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American Bank Customers Express Troublingly Low Confidence in their Financial Status

Banking and Payments Intelligence Report
October 2023

American Bank Customers Express Troublingly Low Confidence in their Financial Status

Despite the inflation rate in the United States dropping more than 5 percentage points in the past year, the financial health scores of banking customers in the U.S. are the lowest they’ve been in a 12-month span.

According to the latest JD Power data, the percentage of customers that are financially healthy has declined to its lowest point in a year. What’s more, customer satisfaction with their financial situation is the lowest it has been in 40 waves since this data tracking began.

Now, as more customers find themselves in precarious financial situations, retail banks need to start addressing how to help customers navigate their current troubles without compromising their future financial goals.

All-Time Lows

There has been a concerning dip in overall financial health. Less than one-third (29%) of respondents say they are financially healthy, while 46% say they are vulnerable. The number of financially healthy customers matches a 12-month low, while the 46% of vulnerable customers is the highest mark in the past year.

Customer sentiment regarding financial health status, stress levels and empowerment to improve their financial situation also fell to a 12-month low, with satisfaction is at the lowest mark since data tracking began. It’s a discouraging trend as customers entered the final quarter of 2023.

The Anatomy of Customer Savings

As customers watch their financial health deteriorate, there is a renewed focus on savings outside of employer-sponsored retirement accounts. Nearly one-half (44%) of customers say their non-retirement funds are in either a savings or higher yield account at their primary bank, while 24% say an investment/wealth management firm, and 15% say a secondary bank. Additionally, (41%) say they do not have any savings outside of a retirement account.

Predictably, the vulnerable population (60%) and those under 40 (48%) are the most likely groups not to have any non-retirement savings, a stunning 37% of bank customers over the age of 40 and 18% of those who make more than $100,000 annually say they do not have any non-retirement savings.

Emergency in Name Only

While retirement may seem like a far-off aspiration to customers that are just trying to make it from month to month, emergency savings funds may be a more realistic target. Bank customers often think of their savings in buckets and while 41% say they do not have any non-retirement savings; they are more likely to say they have some form of an emergency savings account. Only 10% of bank customers say they do not have an emergency savings account, while 44% have their emergency funds in a savings account at their primary bank.

While the intended use of these funds may be for an emergency, some customers have had to pull funds from them to pay for everyday expenses. More than one-fourth (28%) of customers say they’ve used their emergency savings account in the past 90 days to pay for gas, food or rent. This helps explain why customers do not view these accounts as being a long-term savings fund. 

More than one-third (36%) have transferred money into these types of accounts in the past 90 days, and 30% have checked the interest earned on their account, which may imply an opportunity for banks to reach out to their customers with incentives or other high-yield options to help grow these funds all while hoping to stave off any rate shopping these customers may be inclined to do. 

Surviving Now, Preparing for Later

This month’s data illustrate how harsh economic conditions can linger for months long after the initial crisis is over. While most analysts see inflation and its corresponding complications as an issue of the past, many banking customers in the U.S. are still grappling with the aftereffects. 

As customers look to move forward and try to find ways to safeguard against another bout of turbulence in the future, they are turning their eyes towards savings and how to best optimize these funds when they’re still trying to dig themselves out of a hole. Banks could ingratiate themselves to customers by helping in this regard, actively reaching out with tools, advice and options that would help in both the short and long term. Those banking institutions that can forge more meaningful customer relationships will be less vulnerable to rate and shopping and deposits leavings leaving, too. 

Find out More

This Banking and Payments Intelligence Report is based on responses from 4,000 retail bank customers nationwide and was fielded in September 2023. It was authored by Jennifer White, senior director of banking and payments intelligence at JD Power. Please contact us at the numbers below to connect with Ms. White or to learn more about the underlying research.

