One Year Later: Key Learnings for Insurance Companies on How to Manage their Reputation

An Industry with a Poor Reputation

In September 2005, three weeks after Hurricane Katrina devastated many parts of the Gulf Coast, an Ipsos Public Affairs study showed that only 18% of adult Americans approved of the way insurance companies had handled the relief effort, while 43% disapproved and 39% had mixed feelings (read The Insurance Industry's Reputation after Hurricane Katrina" for more).¹

It was clear then that, in addition to colossal liabilities, the insurance industry was facing a steep public relations challenge. Not long after, Ipsos Public Affairs launched I-Rep Insurance Advisor to help insurance companies protect and strengthen their reputation. This program has been tracking key metrics on the reputation of the insurance industry and that of over 30 companies on a continuous basis since the beginning of 2006. (I-Rep Insurance Advisor assesses the impact of media coverage and communications efforts by insurance companies and suggests ways to frame their messaging and community relations strategy.)

Given the sheer scope of the challenge, it's no surprise that public opinion of the insurance industry has not changed much in the year since Katrina: only 21% of Americans hold a favorable opinion of the insurance industry, while 44% hold an unfavorable opinion, and 35% are neither favorable nor unfavorable.² Among other sectors measured, only the oil and gas industry fare worse (11% favorable versus 72% unfavorable) while, at the other end, the food and beverage industry and charities enjoy favorability scores of 61% and 60%, respectively.

To understand why the industry suffers from a poor reputation, one has to look at how Americans rate the industry's performance on specific image drivers. Among 16 characteristics, the one for the insurance industry gets the highest marks for is "being profitable and providing a good return to shareholders." This is also the characteristic least likely to generate favorability from the public.

In contrast, the industry receives relatively low ratings on attributes pertaining to social responsibility, which have a much greater impact on favorability. More Americans rate the insurance industry's performance as poor when it comes to being trustworthy, having ethical practices, and caring about communities than rate it as good.

How Insurance Companies Stand Out

I-Rep Insurance Advisor shows that while the reputation of the insurance industry as a whole is relatively poor, every single individual company is doing better--and in some cases, far better. While the "net favorability score" (percentage favorable minus percentage unfavorable) for the insurance industry as a whole is -23 points, the average net favorability score of individual insurance companies is +14 points, and the net score for the best-rated company is +44 points.

The wide gap between the image of the sector and that of specific companies is not unique to the insurance industry. In other studies, Ipsos Public Affairs has observed similar gaps in the oil and gas, pharmaceutical, and financial services industries. However, because the database is built on more than 30,000 interviews and tracks the reputation of all the major players in a fragmented industry, I-Rep Insurance Advisor is a unique tool to understand better how individual companies succeed in rising above the fray.

Insurance companies with the highest favorability scores tend to be those with the most policyholders and the better-known ones, showing that, as in other sectors, market share and awareness are strong predictors of favorability.

However, favorability scores are also largely driven by the companies' performance on key attributes; those related to service and social responsibility in particular. This is how certain insurance companies, some large and some not so large, distinguish themselves from their competitors.

Nearly all individual companies are rated better for the quality of their services, their reliability, and their customer service than they are on other attributes. Unsurprisingly, companies with the highest performance ratings on service-related attributes tend to enjoy the best favorability scores.

However, except for service quality, the attributes that differentiate the better-regarded and most-trusted insurance companies from the industry as a whole all pertain to social responsibility and corporate leadership. The best performers on these attributes include both market leaders and companies occupying a niche, which have developed a strong rapport with the public through consistent and continuous advertising or have actively communicated their social values and contributions.

Seven characteristics of most trusted insurance companies:

• Is a company I would feel comfortable working in
• Has ethical business practices
• Cares about communities
• Cares about the environment
• Has effective and credible management
• Is a good corporate citizen
• Has credible public spokespeople

Repeatedly, I-Rep Insurance Advisor has shown how corporate reputation can be influenced by communications campaigns and media coverage--positive or negative. Continuous tracking helped monitor the effect of a national TV program on the reputation of a leading company in real time: its net favorability score and its net advocacy score (percentage who would speak highly of the company minus percentage who would be critical) changed overnight. A week after the program was aired, recall of news about the company remained high, but the favorability and advocacy scores were back to their earlier levels, showing that the company's reputation is very resilient.

Customers as Advocates

While Americans tend to have an unfavorable opinion of the insurance industry, they are mostly neutral about individual companies and have a favorable opinion of those with which they have a policy. The best-regarded insurance companies capitalize on the favorable opinion of their policyholders and can count on their active support as advocates.

On average, among Americans who know of them, individual insurance companies receive a favorable opinion from only 24%, an unfavorable opinion from 7%, and one that is "neither favorable nor unfavorable" from 69%.

However, on average, insurance companies receive a favorable opinion from 74% of their policyholders. The best-rated companies, many of which are market leaders, receive a favorable opinion from over 80% of their policyholders.

These findings corroborate with results from another Ipsos Public Affairs survey showing that, one year after Hurricane Katrina, nine in ten homeowners in Louisiana and Mississippi (91%) are satisfied with their insurance company.³

Companies with the highest favorability scores among their policyholders are also those with the highest proportions of customers who would speak highly of them. On average, companies can count on 53% of policyholders who would speak highly of them while only 8% would be critical. However, for some companies, advocates represent 70% or more of their policyholders. Good word of mouth from happy customers explains why these same companies also enjoy the highest favorability scores among the public.

¹ Interviews conducted online with a representative sample of 1,064 adults nationwide, September 22-27, 2005. ² Interviews conducted online with a representative sample of 4,167 adults nationwide, August 3-28, 2006. ³ Interviews conducted by telephone with a representative sample of 881 adult homeowners in Louisiana and Mississippi, August 1-7, 2006.