Learn about Net Promoter Scores and how they can help you when shopping for insurance
Shopping for a new product or service can be a daunting task - there are so many things to consider. While the internet has provided a wealth of information and resources, it is no doubt a challenge to sort through it and make an informed choice.
But despite all of the information available, one thing remains true: We often find the most helpful details are the thoughts and opinions of customers who have experienced a product or service first hand. Wouldn't it be nice if there were a single number or rating you could use to sum up that kind of customer evaluation? Fortunately, there is such a metric, and it's called a Net Promoter Score! But what is a Net Promoter Score and what does it mean for insurance customers? We'll dive into it today, so read on!
What is a Net Promoter Score?
Have you ever seen a little window pop up after you make a purchase on a website? Or perhaps heard an automated message ask if you'd be willing to answer a brief question after a customer service call? The message might have looked something like this: "How likely are you to recommend our company to a friend or family member?" The response options would likely be a simple 0 for "Very unlikely" to a 10 being "very likely."
While these types of survey questions are used in all sorts of quality assurance efforts, they are commonly used for calculating what is known as a Net Promoter Score, or NPS. The answers to these types of questions are used to calculate this rating, which is a type of customer satisfaction rating industries and businesses use to evaluate consumer opinions about their products
, services, and their business.
But more than just evaluating an individual company, it can be used to evaluate an entire industry, like the insurance industry, or specific industries, like auto insurance
. So, for example, you could look at an NPS for the insurance industry as a whole, an NPS for specifically the auto insurance industry, or even an NPS for a specific auto insurance company
Using an NPS score, a company can get a better idea if what they're doing is resonating with the customer base and meeting their expectations. But this score isn't just for businesses or industry leaders - it's also for you, the customer!
How do you calculate net promoter score?
The surveys are quick and easy, and are often sent at various points when a representative from a company interacts with a customer. This could be after a claims call
, customer service call, or after some sort of interaction on the website. Again, a customer is asked to rank their likelihood to recommend a company, product, or service from 0-10.
After collecting a certain number of responses, a company will analyze and group the various ranked responses. The score is calculated by subtracting the percentage of people who respond 6 or lower, from the percentage of those who rank 9 or 10. So, if a business has 20% of respondents that are 6 or below, and 60% that are 9-10, you subtract 20 from 60 (60-20) to get a NPS of 40%.
In addition to the standard question, a company will sometimes craft the survey to include open-ended questions in order to get more detailed insight into the thoughts of a customer. In other words, the score can tell a company how
a customer feels, but an open ended question can help them understand why
they feel that way.
What is a good net promoter score?
While a customer's response to an NPS survey rests somewhere between 0 and 10, the actual score for a company rests somewhere between -100 and 100 and is expressed in a percentage. In general, an NPS of 0% to 30% is good, 30% to 70% is great, and anything over 70% indicates that a business is doing something very well, or at least, it indicates that the customers are extremely satisfied and very likely to recommend said business to others.
But while those ranges give a good sense of things, determining whether or not a company's NPS score is good or not is a little more involved; it is also important to understand scores as they exist in the context of an industry. An individual company may have a lower score compared to the range of possible scores, but that same score may be high when compared to other companies like it. So, when evaluating whether or not a company has a good NPS score, you must look not only at the individual NPS, but how that score compares to the average score for the industry.
For example, let's say the auto dealership industry has an average NPS of 39%. However, a particular dealership has an NPS of 50%. While in the grand scheme of things, it may not seem like 50% is all that favorable considering the max is 100%, but in comparison to the industry score, they're doing quite well.
So, if you're shopping for insurance, or any other product or service, and are looking for a provider with a good NPS score, be sure to not only look at that company's NPS rating, but the average scores throughout that industry.
What does a Net Promoter Score mean for you, the customer?
We've talked a lot about these scores, how they're calculated, and what the values indicate to a business, but what does that mean for you, the insurance customer?
As we've mentioned, an NPS value is determined by essentially one thing, and one thing alone: other customers' opinions. Of course, this is quite helpful to a business. It gives a company insight into how their customers feel about them and what they think about their products.
But that same metric can also be useful when you, the customer, are looking to purchase insurance. As you can imagine, having a metric that gives you insight into the way people feel about a company can be a powerful tool when deciding which company to give your business to.
First, you need to look at the average NPS industry as a whole based on what type of insurance you're shopping for. For example, if you're shopping for a new auto insurance policy and you're comparing providers, you'll want to know what the NPS for the auto insurance industry. In 2020, auto insurance companies had an NPS of 41% on average
With that industry average in mind, you can now evaluate an individual insurance carrier based on their NPS and how it relates to the industry average, or how they compare to other carriers on average.
For example, if you see that one carrier has a score of 40%, 41%, or 42%, you'll know that customers perceive them about the same as any other auto insurance carrier. However, if they have an NPS of 70%, you know that customers seem to have a higher opinion of their business.
Of course, there are many factors to consider when shopping for insurance beyond the carrier's NPS rating. However, a high score means that the carrier has taken the time to reach out to customers and get their opinion about the services and products. But more than that, it means that the customers took the time to respond and on average, they feel strongly that they would recommend the company to family and friends.
One of the best indicators of satisfaction is in fact a customer's willingness or desire to recommend a product or service to their family and friends. Furthermore, having a recommendation from a family member or friend is one of the things that is most likely to move a person towards making a purchase or doing business with a company. It makes sense - we tend to trust the opinions of people who have experience with a company, especially if that experience has lead them to continue being a customer (even if they aren't necessarily friends or family).
With that in mind, you can see why an NPS rating can be quite helpful to you as a prospective customer shopping for insurance. It's a simple percentage that shows you, on average, how many people are thoroughly satisfied with a carrier
Many companies will prominently feature their NPS rating somewhere on their website
or in their promotional materials. However a variety of websites feature lists you can reference
when shopping for insurance and evaluating carriers.
With an NPS score of 76, Germania's around-the-clock claims service and excellent coverage have earned the praise of our most important critics – our customers. But don’t take our word for it! Hear what our customers have to say.
For more information about our insurance products, request a free quote online, or reach out to one of our trusted agents today!
When comparing insurance companies, you may have seen some referred to as farm mutuals. But what is a farm mutual insurance company, exactly? Read our blog for more info!