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Study: Agency Satisfaction with Insurer A Significant Factor in Driving More Business

Source: J.D. Power & Associates

Posted on 16 Feb 2010

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Insurers whose agents are highly satisfied tend to receive a considerably greater share of business from those agents, according to the J.D. Power and Associates 2010 Insurance Agency Satisfaction Study-Personal LinesSM released last week.

The study finds that, on average, there is more than a 150-point gap in agency satisfaction between insurers who receive 5 percent or less of an agency's business and those who receive more than 60 percent of an agency's business (661 vs. 821, on a 1,000-point scale). In addition, 77 percent of highly satisfied agents (satisfaction higher than 950 points) say they intend to increase business with an insurer, while only 24 percent of less-satisfied agents (satisfaction of 600 points or less) say the same.

"Individual policyholders are more likely to be loyal to their independent agent than the insurer that writes their policy," said Jeremy Bowler, senior director of the insurance practice at J.D. Power and Associates. "This strong bond between policyholders and insurance agents makes it essential for insurers to satisfy their appointed agents in order to grow their business."

The study, now in its second year, measures the satisfaction of independent insurance agents and agency staff with the personal property and casualty insurance companies they represent. Agent satisfaction is examined across six factors. In order of importance, they are: key carrier contacts (28%); policy offering (20%); technology (17%); claims (14%); price (14%); and compensation (6%).

While the contact an insurer has with an agency is the main driver of agency satisfaction, the level of satisfaction varies depending on the role the individual holds in the agency. Agent principals are less satisfied with insurers than are agents or producers, particularly in the area of key business contact (778 vs. 808, respectively). Similarly, agent principals are less satisfied than their licensed customer service representatives with the technology interfaces offered by the insurers they work with (735 vs. 764, respectively).

"Frequent contact with the agents and staff is one of the best practices employed by insurance companies with high satisfaction levels," said Bowler. "Insurers that make it a priority to build relationships with their agents see direct results to their bottom line. However, with the difficult economic times, insurance companies are challenged to use their limited resources to maximize agency satisfaction. By understanding the different roles and responsibilities of personnel within an agency, insurers can better target their efforts to meet agent expectations and increase satisfaction."

The study also finds the following trends:

* Fewer agents report being offered marketing dollars-only 23 percent in 2010, compared with 43 percent in 2009. Satisfaction is higher among agents who are offered marketing dollars (an average satisfaction level of 751), compared with 698 among those who were not offered marketing dollars.

* Agent satisfaction with compensation, an important component of the insurer-agent relationship, has increased to 671 in 2010, compared with 628 in 2009.

* Agents report that commissions and cash rewards are the types of incentives that best motivate behavior at their agency.

The 2010 Insurance Agency Satisfaction Study is based on responses from 2,316 insurance agents who evaluated more than 10 insurance companies across the industry, including American Modern, Chubb, Dairyland, Farmers/Foremost, Fireman's Fund, Hanover, The Hartford, Liberty Mutual, Progressive and Travelers. The study was fielded between November and December 2009.