UPDATE: Study: Failure to Reimburse Expenses Impacts Customer Satisfaction

December 19, 2007

A recent study showed the length of time it takes to repair damages on auto and homeowners insurance claims weighs heavily on customer satisfaction. Multiple claims handlers on the same case irked customers as well. And failure to reimburse out of pocket expenses brought the sharpest criticism.

J.D. Power and Associates headquartered in Westlake Village, Calif., studied auto and homeowner insurance claims based on 10,832 responses from customers who filed claims between August and September of 2007.

The inaugural study measured customer satisfaction with regard to the claims process and examined claims settlements, servicing, first notice of loss, estimation processes, repair processes and overall rental experience.

The firm said two-thirds of the auto customers’ vehicles were fixed and returned within 14 days. These customers averaged 843 on a 1,000-point scale of satisfaction. Thirty-six percent of all customers waited longer than two weeks for their vehicle to be repaired dropping the satisfaction average 71 points.

The overall reported average among homeowners customers paralleled the auto customers. When repairs took longer than initially anticipated, customer satisfaction averages declined.

Jeremy Bowler, senior director of insurance practice at J.D. Power and Associates said claimants generally don’t fully understand the logistics required to work through any given claims process.

“The typical claimant is blissfully ignorant to what it takes to actually become whole,” Bowler said. “Where as for the claim adjuster or insurance carrier, it is a daily occurrence. [Adjusters] typically have dozens of active claims at any given moment.”

He recommended proactively contacting the customer, keeping them informed and explaining the process at each step step of the way, “This can soften the impact of a particularly long claim process — enhancing customer confidence and satisfaction,” he said.

“The companies that do a better job of consistently explaining what it is going to take to make them whole again, tend to do a better job of setting expectations,” said Bowler. “It becomes extremely important to manage customer expectations as far as how long it will take for their vehicle or property to be repaired or replaced.”

The number of people a customer had to interact with throughout the claims process emerged as another key factor impacting customer satisfaction. Nearly 75 percent of customers apparently contacted their local agency first. Then, more than one-third of those customers were redirected to an insurer or transferred to a call center. The study concluded redirected-customers tended to be much less satisfied with the claims experience.

“Some insurance companies employ a process of having different individuals handle different components of a claim,” said Bowler.”As the number of representatives a customer interacts with increases, so does the likelihood the customer will need to repeat information regarding the claim, which negatively impacts their overall impression of their insurer and adds to the amount of time spent in the claims process.”

“Customers with a local agent are most likely to be satisfied with claims servicing if they report the incident to the agent and that agent remains as the primary claim contact thereafter,” said Bowler.

The study found the least satisfied customers (one in four) had out of pocket expenses in addition to their deductibles with no reimbursement. Only eight percent of all customers were reimbursed for out of pocket expenses. Despite being reimbursed, many of these customers reported significantly less satisfaction than those who didn’t have any out of pocket expenses.

“The vast majority of insureds have a deductible, so it goes with out saying that they expect to incur some expense,” Bowler pointed out. “Even if they are not at fault for the damages, the process that the insurance company may have to go through to recover the expense (the deductible), could take a protracted period of time.”

“Some insurance companies will recognize that their customers will ultimately be reimbursed and not require the customer to put up the money and wait to get paid back,” said Bowler. Some will float alone. “They’ll incur the short term debt on the customers behalf since they in turn are the ones seeking reimbursement from the second insurance company,” he added.

One in ten surveyed reported the nature of their claim was such that they were not at fault and due to be reimbursed, but their own insurance company made them pay the deductible and subsequently reimbursed them when they got the check from the other insurance carrier.

Meanwhile, many insureds feel very satisfied with their company’s claims handling processes. “To say everybody who suffers a claim thinks poorly of their carrier is really misleading,” said Bowler.

Surveying customers about their insurance companies for 8 years now, Bowler and J.D. Power and Associates also conduct more than 60 different surveys across many different industries. “Customers’ ratings of their auto and homeowners insurance carriers tend to fall between the top 20 to 25 percent of all the industries — be they manufacturing or service industries — that we profile,” he said.

Auto insurance companies tend to get very favorable satisfaction scores in their studies when compared to car manufacturers, airlines, hotel chains and more.

In distinguishing between claimants and customers who have not filed a claim, Bowler said he finds that folks who have had a personal claim experience are significantly more satisfied than those who have yet to file a claim.

His hypothesis is that when one files a claim, they suddenly become much more knowledgeable about what the insurance policy is good for and what it really takes to become whole again.

Bowler said, “It’s proof positive as to why we have insurance.”

Source: J.D. Power and Associates, www.jdpower.com.

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