Customer Satisfactionin the Pension Insurance Industry

Relationship quality important

in retaining business clients

The Dutch pension system, considered to be the best in the world, is facing numerous challenges. The pressure put on the Dutch pension system by financial and economic crises, low interest rates, an aging population and increasing life expectancy is unparalleled. Recent years have seen many changes in the field of pensions. Not only have there been several legislative changes, a new pension agreement and proposals to cut pensions, but the perception of pensions has also changed as pension awareness increases within the public arena.

At the same time, customers have become more critical and demanding. They want greater transparency, clear communication and a high level of involvement. As competition increases, pension insurers are finding that, to retain their clients, they need to provide high service quality and maintain good relationships with their customers.

This article will focus on the performance of the pension insurer in terms of customer satisfaction. How are players in the pension insurance industry managing current dynamics? How can they meet their customers’ heavy demands in this hectic and challenging environment of change? Do pension insurers in 2013 really understand what level of service quality customers expect from them?

Scope & MethodologyIn collaboration with VU University, Amsterdam, Accenture conducted a customer satisfaction survey among pension insurers to help answer the above-mentioned questions. The purpose of this survey is therefore to study the level of satisfaction in the market, and to identify the most important factors that determine customer satisfaction, with a focus on service and relationship quality.

The pension insurance industry is a dynamic and competitive market, with highly demanding customers and increasing scrutiny by the media. To gain insight into the factors driving insurance companies’ level of customer satisfaction, clients across several industries were surveyed and interviewed. The majority of the responses were collected from the business services industry. Specifically, employees within HR departments and Finance departments were asked to assess their level of satisfaction with their pension insurer. Of the 50 respondents, 55% worked in small and medium-sized enterprises and 45% in corporate companies. In total, assessments of customer satisfaction with regard to eight different pension insurers were collected.

The survey consisted of validated items, derived from the literature on service and relationship quality.

Figure 1 provides the conceptual model used to determine the most important factors in customer satisfaction while figures 2 and 3 provide insight into the survey’s population.

Figure 1

Figure 2 - Length of relationship with pension insurer

Figure 3 - Length of current contract with pension insurer

Tangibles

Reliability

Responsiveness

Empathy

Assurance

Information Sharing

Commitment

Trust

Service Quality

Relationship Quality

Customer Satisfaction

Relationship Life CycleModerating effect

% o

f com

pani

es (c

lient

s)

0%

20%

40%

60%

80%

100%

Companies

10-14 years

> 15years

5 - 9 years

0 -4 years

12%

74%

8% 6%

% o

f com

pani

es

0%

20%

40%

60%

80%

100%

Companies

10-14 years

> 15years

5 - 9 years

0 -4 years

45%

22%18%

14%

Key findings

Customer satisfaction is determined mainly by the quality of the relationship

Statistics show that overall relationship quality has a significant effect on customer satisfaction, regardless of company size, industry, length of contract or length of the relationship. Customer satisfaction deteriorates when the business relationship between client and pension insurer is formal and distant. According to our findings, clients ideally want a strong and informal relationship with their pension insurer.

The business relationship consists of three phases: the build-up phase, the maturity phase and the decline phase. Customer satisfaction in the build-up and maturity phases is mainly determined by the quality of the relationship. However, this changes in the decline phase. In the decline phase, customer satisfaction can only be determined by service quality. Relationship quality will no longer affect customer satisfaction.

This might give the impression that service quality is not a predictor of customer satisfaction in the build-up and maturity phases. However, that would be wrong. Even though the quality of the relationship is the strongest determinant for customer satisfaction, the role of service quality should not be underestimated. However, in the decline phase, customer satisfaction can only be improved by tangible activities.

Insurers are allowed to make mistakes as long as they communicate honestly

The clients interviewed indicated that a key element in the assessment of their customer satisfaction was the way pension insurers handle problems and errors in processing mutations. Pension insurers are allowed to make mistakes “provided that the pension insurer is honest about the stage the problem has reached, and that customers continue to be informed about the status of the problem, and that the pension insurer expresses empathy while solving the problem.” This suggests that good communication and empathy will help the pension insurer maintain goodwill, even when mistakes have been made. A good relationship with your client will automatically help you to achieve this.

Figure 4 - Expectation of expanding business with pension insurer in the future

In general, the loyalty of clients is limited

The results show that most respondents are not actively planning to expand their business relationship with their pension insurer. They express their expectations as neutral (57.2%) or even low (25.1%). Only a minority (17.7%) said they had high expectations of expanding their business with their pension insurer in the future.