Media Contacts

Brian Jaklitsch; East Coast; 631-584-2200; [email protected]

Geno Effler, JD Power; West Coast; 714-621-6224; [email protected]

Strategies for Winning Over Emerging Affluent Customers

There’s a clear and urgent need to win over emerging affluent customers. It’s not just about providing regular banking services anymore; it’s about giving them personalized financial advice and guidance. In this second webinar of the Stop Selling, Start Advising series, dedicated to shifting the mindset from sales to advisory services, Jennifer White, a Senior Director of Banking & Payments Intelligence at JD Power, and Evan Siegel from eGain delve into the strategies for capturing the business of the emerging affluent. They reveal the financial challenges the emerging affluent face and their unique needs in today’s banking landscape.

How can you train your frontline teams to provide effective advice strategies to engage this highly desired audience?

Who Are the Emerging Affluent and Why Should You Target Them?

In order to successfully market to this specific group, it is crucial to understand who the emerging affluent are and what drives them. This demographic includes individuals under 40 with an annual household income exceeding $80,000. According to JD Power data, 9 out of 10 emerging affluent customers are interested in receiving proactive advice from their primary bank. However, despite 60% of this group recalling receiving advice or guidance in the past year, only 30% feel that the advice they received was beneficial to their needs.

Why Add Advice Delivery to Your Retail Banking Strategy?

Understanding the significant impact of not providing financial advice to this group: A bank’s failure to provide advice can negatively impact customer satisfaction, retention, and loyalty by up to 390 points.

What Can You Learn with Powerful Consumer Insights? 

• Financial advice preferences among the emerging affluent: This group wants to receive advice on topics such as in-depth financial reviews, tax planning, and home-related matters to help them prepare for major life events.
• Top channels for effectively reaching and engaging with emerging affluent: While email communication is the top preferred choice,  in-branch experiences remain valuable to them—strategically balance in-branch and digital channels to increase engagement proactively.
• Understand the crucial role of personalized financial advice and guidance in creating a positive customer experience: Banks and credit unions can win relationships with emerging affluent customers and compete against larger banks and fintech companies by enabling resources to address customers’ need for valuable financial guidance fully.
• Harness the power of AI-Powered superior advice and solutions: Take the guesswork out by delivering advice by creating tailored recommendations, making the process efficient, consistent, and compliant.
• Using consumer research to enhance your strategy: To create positive customer experiences, it’s important to consider customer segmentation, channel strategy, banker rewards and scorecards, compensation, hiring profiles, HR model adjustments, marketing strategy, and differentiation from competitors.

To learn more about capturing the business of the emerging affluent and the strategies discussed in this conversation, listen to the full webinar by clicking the link below.

View Full Webinar

Loyalty among Live TV Streamers Much Stronger than Cable and Satellite Customers

Technology, Media, and Telecom Intelligence Report
November 2023

Loyalty among Live TV Streamers Much Stronger than Cable and Satellite Customers

No cord? No problem. At least, no loyalty problems. Even though it may be easier to switch streaming service than it is to change cable or satellite providers, customers in the United States are far more loyal to streamers than traditional television providers.

According to the latest JD Power data, the likelihood of live TV streaming customers switching services in the next year is just 12%, while the likelihood of cable and satellite customers switching is 21%.

It’s a surprising trend, given the nature of each of the platforms. While customers have traditionally shied away from switching cable/satellite providers due to service bundles and the clunky cancelation and installation processes or been leery of relying on shaky service from streamers instead of the tried-and-true platform they were accustomed to, those attitudes have shifted, thanks to the superior customer care and problem resolution that streamers are providing its users. 

YouTube TV is King of Live TV Streamers

YouTube TV is now ranked best among live TV streaming customers, a huge boon to the streamer who has provided great service amid an uptick in subscribers due to some big rights acquisitions.

YouTube TV (795) improves more than any other Live TV streaming provider this year and ranked highest in Live TV streaming satisfaction to beat out Hulu + Live TV (785), and Sling TV (772). 

DISH Keeps its Crown among Cable/Satellite

For a sixth consecutive year, DISH ranks highest in the cable/satellite TV–national segment with a score of 709. DIRECTV (705) ranks second.

