Life Insurance – navigating uncertainty

Consulta

The latest South African Customer Satisfaction Index for Life Insurance reveals which insurer has the most satisfied customers.

In a highly competitive financial service offering like life insurance, delivering differentiated and memorable customer experiences across every touchpoint of the insurance journey have become more crucial than ever. COVID-19 has left in its wake a combination of altered life expectancy and forced migration to digital integration in virtually every aspect of daily living,  irrevocably changing customer expectations of every service provider and brand they engage with.  Insurance is no exception. The big question facing life insurers is the profitable convergence point of the actuarial table and customer satisfaction in a digitally adapted, COVID world?

It is this conundrum facing insurers that the latest South African Customer Satisfaction Index (SA-csi) for Life Insurance (2020) conducted by Consulta solves through an in-depth survey of how satisfied customers are with their life insurers over the last year. The benchmark measurement for Life Insurance (2020) provides important insights into the levels of customer satisfaction of  South Africa’s major life insurers – 1Life Insurance, Absa Life, Discovery Life, FNB Life, Liberty, Metropolitan, Momentum, Old Mutual, Sanlam and Standard Bank.

“COVID-19 has brought life insurance into the mainstream of consumer dialogue, and it is no longer viewed as simply a policy document, with little-understood terms and conditions, until the time of crisis when a loved one passes away or a life event alters income-generating capability. The pandemic seems to have narrowed the degrees of separation as the rising COVID death toll is reported daily. Whereas insurers traditionally had limited engagement points with policyholders, now daily ‘life questions’ such as whether taking or refusing the vaccine will impact employment contracts, or whether provision for loved ones is sufficient given current circumstances, has accelerated life insurance to top-of-mind by consumers. Policyholders now expect the same instant responsiveness to their needs from their insurers as they do from the likes of retailers or banks. And banks, as the index has revealed, are doing better at this than the traditional insurers are according to consumers,” explains Ineke Prinsloo, Head of Customer Insights at Consulta.

“It is clear that the customer expectations of 2019 are not the same in the current environment, and fundamental shifts have taken place, both perceptually and in practice. From the customer perspective, the core product of insurance remains highly commoditised. While vaccines provide some hope that an end to the pandemic could be in sight, concerns over more waves and variants of the virus have made the value placed on life insurance more palpable – and commoditisation continuously misses consumer expectations. For consumers, the important differentiators are the ease of doing business with the insurer or broker across omnichannel service channels and the quality of such engagements and advice, the speed and manner in which complaints and enquiries are handled, whether the quality of the actual customer experience matches their perception of value derived versus price paid, and finally, the reputation and ethos of the insurer when it comes to claims time. Any hint of a blunder in this regard is likely to have a significant impact on customer trust and loyalty, and in turn, the overall perception of satisfaction with the insurer,” she adds.

Every single customer touchpoint matters, more so when so much of the insurance customer journey now seemingly takes place behind the scenes and in the cloud.  “It is the cumulative effect of the customer experience at each touchpoint – physical and virtual – that ultimately delivers on whether a customer is satisfied or not.  Cumbersome processes will scupper the best product in the world, as will overly complex rewards programmes that are no longer relevant in a lockdown world and lousy customer service and engagement – whether on- or offline,” adds Ineke.

The past 18 months have clearly demonstrated that insurers need to evolve beyond simplistic insurance products and gross premium metrics to a holistic service orientation underpinned by digital innovation in product design and service channels.

“Customers experience exceptional service from many other industries which have rapidly pivoted to hybrid service delivery models. For many industries, notably the financial services sector, digitisation has delivered numerous unintended consequences.  The most significant of these is that while the intention was to deliver solutions in a digital format to ensure that customer needs are met and improve operational efficiency in an online world, the distance between customer and insurer has widened. Traditionally, insurance brands have been built on physical and market presence and physical engagements and advice delivered by brokers.  With digitisation, both insurers and brokers are much less visible in the lives of their customers as they navigate the digital hyperspace, and where their customers only engage with them when they choose to do so online.  The burning question facing insurers going forward, is what makes for a satisfied, loyal customer in a digital world, and how to rapidly evolve beyond legacy systems and traditional practices?” concludes Ineke.

Key take-outs from the SA-csi for Life Insurance 2020

Customer Satisfaction – Overall Index

• In the 2020 SA-csi for Life Insurance, Metropolitan (83,2), Standard Bank (82,4), FNB Life (81,7) and 1Life Insurance (80,9), all take leader positions and perform above industry par (78,8). It is interesting to note the diversity of distribution models of the leaders from direct, intermediated and bancassurance.
• Although in a leader position, FNB Life is showing a three-year marginal decline in overall customer satisfaction score and will do well to identify and address the root cause of the decline. 1Life Insurance, Metropolitan and Standard Bank all show significant improvement in previous 2019 overall Customer Satisfaction scores, with at least a 3-point improvement in previous scores to put them in leader positions.
• Absa Life (77,5), Momentum (79,5), Old Mutual (78,9) and Sanlam (79,7) are on par.
• Discovery Life (73,8) and Liberty (72,1) come in significantly below par (78,8) on overall Customer Satisfaction scores. Discovery shows a three-year consecutive decline on its Customer Satisfaction score, while Liberty slips back with an almost 3-point decline after showing some improvement in its 2019 score. Both insurers have dropped to their lowest Customer Satisfaction scores since 2016.
• Interestingly, two of the four leader positions are held by banks – FNB Life and Standard Bank – and not traditional life insurers. Bancassurance – the distribution of insurance products through a customer’s established and trusted banking channels – continues to make inroads into the conventional insurer space.