This is in line with the Net Promoter Score achieved by the pension insurers. The graph opposite illustrates that the NPS is -30.8%. Altogether, this suggests that pension insurers may wish to invest in customer satisfaction by placing their primary focus on relationship quality, while certainly not forgetting service quality.

Figure 5 - Net promoter score : NPS = -30,6

laagneutral

59,20%

28,60%

12,20%

0% 20% 40% 60% 80% 100%

Passive

Promoters

Detractors

0%

20%

40%

60%

80%

100%

lowneutralhigh

17,7%

57,2%

25,1%

Relationship Quality is more important than Service Quality

Statistically, relationship quality is shown to be the most important determinant of customer satisfaction. Hence, the better the quality of the relationship, the higher the level of customer satisfaction. However, taking into account the phase of the business relationship, relationship quality only has a significant effect on customer satisfaction during the build-up and maturity phases. In the decline phase, the customer is already considering switching to another pension insurer and is no longer interested in maintaining a good relationship with its current pension insurer.

Customer satisfaction deteriorates when the business relationship between client and pension insurer is formal and distant.

According to the findings of the interviews, clients prefer to have a strong, informal relationship with their pension insurer. Clients find it important to have one specific contact, who knows them by name and knows about the products they have purchased.

Relationship quality is an overall assessment of the strength of a relationship and the extent to which it meets the needs and expectations of the parties involved, based on a history of successful – or unsuccessful – encounters or events1. Relationship quality consists of trust (acting in each other’s best interests), commitment (intending to develop a stable relationship, and willing to make short-term sacrifices), satisfaction (with the relationship) and long-term orientation (willing to expand the business and the relationship).

Of the clients surveyed, 42% said they were happy doing business with their current pension insurer. Another 42% were neutral about their pension insurer.

These clients feel less commitment towards their pension insurer. Only 26% of respondents felt there was a close sense of unity between the pension insurer and the client. Small- and medium-sized companies, in particular, would like to be treated in the same way as important, corporate clients. Yet they often feel that they are being sent from pillar to post, with no positive result. These smaller clients find the lack of a single, personal point of contact within the pension insurance company very annoying. It is important for clients to know who to call in the event of problems. Clients who have a good

Figure 6 - Perception of relationship quality

relationship with their pension insurer are more satisfied, even if errors were made. There needs to be a certain balance. Making mistakes is human. If your relationship is good, you are more likely to get more and honest information about the problem. Fostering a more personal relationship will result in the client being more understanding and patient. For the pension insurer, each moment of contact is an opportunity to ensure its client is still happy and to strengthen the relationship.

1 Smith, J.B. (1998). Buyer−Seller Relationships: Bonds.

Figure 7 - Do’s & Don’ts

laagneutral

4,7

1 2 3 4 5

Commitment

Long-termorientation

Trust

Satisfaction

4,6

4,4

3,8

6 7

laagneutral

Do’s• Plan catch-up meetings with your client every 6 months.

• Have regular (at least quaterly) informal and face-to-face contact with your client.

• Assign a permanent contact person for each client, to ensure continuity.

Don’ts• Don’t have several service-desk employees solving one single problem.

• Don’t keep the client waiting without explaining why.

• Don’t forget to apologize when something has gone wrong - show vulnerability.

But service quality should not be forgotten!

Service quality is a hot topic in today’s business world. Many companies invest in a higher service quality in order to achieve greater customer satisfaction and a bigger competitive advantage. The pension insurance industry is a dynamic market and currently under a lot of pressure. Being efficient, effective and client-oriented may be every insurer’s dream, but it is more easily said than done.

Service quality is defined as “the overall evaluation of the service provided”2. Factors of service quality include:

• Tangibles(physicalfacilities,equipmentand staff appearance),

• Reliability(providingcorrectandreliable service), responsiveness (helping customers proactively and providing service promptly),

• Reassurance(demonstratingprofessional service knowledge and courtesy)

• Empathy(offeringindividualserviceand care).

As mentioned before, all aspects of service quality together do not accurately predict customer satisfaction. However, it appears that service quality can determine customer satisfaction in the decline phase, when tangible services, such as websites and magazines, have the biggest influence on customer satisfaction. The good thing is that clients are also most satisfied with these tangible services. Of the clients surveyed, 70% said they were satisfied with the print materials of the pension insurer, and 57% agreed that they found it easy to get into contact with their pension insurer.

Trust in the service provided received the lowest score (4,0). The average client is neutral with regard to the reliability of the service provided. 41% of the respondents believe that the data files of the pension insurer contain errors, while 33% allege that the pension insurer does not keep its promises. Likewise, the service quality aspect (Empathy) scored low. 29% of respondents said they felt that their pension insurer does not have the client’s best interests at heart. These statistics surely demand action.

