The Relationship Between Net Promoter Score and Insurer’s Profitability: An Empirical Analysis on the Customer Level

Item Type Forthcoming
Abstract

This paper examines the relationship between customer satisfaction and profitability at the level of the individual customer. In many industries, investigations detect a positive, decreasing relationship between customer satisfaction and firm profitability. The insurance industry has rarely been the object of such investigations. Pooser and Browne (2018) started this discussion in 2018 by examining U.S. insurers at the firm level. We provide reasons why the positive satisfaction-profitability relationship might be reversed, particularly in the case of the insurance industry. We conduct an array of OLS regressions with customer level data. Our results reveal a strong positive relationship between customer satisfaction and profitability. The effect is considerably large and also robust when investigating the effect of several customer characteristics on this relationship. We recommend that the increase in profitability is induced by a strong positive correlation between customer satisfaction and premium income, while satisfaction is not associated with the combined ratio.

Authors Jahnert, Jonas Raphael & Schmeiser, Hato
Journal or Publication Title Geneva Papers on Risk and Insurance - Issues and Practice
Language English
Subjects business studies
HSG Classification contribution to scientific community
HSG Profile Area SoM - Business Innovation
Refereed Yes
Date 2021
Publisher Palgrave Macmillan Ltd.
Volume (forthcoming)
Publisher DOI https://doi.org/10.1057/s41288-021-00237-3
Official URL https://rdcu.be/cmbOF
Depositing User M.A. HSG Jonas Raphael Jahnert
Date Deposited 04 May 2021 06:56
Last Modified 09 Jun 2021 07:08
URI: https://www.alexandria.unisg.ch/publications/263107

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Citation

Jahnert, Jonas Raphael & Schmeiser, Hato (2021) The Relationship Between Net Promoter Score and Insurer’s Profitability: An Empirical Analysis on the Customer Level. Geneva Papers on Risk and Insurance - Issues and Practice, (forthcoming)

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https://www.alexandria.unisg.ch/id/eprint/263107
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