INScompanies Blog

Amica Mutual Ranks Highest in Auto Insurance Customer Satisfaction for a Seventh Consecutive Year

WESTLAKE VILLAGE, Calif.: 29 August 2006 — Auto insurance companies that record high levels of customer satisfaction benefit from customer behaviors that have positive financial implications, according to the J.D. Power and Associates 2006 National Auto Insurance StudySM released today.

The study identifies and tracks performance on numerous specific, measurable behaviors on the part of the insurer where there are clear breakpoints in customer satisfaction levels. For example, auto insurance customers are more satisfied when they only have to contact their insurer once to resolve an issue, and satisfaction declines significantly with each additional contact. Customers who had their call resolved on the same day record average satisfaction scores of 862 on a 1,000-point scale. That drops to 816 among those who had to wait one to three days for their issue to be resolved and to 727 for those who had to wait four or more days. When a call back is required, those who receive a call back when promised rate their insurer 135 points higher than those who do not.

“There are certainly financial performance rewards associated with satisfying customers, principally increased renewals and recommendations,” said Jeremy Bowler, senior director of the insurance practice at J.D. Power and Associates. “Carriers achieving high levels of satisfaction retain 90 percent of their customers compared to those carriers with the lowest satisfaction levels who retain an average of only 78 percent of customers. Every customer lost to a competitor has a real impact on an insurer’s bottom line. However, in many cases, it takes little to no investment to improve customer satisfaction. It’s important to invest in the areas that truly resonate with customers. Often this means investing in developing the skills and empathy of the front-line employees and agents who serve customers day to day.”

Other behaviors that directly impact customer satisfaction and loyalty include:

Bundling: Auto insurance customers who bundle other policies with the same insurer, such as homeowners insurance, are more likely than non-bundlers to be satisfied with their auto insurer’s policy offerings and renew their policies at an 11 percent higher rate. Customers who understand the discounts they receive are also more likely to be satisfied with policy offerings overall.

Claims: For customers who file a physical damage claim with their auto insurer, time is critical. Same-day response to the first notice of the accident, followed by a settlement within a week and repairs completed within two weeks, represent the best practice. Satisfaction with claim handling drives 44 percent of the overall impression of their insurer for customers who filed a recent auto claim.

Annual policy reviews: On average, customers who have their policy needs reviewed each year report satisfaction scores that are nearly 80 index points higher than those who did not. Currently, only one-half of auto insurance customers report being offered an annual policy review. Unless a customer files a claim, offering to review a policy holder’s insurance needs is one of only a few opportunities an insurer has to build trust with the customer, who otherwise would only interact with their carrier by paying their bill and periodically changing their policy to update drivers, vehicles or address.

“One of the clearest indicators of the value insurers gain by delivering good service is that satisfied customers are much less likely to shop for a new provider,” said Bowler. “Customers who shop because of poor service are twice as likely to switch than those who switch for lower prices. The 2006 study also finds that auto insurers can limit shopping behavior triggered by price increases by proactively engaging the customer in discussion concerning the options available to them.”

The study finds that overall customer satisfaction with auto insurers improves for a fourth consecutive year, although the rate of improvement has slowed. Overall satisfaction is measured based on performance in five factors. They are (in order of importance): interaction, billing and payment, policy offerings, price, and claims.

Amica ranks highest in customer satisfaction for a seventh consecutive year. Amica is followed in the rankings by Erie, State Farm and GEICO, respectively. American Family and the Automobile Club of Southern California rank fifth in a tie. USAA receives a higher overall score than Amica, but is not included in the rankings because it is only open to U.S. military personnel and their families.

The 2006 National Auto Insurance Study is based on responses from 14,066 auto insurance policy holders who were surveyed between April and May 2006.

For more information on auto insurance provider ratings, please visit the J.D. Power and Associates Consumer Center at www.jdpower.com.

About J.D. Power and Associates

Headquartered in Westlake Village, Calif., J.D. Power and Associates is an ISO 9001-registered global marketing information services firm operating in key business sectors including market research, forecasting, consulting, training and customer satisfaction.  The firm’s quality and satisfaction measurements are based on responses from millions of consumers annually.  J.D. Power and Associates is a business unit of The McGraw-Hill Companies.

