To kick off our new section on how to run your company, Lauren MacGillivray enters the secret world of the mystery shopper – and we have a go at it ourselves

Insurers and brokers all like to claim they have the best customer service, but the boast is difficult to prove – unless you use a mystery shopper.

Consumer Intelligence, based in Bristol, is one of the research firms that provides this service for the industry; the FSA also uses mystery shopping to investigate financial services providers. To find out how the secretive research works – and how insurance companies can do better in it – we asked both for their advice.

We also went under cover to do our own mini mystery shop, asking three household-name insurers for quotes on home contents cover.

For research firms, consistency is one of the main factors when judging customer experience. It’s possible that a customer service representative can simply be caught on a bad day. But even one bad experience can put off a customer for good, so it pays to take care.

Since the research has to be consistent too, in Consumer Intelligence’s monthly mystery shops on car insurance, each company being tested is telephoned more than 40 times (see box, below). The calls are made by real people who are in the market for cover. The research firm assesses the feedback and listens to recordings of every phone call.

The transcripts from Consumer Intelligence’s latest car insurance mystery shop demonstrate that the smallest turn of phrase can put off a potential client – or reel them in.

During one call, the insurance representative sounded like an interrogator: “Is the insurance in your name? And who will be the main driver of the vehicle? Can I take your surname please?

And your first name? And your date of birth? And the postcode of your property? House number please? And the first line of your address for me please? Have you got a telephone number I can take from you please? Is that a daytime telephone number? Thank you. Is it a renewal you have today?”

Instead of asking a barrage of questions, call-centre operators should acknowledge the caller’s responses with phrases such as “OK ... Uh huh ... That’s great,” and so on.

Friendliness helps. Another call-centre operator had the right idea: “What’s your date of birth please ... It’s your birthday on Thursday then, happy birthday ... Have a glass of lemonade on me!”

Callers also expect to get through to an agent quickly. More than 7% of callers for the Consumer Intelligence motor test had to make more than one call before getting a quote, and this excludes those who called outside call-centre hours. The reasons for having to call again were connection problems (“When I gave him my postcode he put me on hold and cut me off”); problems with computer systems and long wait times (“I was waiting on the telephone for 11 minutes, 23 seconds with only an automated voice for company, then I hung up”).

It’s also important for the call-centre operator to remember who he or she is talking to – usually non-insurance types who don’t understand technical speak and might find it off-putting. When agents offer protection for no claims discount, for example, they should clarify what this protection actually is. This is important because different insurers offer different benefits.

Here are two real scenarios from the recent motor test:

Agent: “Would you like to protect your no claims bonus?”

Caller: “Yes please.”

Agent: “OK.”

In that case, no further information was given on the protection.

This is the preferred version:

Agent: “Would you like to have your no claims discount protected? ... That allows you to have two fault claims in a five-year period without affecting your bonus. So you’ve got the peace of mind that if you do get involved in an accident, you’re not going to lose the no claims that you’ve worked really hard to build up.”

Monitoring real-life calls in this way can help insurance companies perform better. For the

FSA, mystery shopping is a vital tool in its investigations (see its tips for shoppers, below). The FSA usually uses external firms to carry out its mystery shopping. Last year, it published the results of a mystery shopping exercise carried out by GfK NOP on the sale of payment protection insurance (PPI). The research company used trained mystery shoppers to carry out 160 shops for PPI at a sample of large lenders of unsecured personal loans.

The shoppers, selected from the panel of GfK NOP assessors, were given a detailed outline of the project, but were not aware that the FSA had commissioned the project. They behaved like real customers and did not follow a prepared script.

The shoppers contacted the lenders via off-the-street face-to-face visits, made appointments for a loan application interview and attended the meetings, which they secretly recorded. All had good credit. They were instructed to take the sale up to the point of signing the credit agreement, but not to complete the transaction.

In its annual report for 2007/08, published in June, the regulator updated its crackdown on PPI. It noted improvements across the board, saying most firms were making it clear to customers that PPI was optional and most were also offering cancellation refunds on single premium policies.

But the FSA’s mystery shoppers did find room for improvement. “Many firms are still not giving customers clear information about the product and what it will cost; they are not explaining the extent to which customers are eligible for PPI cover and the cover the policy provides; and they are not explaining how, where advice is given, the recommended PPI policy meets the customer’s demands and needs,” said the report.

Following the visits and subsequent FSA intervention, 11 firms either stopped selling PPI permanently or agreed to halt sales until they met FSA requirements. Three firms cancelled their FSA permission to sell PPI and four firms said they were reviewing past PPI sales to ensure they were appropriate.

Like the FSA, many large financial services companies use mystery shopping. As they have found out, such tests help you to keep an eye on your own staff, as well as your rivals.

The best motor performers

The research firm Consumer Intelligence carries out a monthly mystery shop on car insurance.
In the latest report, it asked 160 shoppers –
real customers who were in the process of
buying motor policies – to test 23 insurance companies.
Four of the insurers tested – Churchill, CIS, Cornhill Direct and Saga – received a “five-star award” in the research and were praised by the shoppers. Here’s what they said:
Churchill: “Very efficient service, the person clearly explained the policy with all the important information and offered me extras that I might need”
CIS: “Very clear and easily understood and
very polite”
Cornhill Direct: “Highly efficient and personal. Felt like I wasn’t just another customer”
Saga: “Service was very good, a fast efficient service by a confident operator.”