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Short-term insurers manage to navigate through COVID-19 uncertainty and meet higher customer expectations

Short-term insurers manage to navigate through COVID-19 uncertainty and meet higher customer expectations

Consulta releases latest 2020 Customer Satisfaction Index for Short-Term Insurance

The short-term insurance industry has managed to navigate unchartered risk territory in a year thrown into chaos by the COVID-19 pandemic. Not all players emerged the pandemic unscathed, and the industry collectively has some challenges ahead to meet changing and increasing customer expectations. 

The latest Customer Satisfaction Index (SA-csi) for Short-term Insurance conducted by Consulta shows an industry where competition between players is fierce, with the difference between the top four scoring brands on customer satisfaction score barely more than a single index point. For the first time in the history of the SA-csi, the Short-term Insurance SA-csi score overtook the Banking SA-csi score, which has traditionally performed at a very high level. 

In the SA-csi 2020 for Short-term Insurance, OUTsurance emerges as the leader on Overall Customer Satisfaction across direct and intermediated insurers. While the index differentiates between direct and intermediated insurance models, it is important to note that all short-term insurers compete for the same customers regardless of their distribution models.  The 2020 SA-csi for short term insurance polled 2600 customers of short-term insurers during the second half of 2020 across the following brands: 

  • Intermediated insurers:  Auto and General, Discovery, Momentum, Old Mutual Insure and Santam.
  • Direct Insurers: OUTsurance and Virseker.

Customer expectations increased across the industry during 2020. This is attributed to the increase in insurer brand messaging and heightened awareness due to extensive media coverage, notably around business interruption claims, and payment holidays that most insurers offered to financially distressed customers. 

“On one hand, the industry achieved a great deal of goodwill by helping customers navigate the uncertainty that came with the arrival of COVID-19 and its impact on households and livelihoods.  Payment holidays, premium discounts, and restructuring of client portfolios at a time when millions of South Africans found themselves in financial distress went a long way in shoring up loyalty and appreciation for the insurer interventions.  On the opposite end of the spectrum, the damage wrought by declined business interruption claims and the ensuing public legal battles and media reporting raised the stakes in expectations. Customers questioned whether insurers could be trusted to pay in their time of need, and this was a prevailing theme,” explains Ineke Prinsloo, Head of Customer Insights at Consulta. 

Consulta’s ancillary studies during 2020 also emphasised the increasing importance of ‘value’ to customers at a time when households were already and remain financially stretched. Of concern is the general increase in customer complaints across the industry and a commensurate decline in complaints handling and resolution.

“Overall, the industry has some work to do on complaints management – a sentiment that is echoed by the office of the Ombudsman for Short-term Insurance (OSTI), which helped to put almost R120 million back in the pockets of aggrieved customers who approached its office for assistance in 2020.

“With the renewed focus on value drivers that the pandemic has brought about, short-term insurers will need to find and address the service and product delivery shortfalls to customers, who show an increasing propensity to take their business elsewhere if left dissatisfied,” adds Prinsloo.  

“The playing fields have been leveled in terms of product benefits, price, technology and loyalty programmes, and the space for contestation now sits firmly in customer experience. The insurers lagging on this critical measure will be forced out of the race as increasingly demanding insurance customers opt with their wallets.  Legacy, brand sentimentality and track record will be secondary in a heavily contested space where there is very little growth – in this highly contested space, any new customer acquisition will come largely at the expense of a competitor. Incongruence on aspects such as quality of service, product benefits, value and price will be the Achille’s heel of the industry where customers currently perceive there to be minimal real differentiation – customer experience will be the ultimate decider,” concludes Prinsloo.

Key take-outs of the 2020 SA-csi for short-term insurers

Customer Satisfaction – Overall Index

  • OUTsurance takes the leader position in the overall Customer Satisfaction measure across direct and intermediated insurers, with a score of 82,3.  OUTsurance had shown consistent year-on-year improvement in its Customer Satisfaction Score, from 2016 when it was well below par, to clinching leader position in 2020. 
  • Virseker (81,7) follows on par with a decline on its score in 2019 of 83,2.
  • Intermediated insurers: Old Mutual Insure (81,3), Momentum (81,2), Santam (79,5) and Discovery (78,8) are all on par, while Auto & General (75,1) is below par. Both Momentum and Discovery increased their scores compared with 2019.
  • Santam is showing marginal but consistent declines in its Customer Satisfaction score year-on-year and would do well to note the competitive threats from Old Mutual Insure, OUTsurance, Virseker and more recently Momentum, which show consistent improvement despite the tough market and operating conditions that face all players in the industry.

