Canadians unhappy with home insurers

Overall customer satisfaction with Canadian home insurance companies has declined substantially as premiums increase and claims service levels deteriorate across all regions, according to the J.D. Power 2013 Canadian Home Insurance Study released today.

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The annual study examines customer satisfaction with their home insurer by examining five factors: interaction; billing and payment; claims; policy offerings; and price.

Overall customer satisfaction declined nationally to 761 (on a 1,000-point scale) from 769 in 2012. Notably, in the Western Region satisfaction declined by 13 points to 741, compared with a slight decline in both the Atlantic/Ontario (754) and Quebec (807) regions year-over-year.

The decrease in customer satisfaction in the Western Region is primarily driven by year-over-year declines in price, down 32 points to 669, and claims, down 30 points to 738. In the wake of recent severe weather events, insurers have been raising rates to adequately cover anticipated claims, which has negatively impacted satisfaction.

The study finds that when home insurance companies do not notify customers of a premium change through their preferred communication method, satisfaction declines by 74 points. However, when insurers proactively provide a policy review with customers and discuss coverage options, overall satisfaction may improve.

For example, when customers in the Western Region were contacted by their insurer to discuss a premium increase, including any policy options they may have to mitigate costs, satisfaction improved by more than 50 points.

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Even when customers did not choose to make any changes to their policy, the conversation provided an opportunity for insurers to further educate customers on the value of their current coverage. In general, the larger the premium increase amount, the larger the decline in customer satisfaction. Any premium increase of more than $40 is perceived as significant by customers.

According to the study, satisfaction with the claims experience has declined dramatically in the Western and Atlantic/Ontario regions from 2012—by 30 and 31 points, respectively—falling below the industry average of 757. When customers file their first home insurance claim, it is often the first time they fully understand what their policy covers. Therefore, claims service is a vital part of customer satisfaction.

Many steps in the claims service process affect customer satisfaction. The initial call to report the claim sets the tone for the entire experience. Satisfaction among customers who receive an explanation of what to expect throughout the entire claims process is higher than among those who do not receive an explanation—a difference of 179 points. In the Western and the Atlantic/Ontario regions, the proportion of customers indicating they received an explanation of the claims process declines by 5 percentage points and 6 percentage points, respectively.

An agent or broker’s involvement in the claims process may substantially improve customer satisfaction. Agent/broker interaction typically may include such activities as taking customers’ claim reports, providing guidance on the claims process or filling the role of the adjuster. Additionally, only 68% of customers are contacted post-claim by their insurer or agent. Following up with customers once the claims process is complete may be extremely beneficial in addressing any potential service issues, as well as building long-term loyalty.

Overall, loyalty has declined year over year, with 39% of customers indicating they are likely to renew their policy with their current insurer, compared with 41% in 2012. The likelihood that customers will recommend their current insurer drops to 33% in 2013 from 36% in 2012.

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