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The Effects of Customer Satisfaction on Company Profitability: Evidence From the Property and Casualty Insurance Industry

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  • David M. Pooser
  • Mark J. Browne

Abstract

Prior literature presents a positive link between customer satisfaction and firms’ financial outcomes, including greater revenue, profitability, and prices. However, few studies approach the topic of customer satisfaction in the insurance industry. Using a unique data set obtained from J.D. Power, we observe customer satisfaction among U.S. auto insurers and link their customer satisfaction rating to insurer profitability metrics. Our results support the notion that greater customer satisfaction leads to reduced expenses and increased profitability. A potential explanation is that more satisfied customers are more likely to remain with an insurance company and refer others to the insurer, reducing customer acquisition expenses.

Suggested Citation

  • David M. Pooser & Mark J. Browne, 2018. "The Effects of Customer Satisfaction on Company Profitability: Evidence From the Property and Casualty Insurance Industry," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 21(2), pages 289-308, September.
    • Handle: RePEc:bla:rmgtin:v:21:y:2018:i:2:p:289-308
    DOI: 10.1111/rmir.12105
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    References listed on IDEAS

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    Cited by:

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    2. Crosby, Lawrence A. & Ghanbarpour, Tohid, 2023. "The Drucker intangibles measurement system: An academic perspective," Journal of Business Research, Elsevier, vol. 155(PB).
    3. Killins, Robert N., 2020. "Firm-specific, industry-specific and macroeconomic factors of life insurers’ profitability: Evidence from Canada," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).
    4. Christian Eckert & Christof Neunsinger & Katrin Osterrieder, 2022. "Managing customer satisfaction: digital applications for insurance companies," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 47(3), pages 569-602, July.
    5. Zoia Sokolovska & Oksana Klepikova & Tetiana Cherkasova, 2019. "An insurance company as an element of sustainable development of the state socio-economic system: Ukraine insurance companies case study," RIVISTA DI STUDI SULLA SOSTENIBILITA', FrancoAngeli Editore, vol. 0(2), pages 53-72.
    6. Courtney B. Baggett & Cassandra R. Cole & George Crowley & E. Tice Sirmans, 2020. "Spillover effects of increased health insurance enrollment on workers’ compensation insurance," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 23(1), pages 53-74, March.
    7. Jonas R. Jahnert & Hato Schmeiser, 2022. "The relationship between net promoter score and insurers’ profitability: an empirical analysis at the customer level," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 47(4), pages 944-972, October.
    8. Derrick W. H. Fung & Charles C. Yang & Jason J. H. Yeh, 2024. "The market price to embedded value gap: an analysis of European life insurers," Review of Quantitative Finance and Accounting, Springer, vol. 62(1), pages 69-96, January.
    9. Lex, Christoph & Tennyson, Sharon, 2021. "EU intermediary regulation and its impact on insurance agent quality: Evidence from Germany," International Review of Law and Economics, Elsevier, vol. 68(C).
    10. Harman Preet Singh & Ibrahim Abdullah Alhamad, 2022. "A Novel Categorization of Key Predictive Factors Impacting Hotels’ Online Ratings: A Case of Makkah," Sustainability, MDPI, vol. 14(24), pages 1-25, December.
    11. Jie Liu & Shujun Ye & Yujin Zhang & Lulu Zhang, 2023. "Research on InsurTech and the Technology Innovation Level of Insurance Enterprises," Sustainability, MDPI, vol. 15(11), pages 1-19, May.

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