Surveys assess agent satisfaction with insurers

Customers' loyalty to agents elevates significance of results

By Phil Zinkewicz

After the colorful Ed Koch was elected mayor of New York City, he would often begin his speeches with the question: “How’m I doing?” He also used this catch phrase with people he met while walking the city’s streets or riding the subways. It was his way of letting New Yorkers know that they had elected a down-to-earth mayor who really cared about their opinion.

A recently released 2010 Insurance Agency Satisfaction Study for personal lines business indicates that insurers might do well to ask their agency forces, “How’m I doing?” Among other things, the study points out that individual policyholders are more likely to be loyal to their independent agents than to the insurers who write their coverage.

“That strong bond between policyholders and insurance agents makes it essential for insurers to satisfy their appointed agents in order to grow their business,” says Jeremy Bowler, senior director of the insurance practice at J.D. Power and Associates, a global marketing information services company.

The study also found that insurers whose agents are highly satisfied tend to receive a considerably greater share of business from those agents. On aver­age, there is more than a 150-point gap in agency satisfaction between insurers who receive 5% or less of an agency’s business and those who receive more than 60% of an agency’s business, on a 1,000 point scale. In addition, 77% of highly satisfied agents (satisfaction higher than 950 points) say they intend to increase business with an insurer, while only 24% of less satisfied agents (satisfaction of 600 points of less) say the same.

Now in its second year, the study measures the satisfaction of indepen­dent insurance agents and agency staff with the personal property and casualty insurance companies they represent. Kara Steslicki, senior research manager for J.D. Power’s U.S. Services and Emerging Industries Division, says this particular approach was to obtain the independent agents’ and agency principals’ views of company performance vs. the views of agency staff.

“The 2010 Insurance Agency Satisfaction Study is based on responses from 2,316 insurance agents who evaluated more than 10 insurance companies across the industry,” says Steslicki. “Agent satisfaction is examined across six factors. They are: key carrier contacts (28%); policy offering (20%); technology (17%); claims (14%); price (14%); and compensation (6%).” There are some similarities between last year’s study and this year’s study, according to Steslicki.

“Satisfaction levels with technol­ogy and claims have increased slightly, but we did change the methodology so that might account for the difference. Satisfaction levels with agency compensation are higher than last year. On the other hand, agents are less satisfied with insurer funds for marketing than last year. The lower trends for funds for marketing probably are the result of the troubled economy.”

The study also finds the following trends:

• Fewer agents report being offered marketing dollars—only 23% in 2010 compared to 43% in 2009. Satisfaction is higher among agents who are offered marketing dollars.

• Agent satisfaction with compensation, an important component of the insurer/agent relationship, has increased to 671 in 2010, compared to 628 a year earlier.

• Agents report that commissions and cash rewards are the types of incentives that best motivate behavior at their agency.

Agency satisfaction with their insurance markets is a subject frequently addressed in the property/­casualty insurance industry. Last year, Celent, an international strategy consultancy dedicated to helping financial firms create and sustain competitive advantage, released a survey of some 900 independent agents who were asked three things: What do agents want from carriers in services and technology? If given an equal or almost equal price, what factors matter the most to agents when they place business? How are the investments by carriers in agent technologies making a bottom-line difference in agencies?

The survey’s authors, Mike Fitzgerald and Craig Weber, note that typically four carriers represent 75% of an agent’s book of business. “There is no free lunch in the competition space,” they say. The survey also found that agency management systems and carrier proprietary Web sites are the most frequently used technologies. Document imaging is on the rise but still under-utilized, the survey says. “Celent believes independent agents have progressed in their use of newer technology tools, but carriers need to ‘prime the pump’ in specific areas such as mobile technology,” the survey’s authors note.

The authors say the good news is that 39% of the agents surveyed are “very satisfied” with the technology delivered by their best carriers. However, 50% rated their comfort level as “somewhat satisfied,” which argues that not all needs are being fully met and that there is opportunity for differentiation.

Regarding carrier choice drivers, the survey found that the elements that were ranked as the top determinants of an agent’s selection of carriers are: “providing outstanding service to my clients,” “having a good relationship with underwriter,” and “issuing underwriting decisions quickly.” All these were ranked as “very important” by the vast majority of respondents.

Say the survey authors: “Celent urges carriers to incorporate an understanding of carrier choice drivers into their distribution technology and strategies. We believe that, for most carriers, this means:

• Obtaining a clearer understanding of what their producers sell and how they sell it.

• Aggressively pursuing producer feedback to confirm that pricing, product, technology and service strategies are having the intended effect on sales.

• Continuing to focus on execution, which is where many carriers with similar intentions are differentiated.”

Also tackling the issue of agent satisfaction with carriers periodically is the Independent Insurance Agents & Brokers of New York (IIABNY). In its 2009 index, IIABNY found that property and casualty insurance companies grew more popular with their agents during the first half of the year. The 2009 industry index showed that approval ratings for companies doing business in New York rose by 3.6 points for commer­cial insurance and 1.7 points for personal insurance over the winter 2008 results. More than 200 different agencies across the state partici­pated in the survey, which was administered by the consulting firm of Vincent McCabe, Inc.

So-called super regional companies (those that write insurance in multiple states but do not operate nationally) saw the greatest gains, increasing 6.3 points in commercial insurance and 4.3 points in personal insurance. Smaller regional companies also improved by 1.1 points in commercial insurance and 2.3 points in personal. Large national companies gained 1.5 in commercial but declined slightly in personal.

“For the first time since the inception of the IIABNY Industry Index, we saw improvement in nearly every category,” says Kathy Weinheimer, CPCU, AAI, IBANY’s senior vice president of industry relations and education. “Insurance companies have worked hard to improve their agent experience, and these results show their efforts are paying off. In particular, agents gave their companies high marks for the responsiveness and quality of relationships with company field personnel. They also generally approved of the fairness of agency compensation agreements, with scores rising in this regard for both commercial and personal.”

The IIABNY Insurance Industry Index is composed entirely of ratings from agency principals or leaders responsible for company relations in the state of New York.