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Life Business Gets Kudos For Service, But Not Discounts

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By Linda Koco

Life insurance professionals might be a pleasantly surprised by consumer rankings on the life insurance business that the American Customer Satisfaction Index (ACSI) has just published. In one area, they might be a bit puzzled too.

On the pleasantly surprised side, consumers gave life insurers a pretty strong satisfaction rating on the speed and efficiency with which policies were approved. The index score on this was 86, just one point down from 87 last year. In both years, this was the highest index ranking among six categories that ACSI tracks.

Carriers have been working on improving speed to issue for many years. Could it be that they’ve made enough headway for this to be reflected in a consumer study done by researchers outside the business? It appears to be the case.

Here’s another life insurance positive:  Consumers gave strong favorable ratings to their insurance representative or local agent — for courtesy and helpfulness. Their 2014 index score in this category was 84. That’s down from 86 last year, but still high enough to make this the second highest ranked item on the consumer satisfaction list.

Now for the puzzler: ACSI found that life insurers “fall short when it comes to the availability and range of policy discounts, including health rewards and discounts for combining different types of policies.” In fact, consumer satisfaction with policy discounts provided by life insurers received the lowest index score in 2014 as well as in 2013. This score was 74 in both years.

The puzzle is, do life carriers even provide such discounts? Sort of but not in a big way. Take a look:

Concerning health rewards, the industry certainly does “reward” people for good health in the sense that these individuals receive more favorable premium rates in life, health and long term care insurance than less healthy people. That’s not a discount in the conventional sense, but it is a price break.

In addition, some life carriers will lower the rate of a newly insured smoker if the person quits the nicotine habit within a specified period. Some employers have established health plans that “reward” employees with a lower premium for achieving a certain weight goal, too. Again, it’s not a discount program but it is a health-related price break.

As for offering discounts for “combining different types of policies,” the notion isn’t foreign to life insurers. A few property-casualty insurers offer a “multiline discount program” with their sister life carriers. In these programs, a customer who buys an auto, homeowners and life policy from the carrier gets a package discount. Some offer auto-and-life or homeowners-and-life package discounts.

But as for offering a discount for combining life insurance with still other types of insurance, such as annuity, long term care, disability or accident policies, that’s another kettle of fish.

Carl A Friedrich, a principal and consulting actuary at Milliman in Chicago, told InsuranceNewsNet that life carriers do offer riders that accomplish a similar goal. For instance, consumers can buy a life or annuity policy with a long-term-care rider, with favorable pricing. “But the consumer can’t drop the base policy and keep the rider,” so it’s not the same as offering two different policies under a package discount program.

Carriers could conceivably design discount programs with different types of insurance, Friedrich said. “But then they would have to file it that way, and they would have to apply the discount consistently.”

Many life policies do have provisions and options that sweep in elements of other types of coverage such as accidental death, or coverage features such as disability waiver of premium. But those are not programs that combine policies for a discount.

So the trends that the ACSI research picked up seem to be that 1) in areas where the life business has been putting its attention, consumers seem to be largely satisfied; but 2) in the discount program arena, consumers seem to have noticed that this isn’t the life industry’s strong suit.

 

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Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning. Connect with Linda →

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