Customer satisfaction with individual annuities begins to
decline relatively soon after they are purchased, according to findings from
J.D. Power’s 2022 U.S. Individual Annuity Study.
As a result of declining satisfaction, customers are less
likely to consider purchasing other insurance and financial services products
but also lack understanding of the products they already own, the study found.
“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,” Robert M.
Lajdziak, director, global insurance intelligence at J.D. Power, said in a
press release. “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. 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 multichannel approach to client engagement that is resonating
with customers.”
The study also found that customer satisfaction with
individual annuities has decreased 13 points to 789 (on a 1,000-point scale),
caused by steep declines in price satisfaction, product offerings, and
communications.
More than half (51%) of customers have used at least one
digital channel in the past three years to interact with their
insurer—highlighting that digital communication is now a preferred means of
interaction, the study says. These customers have higher satisfaction levels
than those customers who have not used a digital channel.
Despite the high levels of digital customer interaction,
annuity providers are increasingly sending communications to customers via
mail, the study says. Although mail is the most common form of client
communication—received by 74% of annuity customers this year—it is the channel
with the lowest level of overall satisfaction. Mobile apps, by contrast, are
used just 8% of the time, but drive the highest levels of customer
satisfaction.
“The biggest takeaway for the annuity space is how much
people missed interacting with their agents or advisors over the past two
years,” Lajdziak said in an email. “According to J.D. Power data, the metrics
of the adviser-client relationship have declined dramatically and that is
something that will take time to improve to the levels it was at in 2019. If
they don’t improve, firms in the annuity space run the risk of sacrificing
sales or losing customers. The wealth industry does better than the annuity and
life insurance industry in this regard.”
American Equity Investment Life Insurance ranks highest
among individual annuity providers with a score of 838. Fidelity &
Guarantee Life (829) ranks second and Nationwide (822) ranks third, while the
industry average is 789, according to the study.
The 2022 U.S. Individual Annuity Study measures the
experiences of customers of the largest annuity companies in the United States.
Overall customer satisfaction is based on performance in five factors:
communication, interaction, price, product offerings, and statements. The study
is based on responses from 3,152 individual annuity customers and was fielded
from June through August 2022.
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