CUSTOMER SATISFACTION TECHNOLOGY SURVEY SUMMARY REPORT AUGUST 1999 Prepared by: Tom Moormann, FLMI Cary Overmeyer, ACS, AIAA
Customer Satisfaction Technology Survey Summary Report Customer satisfaction is a performance metric, which most managers consider important, but which few companies really measure well. Where systems to measure financial performance involve whole departments and report to senior company executives, systems to measure customer satisfaction are non-existent in many companies and haphazard in many more. Yet, satisfied customers are vitally important to any business, and especially to life insurance companies, where retention plays a large role in determining a company s revenue stream, and ultimately its profitability. To explore how the life insurance industry is addressing the issue of measuring customer satisfaction, LOMA conducted a survey of its members companies. A total of 129 responses were received from 709 companies (response rate of 18%), although a number of responses were unusable because of problems with the technologies used to deliver and receive survey forms. Thus, the results discussed below are based on 116 responses. Respondent companies ranged in size from relatively small to several of the largest life insurance companies, and included companies who market both individual and group products. The survey itself was divided into three general topics company practices with respect to measuring overall customer satisfaction; company practices with respect to measuring satisfaction with specific transactions, such as problem resolution, policy service, or a sales presentation; and evaluation of different technologies for gathering customer satisfaction information. 2
Results Overall Satisfaction: A fairly substantial percentage of respondent companies measure customer satisfaction (Figure 1), ranging from nearly 9 of companies marketing individual life products to about 7 of companies marketing disability products. Companies are more likely to measure satisfaction with those products marketed to individual consumers as opposed to products marketed to groups. However, it is apparent from this figure that roughly half of those companies measuring customer satisfaction do so on an irregular basis, and that a substantial number of companies do not measure customer satisfaction at all. 10 9 8 7 6 5 1 Figure 1: Measuring Overall Customer Satisfaction Total Company Individual Life Annuity Group Life Health Disability Regularly As Needed Do Not Measure The general types of information collected in customer satisfaction surveys are data on overall satisfaction (8 of respondents), satisfaction with product features and 3
benefits (61%), and satisfaction with different aspects of the purchase process (58%, see Figure 2). The one area which stands out as an area customers would like to measure is impact on financial performance. This is perhaps not too surprising, given the traditional emphasis on evaluating investment decisions on the basis of impact on financial performance. In this model, quantifying the impact of customer satisfaction on financial performance would help justify decisions to improve customer service. Yet, only one-third of our respondents quantifies the cost to attract a new customer (33%) or the value of an existing customer (38%). Figure 2: Information Gathered in Surveys 10 9 8 7 6 5 1 Reasons for purchase Overall satisfaction Financial impact Purchase process Product features Other Currently measure Would like to measure Further evidence of the disconnect between measures of customer satisfaction and more traditional business metrics is displayed in Figures 3 and 4. Figure 3 shows the results of a question asking the respondent to identify performance targets. Thirty 4
percent of the respondents have no target, while thirty-three percent specify improvement over the prior measurement as a target. If we were talking about accounting measures, this would be equivalent to saying that nearly two-thirds of the respondents have no budget. Of those which specify a target, roughly one-third (13% of the 37% specifying a target) indicate that they have selected a target which would place them among companies which are recognized as leaders in having satisfied customers. For example, USAA reports that 98% of their customers are satisfied with their products and services. Target levels below 9 suggest that these companies are willing to accept a substantial proportion of dissatisfied policyholders the ones who will tell others about their problems with the company and refuse to renew their policies or buy additional products. Less than 1 of our respondents benchmark their customer satisfaction results against world class companies. Figure 3: Performance Targets 33% 3% 37% 1 16% 5% 3% No Target Improvement >8 80-89% 90-99% 10 Not Specified 5
Figure 4 asks respondents to indicate how useful they feel their customer satisfaction numbers are. Sixteen percent of the respondents indicate that their measures are not useful, and 58% responded with the somewhat tepid support of Useful. Only 26% of the respondents feel that their customer satisfaction measures are very useful this from a group of respondents whose job is to collect this information. Figure 4: Utility of Customer Satisfaction Measures 58% 16% 12% Extremely useful Very useful Useful Not useful Not at all useful 5% 4% 21% Satisfaction with Transactions: Most of the sample respondents measure satisfaction with some type of transaction (87%). Most attention is paid to policy service issues, such as policy issue and policy changes. Relatively less attention is paid to sales and to claims. 6
Figure 5: Topics for Transaction Surveys 9 8 7 6 5 1 Sales Policy issue Problem resolution Customer questions Policy changes Claims Each transaction Sample of transactions Special Projects Figure 6 displays the topics which transaction surveys typically measure. The most surveyed topics are satisfaction with outcomes, timely resolution, and ratings of customer service representatives. As with overall satisfaction, a topic which respondents would like to measure, but do not at this point in time, is the impact of customer satisfaction on financial performance. 7
Figure 6: Transaction Survey Topics 7 6 5 1 Timely resolution Satisfaction with outcomes Characteristics of the transaction Impact on financial performance Customer service representative Currently measure Would like to measure Finally, respondents were asked how the results of transaction surveys were used. The primary uses of these surveys were to increase customer focus, to measure performance, and to control quality. Other uses include benchmarking, strategic planning, and compliance. 8
Figure 7: Uses of Transaction Surveys 10 9 8 7 6 5 1 Compliance Quality Control Customer Focus Performance Measurement Benchmarking Strategic Planning Advertising Primary Use Other Uses Survey Technologies: One of the purposes of this survey was to understand the different technologies used by respondent companies to gather customer satisfaction data. The types of options considered (options shown in Figure 8) include paper and pencil surveys, postcards, telephone surveys with live interviewers, focus groups, personal interviews, paper surveys with scanned responses, telephone surveys with voice response systems, e-mail surveys, and web based surveys. Respondents indicated that they currently use and will continue to use technologies, which might be considered relatively low-tech paper and pencil, postcard, live telephone interviews, and focus groups. They are not and do not plan to use the relatively high-tech options of scannable responses, voice response surveys, e-mail, and web based surveys. One 9
reason for this may be apparent in looking at satisfaction with the different alternatives. As a group, respondents were more satisfied with the traditional methodologies, and less satisfied with the high-tech methodologies. Our experience in conducting this survey, which was done exclusively through these high-tech options, suggests some reasons why satisfaction with these methods was relatively low. We found that the technology for delivering surveys via these methods is not easy to use, and often conveys the impression that the survey is much longer than it really is. Given that this appearance may be one of the factors which discourages responses, and given the sampling bias inherent in using methodologies which rely on computer and internet access, it may be premature to expect widespread usage of these high-tech media, even though they do offer substantial benefits in terms of data entry and speed of delivery. Figure 8: Measurement Technologies 5 35% 25% 15% 1 4 3 2 Satisfaction 5% Pencil Postcard Phone Focus Group Interview Scanned Voice E-mail Web 1 Currently Use Have Used Will Use Satisfaction 10
Conclusions It is apparent from the results of this survey that a relatively large proportion of life insurance companies do measure customer satisfaction, but that a substantial number do not. It is also suggested that customer satisfaction, though an important metric for evaluating business performance, is not treated as such by a large proportion of the industry. There is insufficient attention paid to measuring customer satisfaction on a regular and routine basis, to establishing performance targets which will help management better manage their companies, and to tying customer satisfaction measures to financial measures so that the investment in improving customer satisfaction can be evaluated on as rigorous a basis as other investment opportunities. Clearly, if we believe that measuring customer satisfaction is important, there is room for dramatic improvement in our measurement efforts. 11