US small business' satisfaction with their insurance providers dropped in 2020
- Small businesses' satisfaction with their insurance provider fell for the first time since J.D. Power's US Small Commercial Insurance Study began eight years ago.
- To boost customer satisfaction and avoid churn, insurers should focus on both proactively communicating with small businesses and rolling out more flexible policies.
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Small businesses' satisfaction with their insurance provider fell annually in 2020 for the first time since J.D. Power's US Small Commercial Insurance Study began eight years ago. Insurance industry average satisfaction ticked down from 844 on a 1,000-point scale in 2019 to 836 in 2020. Fifty-nine percent of small businesses stated that they were not aware of initiatives launched by their insurer to help them during the turbulent pandemic period, suggesting a sentiment that providers have not taken proactive steps to better serve small businesses amid the financial dislocation they have experienced this year.
Declining small business satisfaction poses a customer attrition risk for insurers, exacerbated by innovative insurtechs providing more tailored solutions. US policyholders have shown a greater propensity to switch providers during the pandemic period, and a drop in small business satisfaction could drive customer churn in the segment. It could also lead small businesses to explore insurance policies with insurtechs that offer more customized coverage and an enhanced customer experience. For example, US-based small business insurtech Next Insurance—which raised $250 million in September—recently acquired software provider Juniper Labs to boost its data analytics, build a better picture of businesses' risks, and deliver new coverage options accordingly.
Incumbents should focus on both proactively communicating with small businesses and rolling out more flexible policies to boost customer satisfaction and avoid churn. The J.D Power study indicated that insurers that reached out to small businesses were able to boost customer satisfaction, suggesting that small businesses are seeking transparency and advice regarding their policies. Thus, incumbents should invest in their digital tools, such as video conferencing, to empower their employees to engage policyholders amid ongoing social distancing requirements.
What's more, rolling out more on-demand policies will appeal to small businesses that have suffered disruption this year and require flexibility in their coverage. For example, US insurtech Thimble debuted an initiative that enables small businesses to pause their policy payments for up to 30 days, without canceling the policy. Thus, incumbents should react to a drop in customer satisfaction by investing in their capabilities to better serve small businesses with flexible coverage and more frequent communication.
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