The short-term insurance industry is facing an increasingly critical customer when it comes to service delivery, meeting expectations, quality, value, and price. Customer loyalty is on the decline and short-term insurers are struggling to articulate their customer value proposition and differentiate across all the cross-functionalities of their service offerings.
Very few players, if any, have emerged in a better position in terms of Customer Satisfaction after two years of the pandemic, and the industry collectively has some serious challenges ahead to meet in changing customer perceptions of value and quality – and meeting increasingly higher customer expectations.
The latest Customer Satisfaction Index (SA-csi) for Short-term Insurance (2021) conducted by Consulta shows an industry where competition between players is fierce, and where only two insurers emerged on an industry par score for overall Customer Satisfaction, with all others performing below par in the Customer Satisfaction stakes.
In the SA-csi 2021 for Short-term Insurance, there is no leader on Overall Customer Satisfaction across all participating insurers. While the index differentiates between direct and intermediated insurance models, it is also important to note that all short-term insurers compete for the same customers regardless of their distribution models.
The 2021 SA-csi for short term insurance polled just over 3 600 customers of short-term insurers during the second half of 2021 across the following brands:
• Intermediated insurers: Absa, Auto & General, Momentum, Nedbank, Old Mutual Insure and Standard Bank.
• Direct Insurers: Virseker.
“It certainly seems that any goodwill the industry built up in the initial stages of the pandemic in terms of payment holidays, premium discounts, and restructuring of client portfolios at a time when millions of South Africans found themselves in financial distress are now moot,” says Abigail Boikhutso, CEO of Consulta. “More consumers increasingly view insurance as a grudge purchase rather than an enabler and safety net, more so in the stressed economy. Overarching themes that emerged in this latest SA-csi for STI was the importance of value for money, a lack of perceived quality or differentiation, significant increases in complaints incidence, and as a result, a decline in customer loyalty.
“Of concern is the general increase in customer complaints across the industry and a commensurate decline in complaints handling and resolution. Short-term insurers will need to find and address the service and product delivery shortfalls to customers, who show an increasing propensity to take their business elsewhere if left dissatisfied,” adds Boikhutso.
“The playing field has been heavily slanted to price above all other measures, a very challenging space to play in. Legacy, brand sentimentality and track record are proving secondary in a heavily contested space where there is very little growth, of not a declining customer base. Aspects such as quality of service, product benefits, value and price will increasingly become the measures that customers base their decisions on as they perceive there to be minimal real differentiation coupled by a poor customer experience.”
Key take-outs of the 2021 SA-csi for short-term insurers
Customer Satisfaction – Overall Index
• Virseker (82,5) and Momentum (81,5) are the only two insurers on industry par (81,2) in the overall Customer Satisfaction measure. No leader emerges in the 2021 SA-csi. All other insurers are below industry par.
• Virseker (82,5) shows marginal improvement compared with 2020, while Momentum (81,5) has shown consistent improvement over the last three indexes, from a score of 77.8 in 2019.
• Absa (77,3) Old Mutual Insure (77,1), Auto & General (74,8), Standard Bank (74,7) and Nedbank (67,9) are all below par and show a decline in previous 2020 scores, with the exception of Absa which enters the SA-csi for the first time in 2021.
• Nedbank is significantly below industry par by over 13 index points and showing a consistent decline over the last three indexes. Old Mutual Insure and Standard Bank also show declines of almost 4-index points on 2020 scores which will warrant attention as both had been on an upward trend for the last three indexes.
On customer expectations:
• Customer expectations across the board are very high at an industry par of 84,8. It is interesting to note that there was a marked increase in Customer Expectations from the time that the pandemic broke, indicating that customers place high expectations on their insurance performing as expected in times of financial distress and upheaval.
• Customer expectations are highest with Virseker (85,6) and Momentum (85,0). All other insurers are below industry par on Customer Expectations.
• On Perceived Quality, Virseker (85,8) and Momentum (85,1) perform on industry par (84,6).
• All other insurers perform below par on Perceived Quality, with Nedbank having the lowest score (71,1).
• On the Perceived Quality versus Expectations gap, which indicates the degree to which the industry exceeds or falls short of customer expectations, Virseker (0,2) and Momentum (0,1) are the only two insurers with a positive gap where perceived quality meets customer expectations. Nedbank (-5,8), Old Mutual Insure (-3,8) and Standard Bank (-2,8) have the largest negative gaps where perceived quality falls short of customer expectations, followed by Auto & General (-2,0) and Absa (-1,4).
On Perceived Value:
• Perceived value is a measure of quality relative to the price paid and plays a significant role as the economy bites into household incomes. Increasingly, short-term insurance premiums are seen as a grudge purpose and feature higher on the list of potential cost cutting. It is essential that short-term insurers educate consumers about the importance of insurance as an enabler and financial safety net, especially so in tough economic times.
• On the Perceived Value measure Momentum (81,5) and Virseker (82,9) are both on par.
• All other insurers are below par on Perceived Value.
Complaints Incidence and Resolution
• In terms of complaints incidence and handling the industry average of complaints incidence is 11,6% and complaint handling is 55,2/100.
• Absa (12,6%), Virseker (14,4%) and Momentum (14,6%) have the lowest Complaint Incidence scores, although still below industry par (11,6%).
• Nedbank (26,6%), Auto & General (24,0%) and Standard Bank (23,5%), have the highest Complaint Incidence, well above industry par (11,6%) and more than double the par score.
• In terms of Complaint Resolution, Momentum (61,5) and Virseker (60,7) have the best scores, well above industry par (55,2) – which indicates a strong ability to resolve customer complaints.
• All other insurers are either on or below par, with Nedbank (35,8) having the poorest Complaint Resolution score. This coupled with a high Complaint Incidence score means that a large proportion of Customer Complaints are not satisfactorily resolved, and which in turn has a significant negative impact on their overall Customer Satisfaction and Loyalty scores in this year’s SA-csi.
• Complaints across the industry revolved around claims, product and cover details, premiums and costs, payments and debit orders and response time.
Customer Loyalty
• All insurers perform below par (73,5%) on Loyalty, with Nedbank (54,3%) having the lowest Loyalty score.
• Momentum (73%) and Virseker (72,8%) have the most loyal customers and are on par.