WESTLAKE VILLAGE, Calif. — Communication plays a critical role in satisfaction with individual life insurance providers, yet at least 17% percent of customers who purchased through an agent or financial advisor have never had another interaction with their insurer since their initial purchase.
This according to the J.D. Power 2015 U.S. Household Insurance StudySM — Individual Life released in late September.The study, now in its second year, measures individual life insurance customer satisfaction with their insurer based on performance in four factors (in order of importance):
• policy offerings
• billing and payment
Annualized direct premiums written for the U.S. individual life market are approximately $112 billion. On average, approximately 44% of consumers have an individual life insurance policy.
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Price is a primary reason consumers shop for individual life insurance products and providers — and also the main reason they let their policy lapse. However, when insurers are able to effectively communicate the value customers receive relative to what they pay, even customers who pay a higher premium are more satisfied and less likely to shop for a new policy with a competing insurer.
Further, 46% of individual life insurance customers don’t have a complete understanding of their policy. Customers who have an agent or financial advisor or company representative who has reached out to them in the past year tend to have a greater understanding of their policy and are also more likely to say they “definitely will” purchase a policy with their current insurer if they need additional life or financial services products in the future, compared with those whose agent or financial advisor or company representative hasn’t reached out to them.
“Most of the insurers know that communication is important, but they just aren’t doing it,” saidValerie Monet, director of the insurance practice at J.D. Power. “Customer interaction requires a financial commitment from insurers, and they need to see the return on their investment. Interaction can offset a higher price when customers focus their attention on the value of their policy.”
The study finds that 37% of individual life insurance customers have evaluated their life insurance needs, including the relevance of their current product, in the past two years. Yet, nearly 1 in 5 customers who purchase through an agent or financial advisor has never had another interaction with them since their initial policy purchase. Among customers who shopped for a new policy in the past two years, 40% ultimately upgraded or purchased a new policy from their current insurer, while another 12% purchased a new policy with another.
“As insurance customers enter different stages of their life, the amount of coverage and the products best suited to meet their financial planning goals may also change,” said Monet. “If insurers contact their customers even once a year, they can help them understand their policy and address their needs, and in doing so are more likely to retain them as a customer. If they aren’t talking to their customers, they are giving them a reason to shop around, and they’ll likely go to an insurer with a lower price.”
• Overall satisfaction averages 770 on a 1,000-point scale in 2015, up from 763 in 2014.
• Overall customer satisfaction averages 775 among Gen Y customers, 772 among Gen X, 765 among Boomers, and 784 among Pre-Boomers.
• 43% of customers have a term life insurance policy, while 56% have a permanent life insurance policy.
• Nearly one-third of shoppers are new buyers — either those who are new to the market or who have a lapsed policy.
• Competitive pricing drives a Boomer’s purchase decision more often than it drives a Gen Y shopper’s purchase decision (29% vs. 21%, respectively), whereas Gen Y shoppers rely more on recommendations from family and friends than do Boomers (12% vs. 6%).
• Among Gen Y customers, providing tools to help calculate coverage is another key area for improving their experience, which may be due to lower levels of understanding of life insurance policies—just 45% of Gen Y customers say they “completely” understand their coverage, compared with 64% of Pre-Boomers, 44% of Gen X, and 55% of Boomers.
• Among customers with higher levels of price satisfaction (price satisfaction scores of 900 or higher) and a higher policy face value ($250,000 or more), 53% have been contacted by their insurer at least once during the past year; 48% have been informed of other products and services; and 85% say they “completely” understand their policy coverage.
State Farm ranks highest in individual life insurance customer satisfaction with a score of 823.Northwestern Mutual ranks second with a score of 820, followed by Allstateand Nationwide, each with a score of 801.
Rounding out the top 10 are Mutual of Omaha (791), New York Life (791), Guardian Life (788), MetLife (769), Principal (769) and Protective Life (765).
The 2015 Household Insurance Study—Individual Life is based on responses from 6,798 individual life insurance customers. The study was fielded in June and July 2015.
 A.M. Best 2014 L/H Single Companies Writing Ordinary Life for Total US Direct Premiums Written (DPW).
 Facts About Life 2013. LIMRA International. http://www.limra.com/uploadedFiles/limracom/Posts/PR/LIAM/PDF/Facts-Life-2013.pdf
 Data reflects 2014 and 2015 aggregated for analysis purposes.
 J.D. Power defines generational groups as Pre-Boomers (born before 1946); Boomers (1946-1964); Gen X (1965-1976); Gen Y (1977-1994); and Gen Z (1995 and later).