On customer expectations: 

  • Customer expectations across the board are high at an industry par of 84,6. There has been a marked 3-point increase from 81,6 in 2018, to 84,6 in 2020.  
  • On the Perceived Quality versus Expectations gap, which indicates the degree to which the industry exceeds or falls short of customer expectations, OUTsurance and Old Mutual Insure are the only brands where Perceived Quality exceeded Customer Expectations.
  • Santam (-2,7) has the largest gap, followed by Auto & General (-2,0) and Discovery (-1,5) where Perceived Quality fell below Customer Expectations. 

On Perceived Value:

Perceived value is a measure of quality relative to the price paid and plays a significant role as the economy bites into household incomes. Consulta's COVID tracker illuminated the pressure on household finances and how consumers are scrutinising every cent in their budget. Where savings are to be considered, short-term insurance premiums would feature higher on the list of potential cost cutting. It is therefore imperative that short-term insurers don't lose sight of what is ‘Perceived Value’ in exchange for a monthly premium. On this measure, OUTsurance, Virseker, Momentum and Old Mutual Insure are the leaders in terms of customer Perceived Value. Santam and Discovery are on par while Auto and General performs below par.

Complaints Incidence and Resolution

  • In terms of complaints incidence and handling the industry average of complaints incidence is 14% and complaint handling is 49,8/100 – both of which show a decline compared with 2019.
  • OUTsurance has the lowest complaint incidence (6,2) of all direct and intermediated insurers. 
  • Of the intermediated insurers, Momentum (12,9), Old Mutual Insure (10,7) and Santam (11,3) have low complaint incidence scores. Old Mutual Insure has the highest Complaint Resolution Rate of (60,7) followed by Momentum at 58,4 - well above industry par – which indicates a strong ability to resolve customer complaints.
  • Discovery (46,3) and Santam (43,8) scores below industry average on Complaint Resolution.

Customer Loyalty

  • OUTsurance has the most loyal customers of all direct insurers (74,9%) and is ahead of the industry average of 72.7%.  The brand has made considerable gains in customer loyalty scores compared with 2018 when it was at 68,4%. OUTsurance has managed to maintain good scores on loyalty and overall satisfaction despite going through a period of rapid growth – which is typically difficult to maintain.
  • Of the intermediated insurers, Old Mutual Insure leads on customer loyalty at 75% followed by Momentum at 73,3%.  All other intermediated insurers are below par. Although still below par, Discovery and Santam are making consistent year-on-year improvements on Loyalty.

Net Promoter Score

  • Net Promoter Score (NPS) measures the likelihood of a person recommending a brand. The industry par score is 41.4%
  • Both OUTsurance (47,7%) and Virseker (45,9%) have a high NPS and are above industry average. 
  • Of intermediated insurers, Old Mutual Insure (47,6%) has the highest score followed by Santam (45,4%) and Momentum (44,3%) – all above industry average.  
  • Discovery, while still being under par, has improved to 33,3% from 23.8% in 2019. 
  • Auto & General comes in at a low of 16,8%. 

Treating Customers Fairly (TCF)

  • The degree to which customers feel they are being treated fairly by their insurer is highest with Virseker (85.3), Old Mutual Insure (85,0), OUTsurance (83.2), Momentum (83,2) and Santam (82,8) – all above industry par of 82,3. 

“The 2020 SA-csi results clearly indicate that OUTsurance and Old Mutual Insurance are strongly investing in their customer experience strategies across the insurance value chain – and it is paying dividends.  All insurers have managed the transition to the digitisation of processes, and in many respects, insurance products have become commoditised and largely undifferentiated.  All the usual drivers of customer loyalty and satisfaction have been upended, and what is very clear is that customers have become highly critical when it comes to service delivery, meeting expectations, quality, value and price.  Customer loyalty and a great customer experience do not come from a single part of the customer journey.  Insurers need to measure their customer satisfaction and experience across all the cross-functionalities of service offerings, making sure that every interaction is seamless and value-adding,” concludes Prinsloo.

As a strategic tool for gauging the competitiveness of individual firms and predicting future profitability, an organisation’s customer satisfaction performance, as measured by the SA-csi methodology, provides a predictive indication of how well the firm will perform in terms of future revenue and earnings growth.  Supported by both the scientific and practitioner community, the SA-csi is the first independent, comprehensive national customer satisfaction index with international comparability in South Africa and has collected data from more than 500 000 consumers since its inception in 2012. The SA-csi forms part of a global network of research groups, quality associations, and universities that have adopted the American Customer Satisfaction Index (ACSI) methodology via its Global CSISM program.

Short-term insurers manage to navigate through COVID-19 uncertainty and meet higher customer expectations

 

 

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