Many of the clients interviewed say that reasons for switching to a new pension insurer were “high prices and inexcusable delays in solving important problems”.

As noted above, it is important to deal with problems as quickly as possible. If a problem cannot be dealt with quickly, it is vital to inform the client how long it will take to solve the problem.

Furthermore, it is very important to provide online portals or tools, as these are easier for clients to use than tables or figures on paper. However, care has to be taken to keep these portals and tools well maintained, as they can otherwise easily turn into a “dissatisfier”. “Pension insurers may have slick tools, but if the tools give the wrong answers, they’re no longer useful, just frustrating.” It is also important to “speak the client’s language”. This means that the contact person provided by the pension insurer needs to be knowledgeable about the pensions market and legislative changes, and have no difficulty talking about investment of the assets, and so on.

However, it also means that all relevant documents, invoices and general information provided need to be clear and easy for the client to understand. Unclear invoices may give rise to the suspicion that the pension insurer may be charging hidden costs. Uniform Pension Statements (Dutch: Uniform Pensioenoverzicht, UPO) also need to be clear. Pension participants, the client’s employees, regularly complain about the complexity of these statements.

2 Taylor, S., Baker, T., 1994. An assessment of the relationship between service quality and customer satisfaction in the formation of consumers’ purchase intentions. Journal of Retailing.70 (2), 163–178.

Figure 8 - Perception of service quality

Figure 9 - Do’s & Don’ts

laagneutral

4,8

1 2 3 4 5

Trust in service

Empathy

Responsiveness

Perceived assurance

Tangibles

4,6

4,3

4,1

4

6 7

laagneutral

Do’s• Provide customized information and organize events about legislative changes.

• Use state-of-the-art communication methods (social media) and correspond not only by post but also by e-mail.

• Do show empathy when errors occur and promises cannot be kept.

Don’ts• Don’t send invoices without itemization. Clients may get the idea that you have hidden costs.

• Don’t treat small and mid-sized companies differently than corporates.

• Don’t offer a high-tech portal if it contains errors, and make sure you “speak your clients’ language”.

Net Promoter Score and Benchmark

The Net Promoter Score (NPS) is a management tool that can be used to measure the client’s loyalty. The NPS of the pension insurance industry is calculated by taking the percentage of customers who are Promoters and subtract the percentage of customers who are Detractors.

The NPS of the pension insurance industry comesoutat−30.8%.ComparedtotheNPS of other sectors, this seems to be a relatively low score. The reason for this may be the quite neutral assessment of customer satisfaction vis-à-vis the pension insurers, the low level of trust in service, and the current negative public opinion regarding the financial sector as a whole. However, whatever the underlying reasons may be, there is clearly an opportunity here to make improvements.

What’s next? Summing up, this study has shown that, pension insurers who wish to increase their level of customer satisfaction should, in addition to improving process efficiency and quality, consider placing focus to the main determinant of customer satisfaction, i.e., the quality of their relationship with their clients. If they do so, insurance companies should invest first and foremost in the intangible aspects of the client relationship, such as trust, commitment and long-term orientation. However, care should be taken to ensure that this new focus is not at the expense of the tangible aspects of service quality, because these can easily turn into “dissatisfier” factors if neglected.

The study also shows that clients allow pension insurers to make mistakes, providing that the insurer keeps them fully informed about the nature of the problem, its current status and when it will be put right. If the insurer shows empathy and vulnerability, most clients will remain satisfied. They appreciate a good relationship, honesty and vulnerability. The quality of the service provided, though important, is not as important as the quality of the relationship, and factors such as empathy and trust are absolutely indispensable, as they play a key part in raising the quality of a successful and long-lasting relationship.

Figure 10 - NPS

Figure 11 - NPS scores

laagneutral

0 1 2 3 4 5 6 7 8 109

NPS % of Promoters(9s and 10s)

% of Detractors(0 through 6)

Not at alllikely

Extremelylikely

Neutral

Detractors Passive Promoters

laagneutral

4%

-50% -40% -30% -20% -10% 0% 10%

Public Sector

Energy

Pension Insurers

Retail

General Insurers

Telecom

Banking

Healthcare

Automotive

Travel

-6%

-8%

-9%

-10%

-20%

-21%

-30,80%

-37%

-50%

Source: NPS-Branche monitor/store support/2013 & Het Nationale Klantbelevingsonderzoek 2012, Integron, Altuïtion en Tele’Train

Contacts Kaoutar Yakubi Master student Business Administration Vrije Universiteit Amsterdam

Rutger Hagendoorn Managing Director Accenture

Hannah Schaafsma Consultant Accenture

For questions: Hannah Schaafsma Consultant Accenture hannah.schaafsma@accenture.com

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