About The McGraw-Hill Companies

Founded in 1888, The McGraw-Hill Companies is a leading global information services provider meeting worldwide needs in the financial services, education and business information markets through leading brands such as Standard & Poor’s, McGraw-Hill Education, BusinessWeek and J.D. Power and Associates. The Corporation has more than 290 offices in 38 countries. Sales in 2005 were $6.0 billion. Additional information is available at http://www.mcgraw-hill.com.

Media Relations Contacts:

John Tews
Director, Media Relations
J.D. Power and Associates
5435 Corporate Drive, Suite 300
Troy, MI, 48098
(248) 312-4119, or cell (248) 321-5109
john.tews@jdpa.com 
Syvetril Perryman
Media Relations
J.D. Power and Associates
2625 Townsgate Road, Suite 100
Westlake Village, CA 91361
(805) 418-8103
syvetril.perryman@jdpa.com
Kim Milman
JMPR Public Relations
Woodland Hills, Calif.
(818) 992-4353/cell: (818) 618-7163
kmilman@jmprpublicrelations.com 
No advertising or other promotional use can be made of the information in this release without the express prior written consent of J.D. Power and Associates. www.jdpower.com/corporate

Charlotte, NC - “Forced” customer loyalty, that is when customers seem loyal because they really do not have reasonable, competitive choices, proves ephemeral when market conditions change, says former McKinsey consultant Naras V Eechambadi*, CEO, Quaero Corporation.

The Loyalty Effect by Fred Reicheld, an influential book that was first published in 1996 argued that customer loyalty is an extremely desirable goal and that loyal customers are the engine of growth, profits and long lasting value. He argued for a shift in focus and resources from customer acquisition, which can be expensive, to enhancing customer loyalty.

This made eminent practical sense and loyalty programs became all the rage in a wide range of industries from airlines with their frequent flier programs, to hotels and even video rental, drug and grocery stores in the United States. These loyalty programs took on a life of their own within many large companies, as there was widespread acceptance of the “goodness” and desirability of customer loyalty.

Over the past few years, however, there has been a growing realization, supported by academic studies and books published by practicing loyalty experts, that customer loyalty comes in many forms and that investments in increasing customer loyalty have to be tempered by the same scrutiny that all investments have to undergo. Let me illustrate this with some examples.

I live in Charlotte, North Carolina, which happens to be the largest hub for US Airways, which is among the top six airlines in the United States. US Airways handles approximately 90 per cent of the passengers flying in and out of Charlotte, giving them a virtual monopoly in this market. When I want to make a trip anywhere, for business or pleasure, US Airways usually has the best (sometime only) connections. I don’t really have much of a choice but to fly them. I am a Platinum member of their frequent flier program and get frequent upgrades to first class and the privilege of boarding early.

Am I a loyal customer? The numbers would say I am. However, despite my exalted status and the upgrades, I would switch in a heartbeat, if I could, because I don’t like their high, monopolistic fares. Recently, two discount airlines, AirTran and JetBlue, have started flying in and out of Charlotte. AirTran has cheaper fares and JetBlue has better service and cheaper fares. I gladly give up my premium status privileges and fly these airlines when I can. So much for my supposed loyalty. If US Airways had hoped to retain me as a loyal customer based on past behavior and their program numbers, they were mistaken.

My second example comes from the mobile phone business. Three years ago, due to a new law on number portability, it became possible to switch mobile phone providers but retain your phone number. Mobile phone companies found that once number portability became law, the percentage of customers renewing contracts dropped dramatically. Both of these are examples of “forced” customer loyalty. Customers being loyal because they really do not have reasonable, competitive choices. When market conditions change, this kind of loyalty proves very ephemeral.

Another kind of loyalty is that driven by price. My local supermarket has a “very important customer” program. Despite the name, anyone can sign up for the program and get a membership card. I use the card whenever I buy groceries and other supplies from the store and, in exchange; I get discounts on many items. I go to the store because it happens to be convenient. I use the card because I get discounts. My loyalty is driven by price and convenience, not because of any belief that the store is superior to others. This is more of a robotic kind of loyalty. If I were to move, the store would lose me as a customer. I would not go out of my way to shop there.

