Unlike fine wine, a pair of new surveys shows that neither life insurance contracts nor annuities grow more appealing with age.
According to J.D. Power's 2022 U.S. Individual Life Insurance Study and 2022 U.S. Individual Annuity Study, both released today, customer satisfaction with these products drops soon after they are purchased. As a result, those consumers are less likely to buy additional insurance and annuity products in the future, while simultaneously questioning the purchases they already made.
The study revealed that overall satisfaction with individual life insurance fell two points to 774 (on a 1,000-point scale) this year, led by declines in interactions with agents and advisers, call centers, and websites. Similarly, customer satisfaction with individual annuities sank 13 points to 789, led by steep declines in price satisfaction, product offerings, and communications.
The report also showed that the longer a customer lives with a life insurance policy, the more they regret the purchase. For example, the overall satisfaction score for customers with a tenure of five years or less is 821. That falls to 785 after six years, to 759 after 11 years and to 756 after 20 years, according to the study. Longer-tenured customers are also much less likely to believe their adviser is working in their best interests.
“After a brief surge during the height of the pandemic, overall customer satisfaction with individual life insurance and annuity plans have now reverted to their previous long-term trends in which customer satisfaction declines as tenure with the product increases,” said Robert M. Lajdziak, director of global insurance intelligence at J.D. Power.
Lajdziak added that insurers are struggling to maintain regular contact with customers, which not only “limits potential future sales opportunities, but also exposes incumbents to competitive threats from insurtech start-ups that are leveraging digital to deliver a more multi-channel approach to client engagement that is resonating with customers.”
On the topic of insurtechs, the study showed that a lack of brand differentiation is giving them an opening in the market. More than half (55%) of life insurance customers rate the brand reputation of their own insurer equally with other insurers in the marketplace. On the other hand, when it comes to insurtech brands, customers are more likely to view these companies as unique, innovative and affordable.
Despite the rough marks for the industry, it is worth noting that award winners in both studies, State Farm and American Equity Investment Life Insurance, showed some of the largest year-over-year increases in customer satisfaction.
According to the survey, State Farm ranked highest among individual life insurance providers for a second consecutive year, with a score of 839. Globe Life came in second with 812, while Mutual of Omaha ranked third with 801.
In terms of annuity providers, American Equity Investment Life Insurance ranked highest with a score of 838, followed by Fidelity & Guarantee Life (829) and Nationwide (822).
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