Even insurers feel pressure when their market share stagnates or drops. They understand quite well that an insurance policy is just a commodity. Consumers are driven significantly by price since they never actually plan to have an accident and put their policy to use. When there's an accident, the customer's experience with the insurer often determines if he or she will renew for another year. Every insurer knows how important policy retention is to their growth and financial strength. Insurers also know that statistically the best time for another insurer to "steal" a customer is right after an accident, so keeping the customer happy should be their strategy, right? It often doesn't appear to be.
Consider where insurers are investing money as they attempt to grow their businesses and the results of this strategy. Insurers are pouring billions of dollars into advertising for new customers, with questionable results, when they might be much better served by investing the same money into taking better care of their current customers.
Progressive Insurance increased its marketing expenditures by 34 percent from 2005–2007, from $236 million to $317 million. JD Power and Associates later determined that Progressive customers were not happy, and their customer numbers weren't growing.
Was that a surprise to anyone in the repair industry? Did Progressive really need to initiate a JD Power survey to determine this? No. If they were interested in the "true" customer experience, they could have looked at the claim process and then followed the vehicle repairs to tell them exactly what was occurring. They could have turned directly to shop owners and customers for their opinions.
In the past, Progressive has not participated in industry events such as the Collision Industry Conference (CIC), NACE or even I-CAR. In some areas of the country, they don't permit their estimators and supervisors to attend I-CAR classes or other industry events.
But now, based on feedback from their customers, they have been making changes that may bring some positive improvements to their strategies and daily practices. Progressive is not the only insurer to have issues with the customer experience and repair process. Other insurers share Progressive's experience but continue to focus on huge advertising efforts when their focus might better be placed on customers. Why?
Insurers have built huge profits the last few years for many reasons. Cost controls, shifting costs to repairers and the significant lowering of claims frequency have all added to the profits. To offset the huge surplus and ensure their combined ratio is not so low that the state departments of insurance call for additional rate decreases, many insurers have increased their advertising budgets to ridiculous levels.
GEICO, for instance, has increased advertising by 48 percent from 2005 to 2007, from $510 million to $756 million. The top 10 insurers in the United States have averaged a 46 percent increase in advertising over the past three years to a total of more than $3.2 billion dollars spent in 2007. They've done this while denying shops the authority to perform repairs that the shops believe are necessary.
We have been told that the best and most effective form of advertising is word-of-mouth. Think about the times you've seen a business in a great location go out of business because they delivered poor service and/or products or because they didn't deliver products or services as advertised. Would an expensive advertising effort by itself have saved these businesses? I don't think so. The consumer isn't as dumb as the advertising media seems to think.
As badly as some insurers seemed to have failed to understand their customers and given them the type of service they truly want, many shops struggle in this area also. Shops struggle because they fail to see themselves from their customers' point of view.
I have talked with many shop owners who built their businesses on providing what they believed was the highest quality customer service, yet their businesses had almost nothing to work on. Many, unfortunately, never realized what the customer was expecting. Ask yourself, the last time you fixed a customer's vehicle (if the customer had a prior accident), was that person truly delighted with the experience, or did you make the experience feel like a root canal and still convince yourself you did everything right?
The greatest way to facilitate change in this industry is to use the power of the customer to fight back against insurers and their huge advertising budgets. One great idea that many states already have implemented is an Insurer Rating Survey. To work properly, it has to become available and known by the consumers. This type of yearly survey could provide great information for national news and consumer news outlets.
Customers need to be well-informed and provided with multiple resources so they can make intelligent decisions about their vehicle, their rights and what to expect. This can all be accomplished without great cost. Public service broadcasts on cable and radio are an option and consumer-based Web sites such as www.MyConsumerRights.info can provide the necessary knowledge to the customer. Knowledge is power, and the power of the consumer can make change happen.
Please send your comments, questions and potential discussion topics you would like to see addressed in future columns to [email protected]. For additional information you can also visit www.aeii.net.
