Why Satisfaction With Home Insurers Is Falling Faster Than Home Prices

Earlier this week, J.D. Power released its latest annual study of consumer satisfaction with providers of homeowners insurance. Customer satisfaction with these companies fell to its lowest level in five years. (In a related, equally uplifting story for insurers, customer satisfaction with Auto coverage also declined significantly over the past year.)

J.D. Power identified three primary drivers behind the sour results:

· First, customers don’t have a clear understanding of their homeowners coverage – what is insured and for how much.

· Second, customers don’t understand how premiums are calculated, so they were frustrated to see their home values decline, but not their insurance premiums.

· Third, customers were disappointed with how insurers responded to their requests for service, particularly the speed with which their inquiries were handled.

So, while insurers scurry to deploy the latest must-have iPhone app, scramble to establish a social media beachhead, and engage Madison Avenue to create buzz worthy advertising campaigns – they continue to neglect some simple fundamentals, like communicating clearly with customers and responding promptly to their requests.

The problem is, no matter how cool a company’s mobile app is, or how many friends they have on Facebook, or how many awards their advertisements win – it’s all for naught if customers’ basic needs and expectations are not met.

But here’s the good news for insurers (yes, there is some). Addressing these fundamentals doesn’t necessarily require multi-million dollar investments. Here’s a partial prescription for turning around those J.D. Power scores:

1. Drop the jargon and simplify coverage explanations.

Rare is the insurance policy that someone can actually comprehend. These documents are riddled with industry terms that the typical consumer simply can’t understand. Layer on top of that annual notices of endorsements and exclusions, and it’s pretty much impossible to know what your policy actually covers.

The answer? Plain language coverage summaries, renewal notices and bills. Even if, for legal reasons, insurers insist on preserving their detailed (albeit unintelligible) policy contracts, these other documents present great opportunities to supplement the legalese and speak to customers in language they understand.

2. Proactively educate your customer.

When falling home prices aren’t accompanied by commensurate reductions in insurance premiums, there’s an opportunity to proactively communicate and explain why. After all, there can be legitimate reasons why home values and insurance premiums might not move in lockstep (e.g., when disaster strikes, high demand for contractors and building supplies might actually inflate restoration costs).

Imagine if your insurer, out of the blue, contacted you about this – perhaps attaching a note to your billing statement, incorporating an article about it in their newsletter, or even having a live person give you a call. Given that many insurers never communicate with their customers (beyond sending them bills), the mere act of reaching out with something other than a premium notice would, in and of itself, be quite striking. That the information shared might actually be meaningful and educational is icing on the cake.

3. Set expectations and take ownership.

Oftentimes, customer disappointment with a company’s responsiveness has less to do with absolute turnaround timeframes and more to do with poor expectation-setting. Tell me you’ll call me back with an answer to my question “shortly” and you’re playing with fire, because the term is inherently ambiguous.

Instead, coach front-line personnel to make specific timeframe commitments – if not for fully resolving an inquiry, then at least for providing a status update. In many cases, customers will be delighted as long as you clearly articulate expectations and then – here’s the important part – actually follow through on your commitments. It sounds ridiculously simple, but sadly enough, that type of behavior stands out in today’s sea of service incompetence.

Let’s face it, homeowners insurance is a grudge purchase (customers pay, but question if they’ll ever receive anything in return), so people love to beat up on these companies. But with these types of business practices, insurers certainly aren’t helping their own cause, doing little to endear themselves to customers.

Instead, these firms seem to resign themselves to a state of consumer indifference, even while wondering why they perpetually find themselves competing primarily on price.