Short-term insurers now face less loyal customers

Short-term insurers now face less loyal customers who view it as a grudge purchase and are battling to communicate the value they offer and stand out with the service they offer. Only a few emerged in a better position for customer satisfaction after two years of the pandemic.

The industry now has to overcome serious challenges to change customer perceptions of value and quality and meet increasingly higher customer expectations, according to the latest Customer Satisfaction Index (SA-csi) for Short-term Insurance (2021) conducted by Consulta.

The index indicates that competition between companies is so fierce that only two insurers emerged on an industry par score for overall customer satisfaction, with all others performing below par:

• Virseker (82.5) and Momentum (81.5) were the only two insurers on the industry par of 81.2 for overall customer satisfaction, with Virseker showing marginal improvement compared to 2020 and Momentum (81.5) showing 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) were below par with declining scores from 2020, except Absa that participated for the first time
• Nedbank was significantly below industry par by over 13 index points and showed a consistent decline over the last three indexes, while Old Mutual Insure and Standard Bank also declined by almost 4 index points.  

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Customer expectations

The index also showed an increase in customer expectations across the board with an industry par of 84.8. There was a marked increase in customer expectations from the beginning of the pandemic which shows that customers have high expectations for their insurance in times of financial distress and upheaval.

Customer expectations were highest among customers of Virseker (85.6) and Momentum (85.0), while all other insurers were below industry par. Virseker (85.8) and Momentum (85.1) also performed on the industry par of 84.6 for perceived quality, while all the other insurers performed below par, with Nedbank with the lowest score on 71.1.

Virseker (0.2) and Momentum (0.1) were also the only two insurers with a positive gap between perceived quality and customer expectations which indicates the degree the industry exceeds or falls short of customer expectations.

Nedbank (-5.8), Old Mutual Insure (-3.8) and Standard Bank (-2.8) had the largest negative gaps, followed by Auto & General (-2.0) and Absa (-1.4).

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Perceived value

Regarding perceived value, the measure of quality relative to the price paid that fulfils a significant role as the economy bites into household incomes, Momentum (81.5) and Virseker (82.9) were on par again, while the other insurers were below par. 

“Short-term insurance premiums are increasingly seen as a grudge purchase and feature higher on the list of potential cost-cutting for consumers. It is essential that short-term insurers educate consumers about the importance of insurance as an enabler and financial safety net, especially in tough economic times,” says Abigail Boikhutso, CEO of Consulta. 

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Complaint frequency and handling

When it comes to complaint frequency and handling, the industry average of complaint frequency was 11.6% and complaint handling 55.2. Absa (12.6%), Virseker (14.4%) and Momentum (14.6%) had the lowest scores, although these were still below industry par. 

Nedbank (26.6%), Auto & General (24.0%) and Standard Bank (23.5%), had the highest scores for complaint frequency, well above industry par and more than double the par score.  

For complaint handling, Momentum (61.5) and Virseker (60.7) again had the best scores, well above the industry par of 55,2, indicating a strong ability to resolve customer complaints. Again, all other insurers were on or below par, with Nedbank (35.8) having the poorest score.

This, coupled with a high complaint frequency score, means that many complaints are not resolved satisfactorily, which in turn has a significant negative impact on their overall customer satisfaction and loyalty scores.  

Customers mostly complained about claims, products and cover details, premiums and costs, payments and debit orders and response time.

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Less loyal short-term insurer customers

In the section for customer loyalty, all insurers performed below the industry par of 73.5%, with Nedbank (54.3%) having the lowest score. Momentum (73%) and Virseker (72.8%) had the most loyal customers and were on par. 

The survey for the Customer Satisfaction Index (SA-csi) for Short-term Insurance (2021) polled just over 3,600 short-term insurer customers of intermediated short-term insurers Absa, Auto & General, Momentum, Nedbank, Old Mutual Insure and Standard Bank, as well as direct insurer Virseker, during the second half of 2021.

“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. More consumers increasingly view insurance as a grudge purchase rather than an enabler and safety net, more so in the stressed economy.”

The overarching themes that emerged were the importance of value for money, a lack of perceived quality or differentiation, significant increases in complaint frequency and as a result a decline in customer loyalty, Boikhutso says.