the specific type of contact wanted, policyholder customers expressed a desire for the following:

  • Loyalty programs (44%)
  • Proactive policy reviews and advice (31%)
  • Health and wellness initiatives (29%)
  • Online policy management tools (28%)
  • New product information (26%)
  • Annual policy statements (26%)
  • Policy brochures (24%)
  • Premium renewal notices (23%)
  • eNewsletters (22%)
  • Claim information (18%)

Claimants

Making a claim is often made difficult by the circumstances under which the claim is being made, such as illness or tragedy.  Consumers often delay making a claim due to a lack of understanding of their policy and the circumstances under which they should make a claim.

Furthermore, policyholders lack trust that their insurance provider will honour the commitment of the policy at the time of a claim which is exacerbated by an extended period of disengagement from their insurer and the negative media coverage about the life insurance industry.

When asked what they expect a claim process to be like, it’s not surprising that policyholders expect it to be difficult (66.0% perceived claims management rating).  While they expect financial support will be forthcoming (70.2% perceived rating), they have little expectation (despite their desire for it) of receiving holistic rehabilitation support from their insurer to help them return to health and wellness (55.5% perceived rating).

In contrast, the actual experience of recent claimants is significantly better, despite the negative stories communicated in main stream media. Customers with an approved claim rate their insurer highly (79.3% vs. 66.0% for how policyholders think their insurer will perform), achieving a ‘Total Experience Index’ of 79.0% and a high Net Promoter Score of 31.

Pleasing claimants is easy because consumers’ expectations are low. Insurers just need to honour their commitment to the policy, make the application process as easy and as fast as possible, provide high standards of customer service, show empathy and proactively communicate about the status of the assessment

Once a claim is initiated, claimants need increased education about their policy, confirmation that all forms have been completed correctly and that there is no outstanding information, more proactive contact about the progress of their application and a faster assessment and decision of their claim.  We know this from the results of statistical modelling undertaken to determine what drives advocacy of personal insurance products and life companies. Early reassurance about their eligibility to claim is also important, especially in light of the declining consumer sentiment towards insurance companies which has resulted from negative claims stories portrayed in consumer media over the last year.

Pleasing claimants is easy because consumers’ expectations are low. Insurers just need to honour their commitment to the policy, make the application process as easy and as fast as possible, provide high standards of customer service, show empathy and proactively communicate about the status of the assessment to allay any anxiety about a claim not being paid.

Interpretation

Context is vital in understanding the ratings that policyholders and claimants give life companies and their financial advisers.  Without first understanding the context of survey results, research findings are likely to be misinterpreted.

Media context

There is no doubt that amid increasing media scrutiny, negative press and investigations, consumer sentiment for life insurance is falling and if no action is taken, this is likely to negatively impact the sector significantly.  Australians need to feel confident in their insurers’ commitment to cover them in the event of adverse life events and this is becoming increasingly difficult as the consumer press is converging on a singular and negative view of life insurance and the sector overall.

Furthermore, because of what is being portrayed in the media, consumers with life insurance policies and those considering purchasing insurance are becoming increasingly uncertain about whether insurers will approve and honour their claim.  And those in the process of initiating a claim are now more anxious about whether their benefit will be paid at a time when they are already facing a major traumatic event.

This shift has occurred rapidly over the course of 2016 and appears to be driven by what consumers are exposed to in consumer press given that insurers have had minimal time to effect substantial operational changes that otherwise could have caused the significant decline in consumer sentiment.

Personal Context

The journey for each policyholder is unique, involving individual needs and requirements for insurance, a variety of channels to access insurance and an increasingly diverse range of policies and services to choose from.  To understand the ratings that policyholders and claimants give their insurers and financial advisers, the journey that consumers take to become policyholders and claimants must be understood.  Although every policyholder’s journey will be different, there are common patterns that are helpful in better understanding research findings.

As a consumer moves through the early process of purchasing insurance, the activities of thinking through which policy is best suited to their needs, taking advice, undergoing health assessment and then initiating the policy are activities in which both insurers and advisers are involved in with the end-customer.

Likewise, both insurers and advisers are more engaged with the policyholder in the event of a claim as they complete the application, undergo medical assessments and are updated as they await the outcome of the claim assessment process.

However, between acquiring the policy and making a claim there may be years in which there is minimal communication between the insurer, adviser and policyholder.  It is during this time that the relationship between the policyholder, insurer and adviser undergoes a significant change.

Conclusion

The Life Insurance Industry Performance Barometer Policyholder Perceptions Study and Claimant Journey Study results showed that policyholders highly value proactive contact and engagement throughout the life of their policy and become dissatisfied when there is little engagement and communication with their insurer and financial adviser.  Policyholders also have low expectations of the way in which their claims are managed whereas claimants’ experience of making a claim is high.

The overall experience of policyholders in general decreases over time, leaving insurers and advisers with a lot of ground to make up at the time of a claim.  It is during this time that insurers and advisers have an opportunity to build more positive and enduring relationships with policyholders by providing reassurance that they will honour their commitment in the event of a claim.

The next wave of the claimant and policyholder studies are scheduled to start next month.  These studies will continue to empower participating life companies with the insights they need to deepen their customer engagement and develop strategies and messages to reassure consumers of their commitment to paying out claims and to continuous improvement in the service of they offer to their customers.

In the next article, we unravel the roles and responsibilities of advisers and life companies as the challenges of policyholder engagement are made difficult amid a three-way relationship between policyholders/claimants, life companies and advisers, where the roles and responsibilities of each party are not agreed and well defined.  Understanding this is critical to re-establishing engagement with policyholders and providing a positive context to a potential claim.

References

1 The ‘Total Experience Index’ is a weighted average of performance across the different stages of the claim journey with the weights derived from data modelling that identified the relative importance of each stage of the claim journey in predicting life company recommendation

Dr Rebecca Sheils is Director and co-founder of the Beddoes Institute, which specialises in delivering research and consulting services to the financial services sector.

Sheils has designed and managed some of Australia’s most important Life Insurance Company benchmarking programs – four years managing the Australian and NZ Life Insurance Intermediaries Studies, four years managing the AFA Life Company of the Year – Client Service Team Awards, and two years managing the Life Insurance Industry Performance Barometer Policyholder and Claimant Studies.

This latter study examines the expectations of advisers and customers (policyholders and claimants) towards life insurance companies and maps how companies perform in terms of meeting these needs and is based on collaboration with 46 stakeholders from seven life insurance companies. The findings also underpinned the AFA Consumer Choice Awards announced in November 2016.

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