Why Small Businesses Turn to Personal Lines Providers

The personal touch. Paying attention, knowing the business, knowing your client’s business. That’s what matters. The fact is, small companies are happier when they get insurance from a personal lines provider than from commercial lines specialists. Clients truly value the attention that comes from a local agent who can offer specific advice and counsel—an agent who possesses a more intimate understanding of the local market, as well as the client’s operations.

Sure, you could take our word for it, but we have the research to back it up. We developed a study last year to provide insurers with an objective and independent measure of overall satisfaction levels among small business insurance customers in the United States. It focused only on small firms (50 or fewer employees)—ones that have purchased either commercial property or general liability insurance—and 3,525 respondents completed the survey.

So, what did we find?

For one thing, size doesn’t really matter. Say you have a substantially large operation. Your customer pulls in big revenue and has a big staff list. It follows that they’ll likely file claims more frequently. You might think that, with more interactions with their broker and insurers, customers like that would be happier—but that’s not necessarily true. Any differences in satisfaction are minimal; the size of the business or the type of the industry doesn’t matter. The lesson here is not that it’s easier to make this particular company happy, but that the same drivers for customer satisfaction apply to all.

We broke things down into five separate factors that we think span the whole relationship between the customer and their insurer: interaction, whether through an agent, call center, or online; policy offerings; price; billing and payment; and claims. (A word here about our methods: not every small business customer we surveyed has filed a recent claim or used every service channel for service interactions unrelated to claims. So individual customer index scores were based on the experiences and factors that customers rated.)

Let’s get the obvious out of the way: among all the communication channels available, interactions between customers and their insurer’s agent or broker have the greatest impact. For each insurer, the importance of the interaction sub-factors (agent/broker, call center, and website) is influenced by how much their client uses each channel.

But the impact that brokers have on customer perception isn’t limited to service interactions. They also have the ability to influence how the customer judges the value of the coverage they receive and the price they pay for it, and often exert that influence. To the extent that the agent or broker explains coverage, either highlighting features and benefits or simply selling on price, they’re able to influence customer perceptions on two additional factors in the index model: price and policy offerings.

Although the claims experience carries relatively little weight—just six percent— when evaluating the entire marketplace, it is the ultimate moment of truth for policyholders. Among the one in four customers who said they have filed a claim with their current primary commercial insurer, that experience became the most dominant factor influencing their overall satisfaction.

For insurers who excel at customer satisfaction, there’s a natural windfall: increased customer retention, higher rates of positive referrals, and organic growth through cross-selling products and lower price sensitivity among satisfied customers. And exceeding expectations means increased policy retention, new business acquisition through positive recommendations, cross-selling of additional products and services and lower price sensitivity.

Customers who are “delighted” with their experience naturally have a greater tendency to purchase more products from their insurer, as well as a greater tendency to bundle all of their commercial insurance properly protected. They also show it’s vital that information be effectively shared with customers, especially regarding changes to their policy. For example, the billing statement is a recurring touch point, so it’s imperative that customers fully understand their statement—and that any perceived billing errors are kept to a minimum.

We all know that running a small business can be incredibly stressful. Customers not only prefer, but expect their agent or their insurer to respond promptly and provide a flexible experience tailored to their specific situation. Since local agents and brokers are more successful in meeting their clients in person, and often at a customer’s business, they tend to receive significantly higher ratings for truly knowing specific needs and being able to offer valuable advice to help mitigate exposures.

This is exactly the kind of trusted advice and counsel on which many small business owners place great value, and which often lead to strong personal recommendations to fellow business owners, trade partners and employees. Successful agents have worked hard to engender just such referrals for decades, and will continue to capitalize on the benefits of developing strong business client relationships in their local markets for years to come.

Jeremy Bowler is senior director of the insurance practice at J.D. Power, which conducted the survey.

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Copyright 2014 Rogers Publishing Ltd. This article first appeared in the October 2014 edition of Canadian Insurance Top Broker magazine

This story was originally published by Canadian Insurance Top Broker.