J.D. Power studies: Customer satisfaction drops after life, annuity purchases

By Doug Bailey

Customer satisfaction with individual life and annuity products starts declining relatively soon after purchase, resulting in low likelihood of the purchasing other insurance and financial services products, according to two recent studies from J.D. Power.

The surveys also found a general lack of understanding of the products the customers already own.

“After a brief surge during the height of the pandemic, overall customer satisfaction with individual life insurance and annuity plans have now reverted to their previous long-term trends in which customer satisfaction declines as tenure with the product increases,” said Robert M. Lajdziak, director, global insurance intelligence at J.D. Power.

“It’s clear from our data that insurers are struggling to maintain regular contact with customers and to reinforce a unique value proposition during the length of the relationship.”
— Robert M. Lajdziak, director, global insurance intelligence, J.D. Power

“It’s clear from our data that insurers are struggling to maintain regular contact with customers and to reinforce a unique value proposition during the length of the relationship,” Lajdziak said, adding, “That not only limits potential future sales opportunities, but also exposes incumbents to competitive threat from insurtech start-ups that are leveraging digital to deliver a more multi-channel approach to client engagement that is resonating with customers.”

Most of the dissatisfaction seemed to stem from lack of follow up by agents, communication, and education. The J.D. Power studies found that following the largest one-year increase in customer satisfaction in 2021, overall satisfaction with individual life insurance decreased two points to 774 (on a 1,000-point scale), led by declines in interaction with agents/advisors; call center; and website. Likewise, customer satisfaction with individual annuities decreased 13 points to 789, led by steep declines in price satisfaction; product offerings; and communications.

Overall satisfaction 'deteriorates'

“The longer a customer lives with a life insurance policy, the more their overall satisfaction deteriorates,” J.D. Power said. “The overall satisfaction score for customers with a tenure of five years or less is 821. That falls to 785 after six years, to 759 after 11 years and to 756 after 20 years. Longer-tenured customers also are significantly less likely to experience their agent or advisor meeting the key performance indicator of making recommendations in the customer’s best interests.”

While on the one hand seemingly decrying the lack of face-to-face interaction with their insurer, digital was the preferred means of interaction, according to the studies. More than half (51%) of customers have used at least one digital channel in the past three years to interact with their insurer. These customers have higher satisfaction levels than customers who have not used a digital channel.

At the same time, annuity providers are increasingly sending communications to customer via snail mail – in fact it is the most common form of client communications. But it is the channel with the lowest level of overall satisfaction. Mobile apps are used just 8% or the time but have the highest levels of customer satisfaction.

Lack of brand differentiation

Moreover, the studies reveal a lack of brand differentiation as customers rated their own insurer no better or worse than competitors.

“When it comes to insurtech brands,” the study said, “customers are more likely to view these companies as unique, innovative, and affordable."

Among individual companies, State Farm ranked highest among individual life insurance providers for a second straight year, with a score of 839. Globe Life (812) ranked second and Mutual of Omaha (801) ranked third.

American Equity Investment Life Insurance ranked highest among individual annuity providers with a score of 838. Fidelity & Guarantee Life (829) ranked second and Nationwide (822) ranked third.

TransAmerica and Equitable were the cellar dwellers in both product categories, the studies found.

The J.D. Power studies measured overall customer satisfaction based on performance in five areas: communication, interaction, price, product offerings, and statements. The study was based on responses from 3,152 individual annuity customers and 5,583 individual life insurance customers from June through August 2022.

Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at [email protected].