Our research project will be looking at two specific questions: why consumers choose a specific insurance company, and why they stay with that company. As major insurance companies such as AllState, State Farm, Geico, and Progressive battle for market share, it is important to learn and understand the consumers’ thought process when making insurance decisions. In 2007 alone, $1.7 billion was spent on auto-insurance advertising. The top four advertisers (AllState, State Farm, Geico, and Progressive) accounted for 73% of the total auto-insurance advertising budget (Dow Jones).
Our general research objective will be to uncover more information about consumers’ decisions to choose and keep a company. Some problems we will attempt to address include; what qualities/characteristics consumers look for when choosing an insurance company, how trust is important in the insurance exchange, why some consumers view excessive insurance advertising and marketing tactics as burdensome and annoying, and why insurance companies have the problem of low loyalty rates and high turnover among customers. Literature Review
According to Insurance Networking News, there is a significant gap between what consumers want from their insurers and what they feel they are receiving. Accenture surveyed 7,000 people from 13 countries. The majority (84%) of respondents said they are satisfied with their insurance provider but there is a definite expectation gap in customer service issues.
62% of respondents said it was very important for their insurance provider to have clear and easy to understand content on their policies, but only 27% of respondents said they were satisfied with their insurers’ attempts to do so. According to Edwin VanderOuderaa, global managing director of Accenture’s Analytics group for financial services: “This gap suggests that consumers have low expectations rather than they are delighted with the experience they receive.”
The survey also discovered that younger consumers and those from emerging markets are much more interested in technical innovations such as mobile services, more likely to price shop, and also the most promising market segment. 76% of respondents below the age of 35 said they were interested in using mobile devices to text insurers to obtain updates on claim requests, or interact with agents via video capable smart phones. This was compared to less than half (46%) of respondents over 45 years.
More than 61% of respondents said it was very important for their insurance provider to have prompt and effective service, however only 32% of respondents were very content with their insurers’ ability to deliver such service. 53% of respondents stated that access to information they need whenever they need it is very important to them, and only 29% felt very satisfied with their providers’ ability to provide constant 24-hour assistance, 365 days per year (Insurance Networking News).
Research was conducted in 2010 and 2011 to find out more about what consumers desired from insurance providers. Two online surveys collecting 1,819 surveys were conducted by SSI(Survey Sampling International). The demographic distribution of survey respondents corresponded with the general demographics of the U.S. population. The research revealed that consumers want expert advice and counseling, personalized attention and interaction, comprehensive protection to meet varying individual needs, and relationship based customer service.
After good value, consumers want to be able to trust the insurance professional taking care of them. Being able to offer the consumer a choice of companies is not the most important issue. What’s important to them is that the agents are able to deliver value. When the price of two policies is nearly the same, they would likely choose one over the other based on better coverage or a lower deductible. The survey reveals that customers rank “better coverage” as the top priority to choose between two policies which have a similar cost. 69% of customers desire to be contacted when their agent or company has a suggestion to add coverage they may be lacking or increase coverage if they are underinsured. 79% of customers want to be contacted by their insurance company when their policy renewal date is near. 81% of customers want to be contacted for a suggestion as to how they could save additional money on their insurance. 67% of customers want to be contacted every 6 months or less to inquire if there are any changes in their life or circumstances which could warrant a need for change in their coverage. 73% of customers want to hear from their insurance company more often than just at renewal. 85% of customers claimed it is either important or very important that they are contacted by their preferred method (Insurance News). Ethical behavior is extremely important in today’s business climate. According to a research article by Mei-Fang Chen and Liang-Hung Mau from Tatung University in Taipei, a salesperson’s ethical sales behavior plays a large role in winning customer loyalty through trust. Ethical sales behavior can build or destroy both customer trust in the salesperson and in the insurance company, which also influences customer loyalty in the insurance industry as a whole. Customer trust in the salesperson is based upon the ongoing relationship and not merely a single episode or exchange. Repeated interactions between both parties where the customer observes the salesperson to be consistent builds trust (Roman and Ruiz, 2005). Financial services and insurance are highly intangible and filled with latent attributes, which causes most consumers to find them difficult to understand. Therefore, consumers rely on the salesperson to provide them with correct and accurate guidance (Howe, Hoffman, & Hardigree, 1994). Instead of attracting short-term and discrete transactions, insurance providers need to focus on the relationship marketing approach to create warm relationships and retain customers in the long term (Morgan & Hunt, 1994). Figure 1: (Chen an Mau, 2009)
After reviewing the literature, some of the relationships hypothesized to be tested include: ethical sales behavior in relation to customer loyalty, advertising budgets in relation to revenue and retention, and income and educational level in relation to revenue and retention. Research Methodology
Our intended research sample size will be 100-150 participants. The data collection method will be survey. We will distribute our survey in person, as well as online through e-mail and social media. Some of the variables we will study include; exposure to media, income, education level, age, gender, ethical sales behavior, customer service, and geographic locations.
Chen, M., & Mau, L. (2009). The impacts of ethical sales behaviour on customer loyalty in the life insurance industry. Service Industries Journal, 29(1), 59-74. doi:10.1080/02642060802116339 Howe, V., Hoffman, K.D., & Hardigree, D.W. (1994). The relationship between ethical and customer-oriented service provider behaviours. Journal of Business Ethics, 13(7), 497–506.
Morgan, R.M., & Hunt, S.D. (1994). The commitment-trust theory of relationship marketing. Journal of Marketing, 58(3), 20–38.
Roma`n, S., & Ruiz, S. (2005). Relationship outcomes of perceived ethical sales behaviour: The customer’s perspective. Journal of Business Research, 58(4), 439–445.
http://www.insuranceheadlines.com/Auto-Insurance/3882.html Dow Jones http://www.insurancenetworking.com/news/insurance_customer_service_Accenture-28436-1.html?pg=1 Insurance Networking News http://insurancenewsnet.com/article.aspx?id=311216&type=propertycasualty Insurance News