WESTLAKE VILLAGE, Calif. — Communication plays a critical role in satisfaction with individual life insurance providers, yet at least 17% percent of customers who purchased through an agent or financial advisor have never had another interaction with their insurer since their initial purchase.
This according to the J.D. Power 2015 U.S. Household Insurance StudySM — Individual Life released in late September.The study, now in its second year, measures individual life insurance customer satisfaction with their insurer based on performance in four factors (in order of importance):
• policy offerings
• billing and payment
Annualized direct premiums written for the U.S. individual life market are approximately $112 billion. On average, approximately 44% of consumers have an individual life insurance policy.
• For more information about J.D. Power insurance studies, visit http://www.jdpower.com/industry/insurance
Price is a primary reason consumers shop for individual life insurance products and providers — and also the main reason they let their policy lapse. However, when insurers are able to effectively communicate the value customers receive relative to what they pay, even customers who pay a higher premium are more satisfied and less likely to shop for a new policy with a competing insurer.
Further, 46% of individual life insurance customers don’t have a complete understanding of their policy. Customers who have an agent or financial advisor or company representative who has reached out to them in the past year tend to have a greater understanding of their policy and are also more likely to say they “definitely will” purchase a policy with their current insurer if they need additional life or financial services products in the future, compared with those whose agent or financial advisor or company representative hasn’t reached out to them.
“Most of the insurers know that communication is important, but they just aren’t doing it,” saidValerie Monet, director of the insurance practice at J.D. Power. “Customer interaction requires a financial commitment from insurers, and they need to see the return on their investment. Interaction can offset a higher price when customers focus their attention on the value of their policy.”
The study finds that 37% of individual life insurance customers have evaluated their life insurance needs, including the relevance of their current product, in the past two years. Yet, nearly 1 in 5 customers who purchase through an agent or financial advisor has never had another interaction with them since their initial policy purchase. Among customers who shopped for a new policy in the past two years, 40% ultimately upgraded or purchased a new policy from their current insurer, while another 12% purchased a new policy with another.
“As insurance customers enter different stages of their life, the amount of coverage and the products best suited to meet their financial planning goals may also change,” said Monet. “If insurers contact their customers even once a year, they can help them understand their policy and address their needs, and in doing so are more likely to retain them as a customer. If they aren’t talking to their customers, they are giving them a reason to shop around, and they’ll likely go to an insurer with a lower price.”
Next page: Key study findings; carrier satisfaction rankings
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