Note to car insurers: It's 2012 out there
Insurers are your modern stone-age industry.
We are talking a Fred Flintstone level of evolution in terms of customer service. This point was driven home by the latest J.D. Power report on how satisfied customers are with providers of auto insurance.
The car insurance biz is probably high-fiving on the results, which show increased levels of customer satisfaction right across the country. But while the results suggest insurers are doing some things right, they also show the industry still delivers prehistoric levels of customer service in some cases.
Lubo Li, a senior director at J.D. Power & Associates, said the higher customer satisfaction ratings are a result, in part, to a slower pace of premium increases. Fewer customers were charged more at renewal time this year and the average national premium fell to $1,096 from $1,124.
Mr. Li said insurers are also doing more advertising to explain the value they provide. Canadian car insurers have traditionally done little or no marketing, a point that was highlighted at a recent conference where Mr. Li learned of a survey that tracked the most widely recognized car insurance brands in the country. "The insurer with the highest level of brand awareness is Geico, which doesn't even sell insurance in Canada," he said.
What should concern auto insurers is the difference in satisfaction levels between baby boomers and Generation Y. Part of this relates to the fact that young drivers pay higher premiums, and part speaks to the fact that insurers are still doing business the way they did before the Internet was invented. Boomers may be okay with that because they're used to it. Gen Y, quite rightly, questions this complacency.
"How do Gen Y customers buy things? Online," Mr. Li said. "How do they talk to their friends? On Facebook and Twitter. How many insurers are operating in those realms?"
Not many. The realm that the insurers I deal with inhabit might as well be called Bedrock. I phoned my car insurer a few months ago to pay my annual premium with my credit card and waited 45 minutes on hold (busier than normal call volumes, don't you know). A few weeks later, I realized the premium payment never went through and had to spend another 45 minutes on hold to fix the problem. My insurer's website? Basically an online brochure.
And then there's my life insurance company, which has also not apparently heard of e-commerce. It still requires customers to write a cheque and mail it in with a payment stub. Customers are asked to be good little boys and girls and write their policy number on the cheque.
Mr. Li said another source of friction between insurers and their clients, particularly younger ones, is a lack of product flexibility. Consider the situation of a young adult who is attending university or college out of town and needs only occasional coverage to drive the family car while visiting home. Mr. Li himself asked his own insurer if this type of coverage was available for his daughter not too long ago. "They said: No, no, we don't do that."
One of the biggest issues Gen Y customers have with their car insurers is how comparatively high their annual premiums are. In a sense, that's fair because young drivers are unproven and tend to have more accidents than older people. A survey done a couple of years by the car insurer Aviva Canada found that young and new drivers had a 41 per cent higher rate of claims.
But in bludgeoning every young driver equally on premiums, car insurers are making a good case for not owning a car and, thereby, avoiding the cost of insurance. Using a car-sharing service or renting might well be more economical, even if insurance coverage has to be arranged each time.
Mr. Li said there's technology available that allows premiums to be personalized for all drivers, not just young ones. Insurers could have drivers install a remote-sensing device in their cars that notes the distance and speeds travelled. People who drive only a little and keep to the speed limits would be in a position to pay lower premiums after sending their data to their insurer.
In defence of car insurers, Mr. Li said they're trying to change from an actuary-driven business based on selling a commodity product into something more customer focused. Tick-tock, insurers. You're eons behind the rest of the world.
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HOW HAPPY ARE YOU WITH YOUR CAR INSURANCE?
The latest J.D. Power customer satisfaction rating for car insurance shows Gen Y customers are less happy with their insurance.
Customer satisfaction with insurance companies by region, 2012 (based on a 1,000-point scale)
|Region||Overall satisfaction in 2012||Gen Y overall satisfaction in 2012||Overall satisfaction in 2011||Gen Y overall satisfaction in 2011||Difference||Gen Y difference|