Total Loss Claimants More Disgruntled Than Those With Repairable Rides

Filing an insurance claim represents a moment of truth for any policyholder, and the level of satisfaction about how the claim was handled ultimately drives either customer loyalty or discord. Policyholders often manifest their disappointment with negative ramblings to others and, in many cases, by severing the relationship altogether and seeking coverage with another insurer.

J.D. Power and Associates has been charting customer satisfaction levels associated with the auto physical damage claim process—from first notice of loss (FNOL) to settlement—for more than 10 years. Today the Westlake Village, Calif.-based company released its latest findings, in the form of the 2011 U.S. Auto Claims Satisfaction Study, and the message is clear: total loss claims conjure more customer malcontent when compared to repairable auto claims.  

In the report, J.D. Power and Associates enumerates reasons why auto insurance claimants who incur a total vehicle loss are, overall, less satisfied with the claims experience than those initiating a repairable vehicle claim:

“Auto claims resulting in a total loss tend to be more complex, compared with vehicle repair claims, because in addition to filing a claim, claimants also have to purchase a replacement vehicle,” said Jeremy Bowler, senior director of the insurance practice at J.D. Power and Associates.

The study yielded a total of 11,500 responses from auto insurance customers who had filed a claim within the past 12 months. J.D. Power and Associates found that satisfaction averaged 811 on a 1,000-point scale among claimants with a total loss—42 points lower than among those whose vehicle is repaired. This gap, the company gathered, largely stems from the fact that about half of the claimants surveyed cited that the settlement offered by the insurer was less than the cost of replacing the totaled vehicle with a similar make/model vehicle.

In fact, this “settlement factor” accounts for the highest percentage in J.D. Power and Associates' customer satisfaction index (CSI).

“The settlement factor is comprised of two attributes: time to settle the claim and fairness of the claim settlement,” Bowler stated. “These attributes are equally important from a claimant's point of view.

“It's also important for customers to examine the settlement offer and, in particular, verify the vehicle content and condition. The majority of customers who disputed their vehicle's valuation most often cited differences concerning comparable vehicles (56 percent), vehicle condition (53 percent) and aftermarket accessories (18 percent).”

Bowler and report co-authors Mark Garrett and John Tenerovich, research director and research supervisor (respectively) of the insurance practice at J.D. Power and Associates, underscore that insurers can also cultivate a satisfying experience by addressing three core policyholder needs throughout the claims process:

• Communication. Insurers must not only be available when claimants have questions, but must also make the effort to clearly explain the claims process, follow up in a timely manner and keep claimants informed throughout the claims process.

• Speed. Insurers must quickly move the claim along from first notice of loss, to the appraisal, to communicating settlement amounts and ultimately paying claimants. Currently, total loss claimants report having to wait an average of four days to receive a settlement offer following damage appraisal.

• Fairness. Claimants want to be treated fairly regarding the settlement and avoid surprises during the process, whether caused by unexpected out-of-pocket expenses or not fully understanding what a policy covers in a claims situation.

“Ongoing communication and managing expectations are key throughout the entire claims process, as total loss claims take 18.2 days, on average, for claimants to receive payment, compared with just 12.5 days for the return of a repaired vehicle,” Bowler added. “Making the claimant aware of how quickly they'll receive the settlement and providing a thorough explanation of how the settlement amount was calculated are crucial to improving the overall experience in those instances of total loss.”

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