The Relationship Between Net Promoter Score and Insurer’s Profitability: An Empirical Analysis on the Customer Level
Journal
Geneva Papers on Risk and Insurance - Issues and Practice
Type
journal article
Date Issued
2021
Author(s)
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.
Language
English
HSG Classification
contribution to scientific community
HSG Profile Area
SoM - Business Innovation
Refereed
Yes
Publisher
Palgrave Macmillan Ltd.
Volume
(forthcoming)
Official URL
Subject(s)
Division(s)
Eprints ID
263107