NCSI-UK Commentary Third Quarter 2011
Banks, Mortgage Lenders, Credit Cards and Home and Motor Insurance
Customer Satisfaction Rises Slightly as Financial Services Improve; Banks, Mortgage Lenders, Credit Card Companies and Home & Motor Insurers Make Small Gains
November 22, 2011
The National Customer Satisfaction Index (NCSI-UK) rebounds from last quarter’s dip, gaining 0.3% to 74.7 on the 0-100 Index scale. The rise is driven by improvements across all four of the industries in the financial services sector covered by the NCSI: Retail Banks, Mortgage Lenders, Home and Motor Insurance, and Credit Cards.
Of the 22 financial services companies, gainers beat decliners by nearly 2 to 1: 55% improve while only 32% decline and another 13% are unchanged from a year ago.
The Index, which applies the methodology of the American Customer Satisfaction Index (ACSI), demonstrates a strong relationship to economic growth. The 15 industries in the NCSI represent nearly half of total UK consumer spending. GDP growth has been weak in recent quarters and was barely positive at 0.2% in the second quarter when NCSI declined. For the third quarter, GDP and NCSI once again move in tandem, with NCSI’s 0.3% improvement nearly matching GDP growth of 0.5%.
Two financial services categories reported in the third quarter of 2011 score better than the national NCSI average: Home & Motor Insurance (76) and Credit Cards (75). Both improved by 1 % this year. Retail Banks (72) and Mortgage Lenders (71) also improved slightly, but are still far below most other industries.
Customer satisfaction with banks (personal current accounts) rises 1% to 72, the second straight year of improvement and a four-year high for the category. Smaller is still better, as the aggregate of smaller banks and building societies (‘All Others’ with a score of 75) outperforms the industry average again.
With the industry facing pressure to reduce consumer complaints, new strategies implemented by several banks – including additional training and support for frontline staff – seem to have had some effect in boosting customer satisfaction.
HSBC (including First Direct) has the highest customer satisfaction score of the major high street banks—a position it has held alone or shared for the last four years. Last year, HSBC dominated its competition at 78, but now customer satisfaction weakens by 5% to 74, just ahead of Lloyds TSB, at 73.
HSBC continues to benefit from strong satisfaction with its First Direct subsidiary which has had a history of good customer service. But according to customers, the reliability of HSBC services declined somewhat this year, and the introduction of a mandatory Secure Key card that HSBC customers must carry in order to access online banking has sparked criticism for requiring more effort. Nevertheless, HSBC’s overall quality still tops the industry.
Lloyds TSB gains 4% to 73, after an overhaul of its charging structure and a reduction in unplanned overdraft fees. Barclays and RBS Group (including Natwest) both score 72, matching the industry average. Barclays improved by 1% and RBS Group by 6%. Santander and HBOS (Halifax and Bank of Scotland) are at the bottom of the industry, although both improved this year - HBOS from 66 to 69, and Santander from 68 to 69.
Customer satisfaction with mortgage lenders improved for a second straight year, but the mortgage lending industry remains the lowest scoring among the financial services. This year, as mortgage rates reached record lows, customer satisfaction rose 1% to an NCSI score of 71.
Among the major mortgage lenders, Nationwide holds the top spot for the fourth year, improving 1% to 77. As Nationwide stretches its lead over the nearest competitors, Lloyds TSB declines (-1%) and Barclays (including Woolwich) improves (+1%) to tie at 73. The aggregate of all other smaller lenders is up 1% to match the industry at 71. RBS Group gains 3% to 70. HBOS (including Halifax and Bank of Scotland) is unchanged at 70. Santander remains at the bottom of the industry, despite a 1% improvement to 68.
Customer satisfaction with credit cards is up 1% to an NCSI score of 75, a record high for the industry. Effective rates on credit cards have fallen and credit card usage increased by 4% compared to the third quarter of 2010 as credit card issuers continue to offer incentives on new purchases and balance transfers in an effort to spur spending via credit cards.
Smaller credit card issuers lead the category again, improving 1% to an NCSI score of 79, well ahead of the largest banks. A year ago the major banks were tightly grouped within a much lower range but now there is a considerable gap. HSBC jumps into the lead with a 6% surge to 76. RBS Group and HBOS follow at 73, up by 3% and 4%, respectively. At 70, Barclays now scores better than Lloyds TSB, which falls 4% to 69 to the low end of the industry, well below the other big bank credit cards
Home and Motor Insurance
Customer satisfaction with home and motor insurance improves 1% to an NCSI score of 76, highest among all financial services. Online insurance aggregators are a major reason why satisfaction is so much higher for this category—aggregators provide quick and easy access to pricing across a range of providers and enable customers to find the product that best fits their needs and budget. Consequently, competition among insurance providers is much stronger than in other financial service sectors.
This year’s improvement for the category is due to an increase among smaller home and motor insurers, up 1% to 77 to lead all insurers. Among the larger insurers, Churchill remains in the lead from a year ago, unchanged at 76. Royal & Sun Alliance and Direct Line fall 3%, while Aviva (the former Norwich Union) slips 1%. Zurich Financial is unchanged at 73.