The General Insurance Standards Council (GISC) has reached a landmark registration of more than 1,000 members. Some will take that as evidence that this market is looking for a single body to regulate the industry and act as a guiding light to better days.
However, as the market continues to look for marked improvements in customer service and is self-critical of its service standards, more will have to be done if companies are going to improve their image in the customer satisfaction stakes. If the GISC is finally accepted, it can, and probably will, help by imposing its rulebook terms on its members.
Choice encourages change
But imposed conditions fall short of what is really needed. Companies will not satisfy an increasingly discerning insurance buyer unless they can see attitudes change from within the companies themselves, through a genuine desire to improve and not just because it has been determined by regulation.
For many, if not most, insured, insurance is a grudge purchase like tax and hence they may come with feelings of resentment when renewing their insurance – especially if they have not claimed in previous years but premiums have increased. This attitude emphasises the need for companies to excel in service standards and help buyers overcome prejudices. Customers should at least feel that good service made the experience more pleasant and, therefore, that yours is a more pleasing company with which to transact further renewals in the future.
Unlike tax, insurance premiums don't have to be paid to one pre-determined organisation. The insured has choice. This provides them with a sense of power – they have to buy the insurance, but at least they get to choose from whom it will be purchased.
Clearly the insurance intermediary/ broker and insurance companies have competitive advantages that they throw into the negotiations in order to win or keep the risk. But it
takes just one bad experience with service and the buyer is keen to look around for another ser-
vice provider. Hence a supplier's key strength is no longer lower prices or more “bells and whistles” cover, but rather solid, trustworthy and personal customer service offered and sustained through staff that believe in the company and value its success.
So how does a company begin to make a difference? It starts with having an understanding of how the company is perceived in the minds of the market and its customer base, and subsequently by keeping close to, and regularly analysing information from, that source.
A truly successful customer service record is determined by the presence of a well implemented “service link”. The service link is the practical, tangible connection between strategies and resources, or theory and actual practice.
Determining the intellectual and tangible properties of the link and implementing it, first requires a commitment to a cultural redefinition of the company as being customer centred. This is more than just saying you are customer centred. It requires investment, intellectually and financially, then a willingness to change in necessary areas, followed by implementation of those changes, which in turn will be regularly audited and adjusted as required.
Patience is a necessary virtue as none of this is achieved quickly, but the payoff is improved customer retention, growth, increased stability and profitability. It is becoming apparent that the only enduring competitive advantage is based on the satisfaction of customers and not on price, size or financial strength. Yet despite this, it is understood that less than one-third of companies have a well defined customer service delivery system that is linked to their operating strategy.
A company will not usually invest in a drive to improve customer satisfaction unless it results in a sustainable improvement in bottom line profit. Evidence from a study conducted by the Strategic Planning Institute of Cambridge, Massachusetts, shows that profitability is tied to the quality of goods and services. Of the 2,600 companies analysed, those whose service quality ranked in the top third of their industry outperformed their competitors by a factor of
2-to-1. It was also learnt that higher service quality enabled them to attach a premium when pricing their goods and services, realising an average price of 9% higher than those companies that offered lower service standards.
Services purchased by the customer come hand-in-hand with the means by which they actually get the service. The combination of these two facets of the transaction is defined by the term “service quality”. Whether a company wants it or not, they are going to be judged and subsequently found innocent or guilty by customers' perceptions of that company's service quality. If it was good enough, they will probably come back again. If it wasn't they are likely to go to another service provider when renewal comes around again.
So long as customers are free to choose, suppliers with commercial motives are bound to seek measures to please the customer or else they will lose them. It just needs one competitor to stand out and be exceptional and then all others will begin to feel the consequences of their inactivity.
For companies that have a “life wish”, the answer is to invest in customer satisfaction. Pricing, size, financial strength or any other strength for that matter will have little value unless your company seriously addresses its customer service functions with the customer in mind and as a part of the audit process.