Why Are Customers So Unhappy With Life Insurance and Annuities?

Customers’ satisfaction starts to decline relatively soon after they buy individual life insurance and annuity products, according to two new studies from J.D. Power.

As a result, there is both a low likelihood that customers will consider buying other insurance and financial services products and a general lack of understanding of products these customers already own.

“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,” Robert Lajdziak, director, global insurance intelligence at J.D. Power, said in a statement.

Lajdziak said the research shows that insurers are struggling to maintain regular contact with customers and reinforce their unique value proposition during the length of the relationship.

“That not only limits potential future sales opportunities, but also exposes incumbents to competitive threat from insurtech start-ups that are leveraging digital to deliver a more multi-channel approach to client engagement that is resonating with customers,” he said.

The two studies were fielded from June through August. The life insurance study received responses from 5,583 individual life insurance customers, the annuity study from 3,152 individual annuity customers.

Dissatisfaction Across the Board

The life insurance study found that after the largest one-year increase in customer satisfaction in 2021, overall satisfaction decreased two points to 774 (on a 1,000-point scale) this year. The biggest declines occurred in interaction with agents/advisors, call centers and websites.

Customer satisfaction with individual annuities decreased 13 points to 789, led by big drops in price satisfaction, product offerings and communications.

Life insurance has a long tail of waning satisfaction, according to the study. The overall satisfaction score for customers with a tenure of five years or less is 821. That tapers off to 785 after six years, to 759 after 11 years and to 756 after 20 years.

Longer-tenured customers also are significantly less likely to experience their agent or advisor making recommendations in the customer’s best interests, a key performance indicator.

Fifty-one percent of customers report that they have used at least one digital channel to interact with their insurer in the past three years to interact with their insurer. These customers have higher satisfaction levels than those who have not used a digital channel.

The life insurance study found that 55% of customers rate the brand reputation of their own insurer equally with other insurers in the marketplace. But when it comes to insurtech brands, they are likelier to view those companies as unique, innovative and affordable.

According to the annuity study, mail is the most common form of client communication — 74% of annuity customers have received mail this year — but it is the channel with the lowest level of overall satisfaction. In contrast, mobile apps, used just 8% of the time, drive the highest levels of customer satisfaction.

See the gallery for overall customer satisfaction rankings for individual life insurance providers.