Competitive Market Boosts Satisfaction with Small Commercial Insurance; Gen Y Satisfaction Spikes Well above Others, J.D. Power Study Finds

American Family Ranks Highest in Small Commercial Insurance Customer Satisfaction

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Aug 08, 2016, 08:00 ET

COSTA MESA, Calif., Aug. 8, 2016 /PRNewswire/ -- No longer able to compete primarily on price, insurance providers are now focusing their efforts on ways to please their customers, with the payoff being a significant increase in satisfaction among their small business commercial customers, according to the J.D. Power 2016 U.S. Small Commercial Insurance Study,^SM released today.

Three consecutive years of steadily declining insurance rates have carriers looking at other ways to differentiate themselves in a competitive market. Turning their attention to customer interactions and policy offerings has led to a 30-point improvement in overall satisfaction in 2016, to 823 on a 1,000-point scale, up from 793 in 2015.

"With few exceptions, insurers are dropping prices, so the best way for them to compete in a soft market is on customer satisfaction," said Greg Hoeg, vice president of U.S. insurance operations at J.D. Power. "Small business owners are the beneficiaries of being in an attractive market segment of insurance where satisfaction is the key differentiator."

The study, now in its fourth year, examines overall customer satisfaction and insurance shopping and purchasing behavior among small business commercial insurance customers with 50 or fewer employees. Overall satisfaction is comprised of five factors (in order of importance): interaction; policy offerings; price; billing and payment; and claims.

This marks the third consecutive year satisfaction has improved, with a 46-point increase since the study launched in 2013. Satisfaction increases across all factors in 2016, with interaction and policy offerings contributing most to the year-over-year gain.

Customer Interaction Is Critical
Insurer interaction with their customers is vital when price competition is neutralized due to the shift to a soft market. The study finds that interaction improves the most among all study factors, increasing 32 index points from 2015. Satisfaction in all three interaction subfactors improves significantly in 2016, with website performance showing the largest jump year over year (+36 points), followed by agent/broker (+34) and call center (+28).

While interaction is driving the overall increase in satisfaction, it is having the greatest impact on satisfaction of Gen Y¹ customers. Satisfaction among Gen Y customers improves 51 points—the largest rise among the generational groups—to 851. Overall satisfaction among Boomers is 820, followed by Gen X at 812 and Pre-Boomers at 809. This is the only J.D. Power insurance study in which Gen Y is the most satisfied generation.

"For young entrepreneurs, their business defines who they are, and they want to protect it," said Hoeg. "Gen Y's satisfaction with their insurance provider also reflects their social consciousness—they care about their business and their employees."

Keeping Gen Y Business Owners Satisfied
The key reasons for higher satisfaction among Gen Y customers are largely driven by interactions with their agent/broker. Not only do more Gen Y customers indicate having at least two interactions on an annual basis, compared with Gen X and Boomer customers, but they also have more in-person interactions with their agent/broker. In addition, these in-person interactions are typically more meaningful, as the study finds agents/brokers are nearly twice as likely to provide advice or recommend changes to Gen Y customers when compared with older cohorts.

"Gen Y wants the traditional values from their business insurer: good service, financial protection and good price," said Hoeg. "The insurers— especially commercial-focused insurers—are providing that."

Hoeg noted that as competition continues to increase in the small commercial space, it is important for insurers to understand the types of business customers they are dealing with and what those customers value most. Younger business customers have different needs than their older counterparts. As expected, Gen Y businesses have been operating for a much shorter time, but they typically have higher revenues than the businesses of their Boomer counterparts (51% of Gen Y business customers report annual revenue of more than $500,000, compared with 42% of Boomers).

Small Commercial Insurance Customer Satisfaction Rankings
American Family ranks highest among small commercial insurers, with a score of 839, a 73-point improvement from 2015. American Family performs particularly well in the policy offerings and billing and payment factors. Allied and Nationwide rank second in a tie with a score of 835.

The 2016 U.S. Small Commercial Insurance Study is based on 3,396 responses from insurance decision-makers in businesses with 50 or fewer employees that purchase general liability and/or property insurance. The study was fielded from March through May 2016.

¹ Note: J.D. Power defines the generational groups as Pre-Boomers (born before 1946); Boomers (1946-1964); Gen X (1965-1976); Gen Y (1977-1994); and Gen Z (1995-2004).

Study Rankings

(Overall Customer Satisfaction Index Scores Based on a 1,000-point scale)		J.D. Power.com Power Circle Ratings For Consumers

American Family	839	5
Allied	835	5
Nationwide	835	5
State Farm	831	4
Erie Insurance	829	4
Allstate	827	3
Auto-Owners Insurance	826	3
Industry Average	823	3
Liberty Mutual	821	3
Zurich	821	3
Farmers	818	3
AIG	816	3
The Hartford	814	3
Chubb	810	2
CNA Insurance	806	2
Travelers	793	2

Power Circle Ratings Legend
5 – Among the best
4 – Better than most
3 – About average
2 – The rest

Award-Eligible Television (TV) Brands Included in the Study

Company	CEO Name	City
AIG	Peter Hancock	New York, N.Y.
Allstate	Thomas Wilson	Northbrook, Ill.
American Family	Jack Salzwedel	Madison, Wisc.
Auto-Owners Insurance	Jeffrey Harrold	Lansing, Mich.
Chubb	Evan Greenberg	Warren, N.J.
CNA Insurance	Thomas Motamed	Chicago, Ill.
Erie Insurance	Terrence Cavanaugh	Erie, Pa.
Farmers	Jeffrey Dailey	Woodland Hills, Calif.
Liberty Mutual	David Long	Boston, Mass.
Nationwide	Stephen Rasmussen	Columbus, Ohio
State Farm	Michael Tipsord	Bloomington, Ill.
The Hartford	Christopher Swift	Hartford, Conn.
Travelers	Alan Schnitzer	St. Paul, Minn.
Zurich	Mike Foley	Schaumburg, Ill.