ACSI: Customers Not Impressed with Health Insurance

Blue Cross and Blue Shield wilt; satisfaction with credit unions falls sharply

Published: Wednesday, January 19, 2011 - 08:21

(ACSI: Ann Arbor, MI) -- Steady or improving customer satisfaction with several types of financial services is not enough to overcome the customer satisfaction challenges of the health insurance industry, according to a recent report released by the American Customer Satisfaction Index (ACSI). The report covers customer satisfaction with banks, credit unions, health insurance, life insurance, and property and casualty insurance.

Higher premiums put a big hurt on health care

After two years of improvement, customer satisfaction with health insurance fell 2.7 percent to an ACSI score of 73. The aggregate of smaller companies leads the industry, down 1 percent to 76. Blue Cross and Blue Shield dropped 4 percent to 70, but is ahead of the other large insurers, while Aetna fell 3 percent to 68. UnitedHealth plummeted 10 percent to an industry low of 65. Complaints about customer service and the recent handling of Medicare drug coverage are at the forefront of UnitedHealth’s troubles. WellPoint is the only health insurer that shows an improvement, up 3 percent to 69.

The cause of the customer satisfaction decline is not difficult to find: “Sharp increases in premium costs and deductibles are to blame,” says Claes Fornell, founder of the ACSI and author of The Satisfied Customer: Winners and Losers in the Battle for Buyer Preference (Palgrave Macmillan, 2008). “Medical costs are rising, and companies are passing on a greater share of the insurance burden to employees. When consumers pay more without getting better service, they are obviously not happy.”

Smaller is better, but credit unions under pressure

While not yet returning to levels prior to the banking crisis, customer satisfaction with checking, savings, and personal loans rose slightly, up 1.3 percent to 76. Bank fees have risen as of late, but consumers seem to be taking the increased costs in stride by finding ways to avoid them. As usual, smaller banks do better and are unchanged at an ACSI score of 80. Among the big banks, Wells Fargo is on top, unchanged at 73; followed by Citigroup, up 2 percent to 69; and Bank of America, up 2 percent to 68. JPMorgan Chase rounds out the industry, down 2 percent to 67 and showing a decline for the fourth straight year.

Credit unions, similar to small banks, have significantly higher customer satisfaction than the big banks, but suffered a sharp decline of 5 percent to 80. The difficulties in managing rapid growth are partly to blame, as regulators have allowed credit unions to expand offerings to include more mortgage and investment banking activity. Financial losses by several individual credit unions have taken a toll. Because credit unions can’t raise capital by selling stock, the only recourse to recover losses is through cost cutting, which usually leads to less customer service, or raising fees, which leads to higher customer cost.

Life and property insurance ride high among financial services

Life and property insurance are tied with credit unions for the highest ACSI score in financial services. The life insurance industry gained 1.3 percent to 80, while property and casualty insurance is unchanged at 80. Smaller life insurers lead the category, up 1 percent to 81. Northwestern Mutual tops the big companies, despite a small 1 percent dip to 80, followed by New York Life, down 3 percent to 78. MetLife and Prudential—the largest players in the life insurance business—are close behind, with MetLife up 1 percent to 78 and Prudential unchanged at 77.

Among property and casualty companies, State Farm maintained the lead, unchanged at 82, followed by GEICO, also unchanged at 81. Progressive and Allstate each fell 1 percent to 79 and 78, respectively, while Farmers dropped 3 percent to 76 to round out the industry. Last year 2010 marked the fourth consecutive year that Farmers has occupied the bottom spot.

“Life and property and casualty typically do better with customers compared to health insurers because premiums are lower and policyholders have fewer reasons to interact with the insurance company, so there are fewer opportunities for things to go wrong,” says Fornell. “This is particularly true for life insurance. Premiums typically are fixed for the duration of the policy, and once a policy is in place, a customer might never again interact with the insurer.”

About The Author

American Customer Satisfaction Index ACSI

The American Customer Satisfaction Index (ACSI), founded at the University of Michigan’s Ross School of Business and produced by ACSI LLC, is a national economic indicator of customer evaluations of the quality of products and services available to household consumers in the United States. The national index is updated each quarter and scores on a zero-to-100 scale at the national level. The ACSI produces indexes for 10 economic sectors, 47 industries, more than 225 companies, and more than 200 federal or local government services.