Bold Measures: 10 Metrics for the Customer-First Insurer

Updated: Nov 30, 2021

Success in today’s fast-changing insurance world demands new ways of thinking and new ways of keeping score as well.

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Traditionally, business metrics for insurers have focused more on products, channels and operations than customers. But this is changing quickly for two reasons:

  1. Ever-rising consumer expectations created primarily by Big Tech, and increasingly exploited by savvy insurtech startups and carriers. These expectations revolve around speed, transparency and ease of interaction. A pain point trifecta for insurance-land.

  2. A growing body of research that proves the substantial business benefits of a customer-first approach in insurance.

“If the insurance industry is known for anything, it’s certainly not customer experience.” Watermark Consulting, 2019 Customer Experience ROI Study

What is the value of a great customer experience to insurers? Based on a study this year by Watermark Consulting, a good deal more than you might think.

According to the study, which ties customer experience to shareholder value over a nine-year period, not only do customer experience leaders outperform laggards in the marketplace, but the margin of outperformance is astonishing and growing.

  • In the auto insurance sector, customer experience leaders generated a total cumulative return that is over four times greater than that of the laggards. In home insurance, the return was three times greater.

  • The performance gap is becoming a chasm. In just the past two years the leaders have tripled their total return advantage.

If you plan to join the leaderboard, here are some metrics to work on. Taken alone they offer you valuable insight, but together they’ll form a complete and actionable picture of your customer experience progress.

Paradise by the (CX) dashboard light

1. Average time to settle a claim

According to a recent J.D. Power & Associates Property Claims Satisfaction Study, claim cycle time is the number one indicator of customer satisfaction. The Average Time to Settle a Claim KPI measures how long it takes — on average — to settle insurance claims for each type of policy your organization offers. That same study reported Amica as the insurer with the shortest claims cycle, at an average of 11 days.

2. Underwriting speed or time to coverage

Speaking of speed, today’s consumer expects everything to happen immediately, even something as complex and consequential as buying insurance.

This KPI measures the average number of days required to process a new policy, from offer of coverage to policy approval and delivery to the customer. High values here might indicate low underwriting productivity or inefficient processes.

3. Revenue per policyholder

Revenue per Policyholder measures the amount of revenue generated by the company, per policyholder serviced. A low or lagging value could indicate poor sales or customer service performance, or a lack of sound investment in these areas.

4. Renewal/retention rate

This measures the percentage of customers who continue coverage after their policy has expired. According to an article posted by The Independent Insurance Agents of Dallas, the average customer retention rate within the insurance industry is 84%.

Following customer retention is critical because it is usually much less expensive to retain existing customers than it is to acquire new ones. Studies by The Temkin Group have found that loyal customers are five times more likely to repurchase, five times more likely to forgive, four times more likely to refer, and seven times more likely to try a new offering.

Retention is not the same as loyalty. According to Watermark, insurers frequently rely on retention to gauge the quality of their customer experiences. While retention is a valuable metric, it can be a misleading indicator of customer perception (a retained policyholder is not necessarily a loyal one). As a result, many firms overrate the quality of their customer experience based on their retention rate alone.

5. Sales or new business

This metric tracks the number of new insurance policies onboarded. This can be tracked by product line and/or by channel over a defined period of time.

6. Customer Lifetime Value (CLV)

Customer Lifetime Value is a prediction of the net profit attributed to your entire future relationship with a customer. CLV can be calculated as the value that the customer brings during the lifetime of their relationship with a company or over a defined period of time.

7. Number of referrals

This measures how many new clients were referred by existing clients.

Are you listening?

The best CX measurement programs track not only what customers do, but what they say. The most popular customer listening metrics include Net Promoter Score (NPS), Customer Satisfaction Score (CSAT) and Customer Effort Score (CES). All three are designed to gather maximum insight with minimum customer disruption. They’ll help you to get the little things right. And in the low-touch world of insurance relationships, the little things count big.

8. Net Promoter Score (NPS)

About two-thirds of large companies globally are using NPS to define where they stand in terms of customer experience. NPS consists of only two questions, so it’s easy for customers to answer and for companies to track. It’s most often used to rate a brand, service or product and is useful for tracking customer loyalty over time.

9. Customer Satisfaction Score (CSAT)

The most common form of CSAT is a rating scale from 1 to 5. Google and Facebook ratings are good examples. Distribute CSAT surveys to understand how satisfied customers are after key touchpoints in the customer journey, like a customer service interaction or claims submission. It’s a great way to see what your customers think about you now.

10. Customer Effort Score (CES)

Like CSAT, Customer Effort Score is a transactional metric used to assess the simplicity of a single transaction like a service interaction or product purchase.

CES typically answers “how easy was it to solve your problem with {our company} today?” and has a 5- or 7-point scale system. CES helps you to understand the complexity of a transaction and reduce friction. Why is this important? According to research by CEB, 94% of customers going through an effortless experience are likely to repurchase vs. only 4% of those who went through a high level of effort.

Join the leaders

The Watermark study makes clear what’s at stake for insurers who are willing to differentiate on customer experience. Those brands that are disciplined and deliberate in how they shape their end-to-end, prospect-to-policyholder-to-claimant experience are rewarded handsomely by consumers and shareholders alike.

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