Recently released survey data from J.D. Power found that severe catastrophic losses, supply chain-related delays, and inflation made 2022 the worst year financially for homeowners insurance carriers in the past decade and was the first year that digital means of claims processing decreased due to customer dissatisfaction. Meanwhile, for the first four months, auto insurance customer claims satisfaction stayed about the same as in 2021.
According to the 2023 U.S. Property Claims Satisfaction Study, more severe events, rising costs, and longer cycle times strained customer satisfaction and tested the limits of the digital tools that were designed to help homeowners insurance carriers respond quickly and efficiently.
A June 2022 report, focused on auto insurance, found that record-high serious collisions, skyrocketing used vehicle prices, and surging repair costs created an unenviable scenario for auto insurers: raise rates or go out of business. In turn, customer satisfaction with available pricing declined sharply while carriers put efforts forth to improve customer engagement, mostly through digitization and artificial intelligence (AI). J.D. Power says the effort by carriers to do so kept customer satisfaction afloat and similar to the previous year.
“The P&C industry playbook for the past few years has been to invest heavily in digital solutions that streamline the claims process for customers while reducing costs and improving efficiency for carriers,” said Mark Garrett, J.D. Power’s insurance intelligence director. “However, the longer cycle times have made it increasingly difficult to keep customers informed via digital channels and limit their need to contact their insurer with questions.
“J.D. Power has seen a sharp rise in the number of customers contacting their insurer for information, particularly tied to these longer-tailed claims. Satisfaction among customers who need to primarily call their insurer for updates includes some of the lowest scores compared with other update methods. Also noted this year is that the increase in severity has driven down digital claim reporting as lower-severity claims are more likely to be reported digitally.”
He added that 2022 was the first year J.D. Power has ever seen a decrease in the use of digital claims reporting, digital used as a primary channel for status updates and for submitting photos that were used for the estimate.
“This is a worrying sign for the industry, as digital tools are apparently not meeting customer needs,” Garrett said.
The 2022 report, based on 2021 claims experiences, found record utilization of usage-based auto insurance, which monitors driving habits and assigns risk as well as price according to vehicle telematics data. Use doubled from 2016 through 2021 with 16% of auto insurance customers participating in such programs. Price satisfaction among customers participating in the programs was 59 points higher, on average at the time, than among customers overall.
J.D. Power said at the time that auto carriers with a multi-channel strategy of digital and in-person were best for a successful approach to claims handling because of efficiency since “customers can handle transactions quickly while spending more valuable time with an agent or CSR [customer service representative].”
Key findings from this year’s study include:
- “Average claims cycle time is 22 days, more than four days longer compared to 2021 and a week longer than in 2020. …The increases have been driven by a combination of severity of damage and continued delays getting the materials needed to complete repairs.
- “Insurance company results are mixed: While the overall industry improved 3 points (on a 1,000-point scale), eight ranked insurers showed declines in satisfaction while nine improved year over year. Notably, the insurers that have the largest increases in satisfaction were able to limit their customers’ need to contact them for information — a key difference between brands that have improved in score and those that have declined. Companies that have improved the most also were able to keep the interactions with their customers streamlined with only one or two representatives involved at a much higher rate.
- “Proactive management of customer expectations necessary: While average repair cycle times of three weeks or more create a significant drag on customer satisfaction, there are steps insurers can take to improve customer satisfaction for longer, more complex repairs. Offering options for receiving status updates; providing accurate claim length expectations; limiting customer-initiated requests for information, and making representatives immediately available are among the top drivers of customer satisfaction in a protracted repair cycle.
- “Forcing digital on customers who prefer a phone call strains customer satisfaction: Among customers who indicated a preference for interacting with their insurer via phone/in-person channels, satisfaction was notably lower when they primarily must use digital channels for key touch points in the claim. Nearly 20% say they either received only a digital copy of their repair estimate or primarily received status updates through digital channels. …overall satisfaction was… approximately 60-70 points lower than among customers who received a phone call for either of these interactions.”
The U.S. Property Claims Satisfaction Study measures satisfaction with the property claims experience among insurance customers who have filed a claim for property damages by examining five factors — settlement, claim servicing, first notice of loss (FNOL), estimation process, and repair process. The study is based on responses from 5,343 homeowner insurance customers who filed a claim between May 2022 and February 2023. The study was fielded from December 2021 through December 2022.
Featured image credit: sefa ozel/iStock