The life insurance conundrum: satisfaction declines as policy tenure increases

A 2022 survey by Forbes found that three in four US adults have a life insurance policy in place, with women twice as likely as men to hold a policy. Yet customer satisfaction data recently released by J.D. Power has found satisfaction with these products starts declining relatively soon after purchase.

In its 2022 US individual life insurance and individual annuity study the analytics firm, which specialises in measuring customer satisfaction, charted the effectiveness of specific insurance providers and how customers feel about their relationships with them over time.

The director of global insurance intelligence at J.D. Power, Robert M. Lajdziak, explained that while 2021 saw the biggest single-year increase in customer satisfaction, rates have “now reverted to their previous long-term trends in which customer satisfaction declines as tenure with the product increases.”

This two-point drop in the 1,000-point customer satisfaction scale has a host of different reasons.

Insurers have to reckon with a customer base that increasingly wants to have its insurance needs handled online. According to the report, more than half of the customers who were sampled for the survey have contacted their insurers online in the last three years.

State Farm is the provider leading J.D. Power’s index for the second year in a row. This kind of success is at least partially due to State Farm revolutionising its digital presence in 2016. According to Forbes, by 2019 this saw a 400 percent increase in bills being paid online and a 75 percent increase in State Farm app downloads.

Tackling the satisfaction decline

This J.D. Power survey, alongside further reporting, suggests that for businesses to be successful they must ensure customer convenience through their online platforms. A New Horizons report cited by Lightico argues that “insurance companies lag behind other industries in the realm of digital transformation.” Indeed, according to the report, customers are more likely to consider InsurTech companies “unique, innovative and affordable” than traditional insurance companies.

With the rise of InsurTech, insurance businesses will need to dramatically improve their online accessibility to maintain a relationship with their customer base.

A 2019 Deloitte study suggested that potential customers were 20% more likely to purchase a life insurance policy if the application and underwriting process were reduced to a more reasonable length of time. Today that kind of accessibility mean ensuring the process can be completed on mobile. Indeed, the J.D. Power report highlighted how mobile apps drive the highest customer satisfaction rates despite only being used 8 percent of the time.

Insurance providers must revolutionise their method of reaching customers if they want to reach them next year and beyond. State Farm’s impressive technical developments were rooted in its desire to provide customers with an easy experience. The firm’s success in this area was summarised by chief digital officer, Fawad Ahmad, who said: “…We’re not going to be inventing new products constantly. We chose customer experience.”

As highlighted in the ServiceNow report Drive customer loyalty with connected digital workflows businesses that focused on customer experience were three times more likely “to have significantly exceeded their top business goals in 2019.”

The majority of reports, including the one from J.D. Power, suggest that building a customer journey that streamlines customer data through carefully choreographed touchpoints, is the best way to secure loyalty.

Here are the J.D. Power results in full