Customer Expectations and Perceived Quality

• Customer expectation is a measure of the customer’s anticipation of the quality of a company’s products or services. This includes some non-experiential information like advertising and word-of-mouth and a forecast of the company’s ability to deliver quality in the future. Perceived Quality is a measure of the customer’s evaluation via the recent experience of the quality of a company’s level of service and product delivery – in other words, the actual experience, as opposed to what was expected.
• All brands measured met or exceeded the expectations of customers, except for Discovery and Liberty. These brands showed the most significant negative gaps of -3,7 and -4,4 respectively between Customer Expectations versus Perceived Quality, which means that perceived quality did not meet customer expectations. Both these brands come in below par on Customer Expectations and Perceived Quality scores.
• FNB Life leads the way in meeting and exceeding Customer Expectations with a score of 84,2 and a Perceived Quality score of 84,2. Standard Bank follows with 83,9 and 82,8 respectively, Momentum with 83,1 and 82,7 and Metropolitan with 83,0 and 82,4 respectively.

Perceived Value

• The perceived value measures the quality relative to the price paid and is one of the most critical drivers of overall satisfaction when an industry is highly competitive.
• 1Life (83,5), FNB Life (85,2), Metropolitan (83,2) and Standard Bank (84,5) take the lead on Perceived Value. In particular, 1Life Insurance and Standard Bank have shown significant year-on-year improvement on this crucial score, while FNB Life shows a levelling out.
• Discovery Life (72,8) and Liberty (74,7) are well below industry par (79,7) with the former showing a year-on-year decline on this score. All other insurers perform on par.
• Effort levels have a significant impact on perceptions of value, with customers being at risk of moving their cover when it becomes too high (as a result of poor service and feedback) and benefits that do not deliver what customers were led to believe. Overly complex rewards/loyalty programmes that require high effort levels also impact on customer perceptions of value.

Complaints Incidence and Resolution

• The industry recorded a slight decrease in complaint incidence and is only slightly above the 10% recommended benchmark. The industry’s complaint handling is above the recommended 50 (53.8 out of 100) benchmark, improving from the 50.4 achieved in 2019.
• Sanlam has the lowest number of complaints (7,0%) while Liberty (15,3%) customers complain the most and are well above industry par (10,2%). Liberty has shown a significant increase in complaint incidence from its score of 9,2% in 2019 and 8,9% in 2018.
• Sanlam (65,8) recorded the best complaint handling score way above industry par (53,8), followed by 1Life (55,2). Sanlam has made significant improvement in its complaints handling score from 47,4 in 2019.
• Liberty (37,2) and Discovery (37,2) have the lowest complaint handlings scores, well below industry par, and both show a decline in 2019 scores, with Liberty showing a big decline from 63,2 in 2019.
• Across the industry, issue related to customers’ policies were the most frequent complaint (20%), followed by fees and costs (10%) and debit orders (9,9%).

Customer Loyalty

• Retention and price tolerance are used to determine customer loyalty.
• FNB Life (75,3%), 1Life (74%) and Metropolitan (74%) have the most loyal customers and are above industry average (68,4%), while Discovery Life (61,9%) and Liberty (62,3%) have the least loyal customers. The overall industry Loyalty Index (68,4%) has increased from 2019 (68,0%).

Net Promoter Score

• Net Promoter Score measures the likelihood of a person recommending a brand.
• 1Life (51,7%) and Metropolitan (53,4%) significantly outscored all other insurers and are well above industry average (33.9%).
• FNB Life (43,6%), Sanlam (40%), Standard Bank (43,8%) and Absa Life (35,5%) follow with NPS above average.
• All other brands score lower than the industry average, with Momentum (31,1%), Old Mutual (29,8%), Liberty (20,9%) and Discovery Life (7,0% ) falling well below average. Discovery took a significant decline from its 2018 score of 29,4% to 7,0% in 2020 and had one of the highest levels of detractors at 28%. In the context of NPS, detractors are unsatisfied customers who are less likely to recommend a brand and to speak negatively of it to family, friends and colleagues.

Treating Customers Fairly (TCF)

• The degree to which customers feel they are being treated fairly by their insurer is highest with Metropolitan (86,5), 1Life Insurance (84,7), Standard Bank (82,9) and FNB Life (84,4) – all above industry par of 81,3.
• Discovery Life (75,1), Liberty (75,7) and Absa Life (79,3) are below industry par.

The SA-csi for Life Insurance is the most comprehensive survey of customer satisfaction, and is a causal model that links customer expectations, perceived quality, and perceived value to customer satisfaction (the SA-csi score), which in turn is linked to customer complaints (and recovery), and customer loyalty intentions.  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 methodology of the American Customer Satisfaction Index (ACSI) via its Global CSIsm program.