A recent survey conducted by the IBM (Armonk, N.Y.) Institute for Business Value has found that P&C insurers have highly loyal customer bases, especially when compared to other areas of financial services, but that they'll need to improve multi-channel distribution efforts and customer service levels if they want customers in younger age demographics to become loyal as well.
The results of the 3,020-policyholder survey were released on Monday in "Surviving climate change in the property & casualty industry by growing customer advocacy." The survey results showed that 51 percent of policyholders could be considered "advocates" for their insurance carrier, using the Customer Focused Insight Quotient (CFiq). Meanwhile, banking, another industry looked at in similar IBM study, only demonstrated a 24 percent advocacy rate.
The CFiq is a new metric from IBM that considers customers as "advocates" if they would a.) recommend their company to others, b.) consider their current company first for future products and c.) stay with their current company if offered competitive products elsewhere.
While just over half of policyholders surveyed strongly agreed with all three of those aforementioned statements, study co-author Robert Heffernan, an associate partner and CRM Global Leader at the IBM Institute for Business Value, points out that a majority of advocates come from older demographics. When you remove older policyholders -- who are most likely to prefer a traditional delivery and service model -- from the equation, Heffernan says that the insurance industry's advocacy rate drops to around 25-percent.
"The bottom line is insurers are looking good now when compared to different industries, but they really need to take a look at how they view younger segments. [They need to be] moving towards more direct channels or at least laying that foundation, and they need to understand what younger customers want and what they're going to value online," Heffernan says.
The aim of the CFiq metric is to roll a few common customer service metrics into one -- providing a better enterprise-wide view of a given company's success in satisfying customers.
"There are number of satisfaction metrics within a firm. Some might be based in the call centers and some be based with agents, and so on," Heffernan relates. Any one metric, however, can be a poor predictor of a satisfied customer's future behavior.
For example, Heffernan explains that many customers say that they would recommend a company to friends and family, but also say they'd go to another company when looking for a new insurance policy. "A high 'recommend' percentage doesn't necessarily give you any understanding of the commercial viability of that customer," he says.
Future success in converting younger policyholders and potential customers into advocates could be dependent on customer service. Heffernan explains that new products are soon copied and pricing changes are quickly matched. "We think the differentiator is really going to be from the customer experience. It's how you use your company to effectively change up and differentiate how you interact with a client," Heffernan says.
Meanwhile, Heffernan says insurers must balance the needs of many baby-boomers and seniors, many of whom still prefer more traditional insurance models and renew policies at very high rate, with the preferences of many younger policyholders who increasingly look to more mobile, more Web-based and more direct and automated ways to interact with their carrier.
"We're starting to find a demographic split with respect to age. It's really pronounced in the insurance side of it. We're seeing insurance companies trying to address those two demographics, and the two have sometimes contradictory objectives," Heffernan says.