Insurers excelling at customer experience track better underwriting performance

Insurers that provide a high quality customer experience can expect to see a correlating uptick in their underwriting results, according to new analysis by market intelligence firm Insurance DataLab.

After comparing the findings from its July 2021 Customer Experience Report and its February 2022 Underwriting Performance Report, Insurance DataLab was able to track a moderate positive correlation between customer experience and underwriting performance.

This means that for every percentage point increase in an insurer’s Insurance DataLab customer experience rating, a correlating 0.3 percentage point increase can be noted in its Insurance DataLab underwriting rating.

Putting this theory into action, of the five insurers ranked highest for customer experience by Insurance DataLab, three have reported a sub 100% combined operating ratio (COR) in their latest Solvency and Financial Condition Reports (SFCR), as analysed by the intelligence firm.

This compares to just 28% of insurers across the whole Underwriting Performance Report sample that achieved a COR of less than 100% within their latest SFCR.

The analysis also showed that of the five lowest ranked insurers in Insurance DataLab’s Customer Experience Report, four were also in the bottom five when ranked for underwriting performance.

Looking for loyalty

Commenting on the analysis findings, Insurance DataLab co-founder Matt Scott said: “This analysis cannot definitively say that offering a better customer experience will equate to better underwriting results, but the numbers certainly do seem to back that argument up.

“And when you look at everything in the context of the FCA’s pricing reform – which have seen home insurance premiums reach record levels – you can clearly see how the battle for new business is going to intensify over the rest of the year. This means that insurers will need to look to increased loyalty from their customer base.”

This means that “one of the driving forces behind success in 2022” will be insurers’ ability to “offer a best in class customer experience”, added Scott.