NCSI-UK Commentary Third Quarter 2008
Results for Credit Card Providers, Home & Motor Insurers
Commentary by Patrick Barwise,
Emeritus Professor of Management and Marketing, London Business School
November 3, 2008
Credit Card Providers
Note: All scores are on the 0-100 Customer Satisfaction Index (CSI) scale and measure customers’ experience with their most used credit card.
Results represent the five largest high street credit card providers: Barclays (including Goldfish), Lloyds TSB, HBOS (Halifax/Bank of Scotland/Intelligent Finance), RBS Group (Royal Bank of Scotland/NatWest/Mint) and HSBC (including First Direct). These account for over 50% of the market, with the others reported in the ‘All Other’ category.
Overall satisfaction with credit card providers is 73 - similar to the banking industry measured at 71 in Q1 2008. The large credit card providers register lower levels of satisfaction than the smaller companies represented by ‘All Other’ - the average CSI for the five largest high street credit card providers is 70 versus an average of 76 for ‘All other&rsquo.
HSBC (including First Direct) leads with 73 - both brands score highly individually, too. Barclays is below the industry average at 68. Lloyds TSB and RBS share a score of 71, while HBOS is at 70. Complaint levels (% of customers) are high. Lloyds TSB receives the most complaints (15%) and is poor at handling these but enjoys the highest loyalty of the six providers, perhaps because its slightly older, less affluent customer base may be less prone to switching. HSBC also has a slightly above-average level of customer complaints (12%) but handles them notably better.
At the industry level, older customers (55+) register significantly higher levels of satisfaction - 80 vs 65 for 19-29 year olds, 66 for 30-39 year olds and 69 for 40-54 year olds. Older customers are also the most loyal and typically have other products with the same bank. People earning below £20,000 are more satisfied and loyal than higher income groups. This aligns with ACSI results in the US, which have also consistently shown that older, less educated, and lower income customers tend to have higher levels of satisfaction. Younger people tend to have higher expectations leading to greater disappointment; more educated customers have greater access to information leading to more discerning choices and more critical evaluations; and lower income customers may be either trapped with a particular company due to existing levels of debt or inability to get credit elsewhere, or may feel that having credit affords them better living standards and results in overall satisfaction.
Ratings for likelihood to switch to a competitor’s credit card in the next 6 months are low across the board, with Barclays being the most considered alternative brand. In the recent past most cards were offering free balance transfers and long zero percent rates. We have now seen the introduction of penalties and charges associated with such transfers, which discourage switching and put more emphasis on the relationship with the current provider.
In the last year, banks have tried to become more environmentally friendly, encouraging customers to switch to electronic statements and reduce paper usage. However, scores for “Responsible behaviour towards the environment” are still low, with only HSBC reaching the level of 60.
Regarding Privacy and Data Protection, RBS Group customers are least confident about the security of their personal details. Lloyds TSB is the leader in this area scoring 9 points above RBS.
Home & Motor Insurers
Note: All scores are on the 0-100 Customer Satisfaction Index (CSI) scale and measure customers’ experience with their current motor or home insurance provider.
Results represent the five largest home and motor insurers: Norwich Union, Direct Line, Churchill Group (Churchill/NIG), Royal & Sun Alliance (More Th>n) and Zurich, with the rest measured in the ‘All Other’ category. Direct Line and Churchill are part of the RBS group but are reported as separate brands.
Satisfaction with home and motor insurers is 77 – slightly below the latest ACSI score of 80 for this industry in the US but higher than for the other UK financial services measured to-date (banking 71, credit cards 72). Customers therefore appear generally satisfied with their insurance provider, but are increasingly switching between suppliers because of the growing availability of price comparison sites, heavily advertised in the last year, which encourage them to shop around for the best quote. Nevertheless, high industry-wide ratings for perceived quality suggest that satisfaction with insurers is not entirely driven by price: reliability, trust and customer service all play a major part, especially in retaining existing customers. Despite the growing use of price comparison sites, 67% of customers have been with the same insurer for over a year.
Of the five main insurers, Zurich has the highest customer satisfaction score (79), closely followed by the Churchill Group (78). In contrast, Norwich Union, the largest home and motor insurer, achieves a bottom-ranked score of 69, eight points below the industry average (77). Direct Line scores just below the industry average (76). Royal and Sun Alliance, which trades under the More Th>n brand, scores 74 - still five points above Norwich Union.
All five companies generally exceed customers’ expectations and complaint levels are relatively low - 6% for the industry, with the highest for Royal and Sun Alliance (More Th>n) at 9%, which also registers the lowest price tolerance.
Average satisfaction scores increase significantly with age, ranging from 71 for 19-39 year olds to 81 for customers aged 55+.
In terms of likelihood to switch to another main insurer at the next renewal, Direct Line comes out as the most attractive brand. It also ranks second for existing customers’ loyalty. Churchill generates less loyalty, despite ranking second in customer satisfaction, and has the lowest proportion of customers who have been with it for over a year. Royal and Sun Alliance (More Th>n) comes bottom for customer consideration.