Contrast these with a pioneering example of a loyalty program that was wildly successful in the ’80s. MCI was a scrappy little long-distance telephone company that was trying to win market share against a former monopoly, AT&T. They launched a program called ‘friends and family’, where customers were encouraged to get others to sign up for MCI’s long distance service in exchange for deep discounts on calls to those people in their ‘friends and family’ circle.

Overnight, MCI succeeded in turning its customers into its best sales people, because they were trying to convince their friends to switch. Of course, it was driven by the discounts, but how many of us can say no to a friend who calls with a compelling value proposition? This was an early example of viral marketing and MCI went to on to become a major competitor to AT&T.

The latest thinking on loyalty emphasizes that repeat purchase behavior by itself is not a sign of great loyalty. True customer loyalty goes beyond behavior and encompasses notions of emotional commitment and customer advocacy, a la MCI. A couple of years ago, I was speaking to the top management team at one of our clients. I happened to mention an insurance company called Amica that happens to be my insurance company, as a firm that engenders inter-generational loyalty, not just lifetime loyalty.

Until recently, Amica only accepted new customers if they were recommended by an existing customer! It still relies largely on customer referrals for its growth. The CFO of the client company came up to me after my talk and wanted to share his own Amica story. His house and two cars had sustained very heavy damage during Hurricane Andrew in the early ’90s (he lived in Miami, Florida). After the insurance adjuster came to his home and assessed the damage, he said “I will file my report with xxx insurance company and they will follow up with you about the claim.”

At that point Steve, the CFO, asked, “What do you mean you will file with xxx company, my insurer is Amica”? The adjuster then responded, “I am sorry, I work with several companies. I do see that you are an Amica customer. In that case, I will write you a check for the damage right now. Amica authorizes me to do that, to minimize hassle at a time like this.” The check was for a very large amount. Steve said he knew that his premiums over a lifetime would not add up to the amount of that claim and he felt so good about the way he had been treated and so guilty that Amica would never make money on him as a customer that he recommends it whenever he could to his friends and family, in the hope that this would repay Amica for the cost it had incurred by having him as customer. Now, that is customer loyalty.

*Naras Eechambadi, Ph D, former consultant and co-founder of CRM practice within McKinsey & Company, is CEO, Quaero Corporation (www.quaero.com), a marketing performance management company headquartered in Charlotte, NC. He is the author of High Performance Marketing: Bringing Method to the Madness of Marketing.

April 21, 2006 

BOSTON — Amica Mutual Insurance seeks to raise doubts among consumers about their current insurance company relationships in a multimedia push that broke this week. 

A 60-second TV commercial by agency Cronin & Co. (which combines two 30-second spots, “Trophy Case” and “Push,” that will also run separately) opens on someone placing an award in a display case. “What does it mean when J.D. Power and Associates ranks you highest in customer satisfaction among national auto insurers six years in a row?” the voiceover asks, as additional trophies are jammed onto the shelf which begins to sag in the middle, creak and eventually crack. 

In the second half of the spot, viewers see the top of an office cabinet; a plant, files and other items are pushed over the edge. The frame widens to reveal that Amica’s six J.D. Power trophies are shoving everything off the shelf. 

The effort closes with the tagline, “It’s not just how you’re covered. It’s how you’re treated.” Cronin introduced that theme a year ago in its first work for the Lincoln, R.I.-based client. 

Radio, newspaper and magazine ads are also in the mix. 

Amica spent $12 million on ads last year, per Nielsen Monitor-Plus. 

The new work represents another attempt by Amica to stand out in a crowded marketplace despite spending far less on ads than many of its larger competitors. 

Industry leaders like Allstate and State Farm each spend upwards of $200 million annually on measured media and sell their products through licensed brokers. Amica sells its product directly to the public. As such, Amica’s campaigns have made greater use of direct appeals. (The new work continues in this mode, keeping a toll-free number on screen at all times.) 

“Traditionally, Amica is not one of those companies you’ll catch bragging,” said Steve Wolfberg, evp and chief creative officer at Cronin, an independent shop in Glastonbury, Conn. “But, in a category overwhelmed by price and service messaging, the J.D. Power recognition stands alone as validation that Amica’s commitment to the customer is a cut above the rest. It’s the very essence of the brand platform.” 

The new work runs through mid-June in 16 states. Havas’ MPG in New York handles media planning and buying.