Does "Quality" Really Matter?

What would be the difference if the insurance industry (we'll start with the commercial P&C market) was committed to quality?

A question worth pondering? The answer depends on what "Quality Results" could be produced if the industry adopted Quality as a standard management practice. Quality is about reducing cost while improving customer satisfaction. But if customer satisfaction doesn't bring new value to the suppliers (the carrier, the broker, TPA etc.) why would the industry want to spend the time and money to achieve improved customer satisfaction? So what drives customer satisfaction within the P/C insurance industry enough that customers would change if one company offered said value and another did not? The data would suggest it is that "Quality" is not a factor that drives the customers decision.

Historically customers are driven by the price of insurance and security because insurance is predominantly a price driven commodity that is only measured as a cost by many organizations. From the perspective of customer loyalty studies have shown that the driving factor is one of relationship attributes. Relationship attributes are subjective and difficult to measure my any customer segment. So one could say that the driving factor of customer satisfaction is relationship attributes and price. Even if a company could provide faster turnaround on request, issue a policy correctly the first time, settle claims faster and at less cost etc. etc., the driving factor is still price and relationships.

The insurance industry is extremely inter-connected. An insurance carrier relies on Reinsurance, TPA's, Technology partners, Brokers & Agents, Serving bureaus, industry trade groups etc. etc. of which all are inter-connected in a system which ultimately delivers a product and service to the end customer. Thus improving customer satisfaction of product or service requires a collective effort of all the related parts. A daunting task for anyone company to take on especially if the end result doesn't really matter to the customer.

in 1995 The Chairman of the QIC, who was also the President of CNA Insurance at the time, told the RIMS Executive Committee that if Risk Managers did nothing with the QIC survey results, the QIC effort would be in vain. RIMS and the Risk Managers did nothing and the QIC failed. To this day, as pointed out in the recent "Quality" survey completed by RIMS, only 9% of companies have changed brokers following the Spitzer' findings and their own continued complaints of quality from their suppliers. Just 9%! Does this mean that Quality didn't matter to 91% of the customers? Even more important if Quality really doesn't matter then why would the industry go through all the effort to make improvements?

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Now independent of achieving improved customer satisfaction companies can save money by reducing operating cost driven by rework and complexity of a non-connected systemic processes. Companies could also improve employee satisfaction and retention. However, are these objectives worthy of the time, attention and expense of senior management? It really depends on the mind set and leadership style of an individual company. Collectively as an industry and as a system one could conclude that a systemic quality driven approach to achieving the objectives is rare and not a standard practice of the industry. How could one conclude this? A look at the data would bring one to this conclusion. What data? Operating expenses as a percent of total income has not significantly changed over time. Employee turnover rates have not significantly been reduced when measured over time.

So back to the question "Does Quality Really Matter?". One could easily say it does not for customers of the commercial property casualty industry.

The next obvious question is "Should Quality Matter?".

That is an issue that ultimately is for the customer to answer and if yes then why and what results would have to change.