DISH performed exceedingly well in two markets, as it ranks highest in the cable/satellite TV in both the U.S. North Central (699) and South (725) regions. Verizon Fios ranks highest in the East region, while DIRECTV ranks highest in the West region (704). 

The Growing Divide

What’s driving this chasm between cable/satellite and streaming providers? A multitude of factors. The largest difference (156 points) was in the cost of service, with cable/satellite providers just not being able to compete on price with the live TV streamers. But live TV streaming providers also distinguished themselves from their cable/satellite counterparts in customer care (80 points), performance and reliability (64 points), and billing and payments (60 points). 

Customer care was the area of largest year-over-year improvement for live TV streaming. Customers reported improvements across all care channels, including phone (+24 points); website (+17), and the streamer’s respective apps (+8). Hulu + Live TV has the highest customer care satisfaction score, with YouTube jumping into second thanks to a 49-point improvement. Overall, 30% of all streaming customers that contacted customer service this year, and 84% felt the provider made it somewhat or very easy to resolve their problem.

Swimming Up-Stream

In the past, cable/satellite providers may have been the beneficiaries of their status as a legacy model that had a high degree of difficulty in switching or outright canceling. But these providers can no longer rest on their laurels. The improvements made in customer care have vaulted live TV streamers to a different level in terms of satisfaction and loyalty, and the subscribers that are on the fence about switching have taken note.   

Streamers have always been a more affordable choice, but there was always a trade-off in reliability and customer care. Now, with streamers succeeding in all areas, cable and satellite providers have no choice to step up their game and rise to the occasion. If they don’t, they run the very real risk of fading into the background faster than anyone anticipated. 

Find Out More

This Technology, Media, and Telecom Intelligence Report is based on responses from 23,584 customers and was fielded from October 2022 through August 2023. It was authored by Carl Lepper, senior director of technology, media, and telecom intelligence at JD Power. Please contact us at the numbers below to connect with Mr. Lepper or to learn more about the underlying research.

Media Contacts

Brian Jaklitsch; East Coast; 631-584-2200; [email protected]

Geno Effler, JD Power; West Coast; 714-621-6224; [email protected]

Even as Inflation Eases, U.S. Bank Customers Frustrated by Stubbornly High Prices 

Banking and Payments Intelligence Report
November 2023

Even as Inflation Eases, U.S. Bank Customers Frustrated by Stubbornly High Prices 

The recent news on inflation has been positive, but the financial health scores^[1] of banking customers in the United States have not budged.

According to the latest JD Power data, while the inflation rate has dropped to 3.2%, the percentage of customers that are financially healthy remains near an all-time low. What’s more, customers say that they feel less empowered to manage and more affected by inflation. 

The problem, it seems, is that even though topline inflation rates have slowed, the prices of consumer goods have remained higher than ever, leaving many consumers uncertain about whether they can keep up with rising costs.

The Doldrums

One month after customers’ financial health status dipped to all-time lows, not a lot has changed. Less than one-third (30%) of respondents are financially healthy, while 46% say they are vulnerable. 

Customer sentiment regarding financial health status, stress levels and empowerment to improve their financial situation rebounded slightly, but all are comparable to 2022 levels, when the economy was in a much more tenuous state.

The Price is Wrong

While the economy has provided some positive signs, including GDP and employment growth, bank customers are still having trouble with consumer prices. More than three-fourths (76%) of customers said that the price of goods they buy is increasing faster than their income, a rate that was highest among stressed customers (88%).

It all amounts to a counterintuitive trend in which the effects of inflation have begun to rise again, and customers’ confidence in their ability to manage inflation has fallen off since the summer, all while the rate of inflation has slowed. That’s largely due to the fact that, although the inflation rate has been declining, the Consumer Price Index up 3.3% over the past year. 

’Tis the Season

As high prices continue to wield an outsized influence on consumers’ financial health, banking customers are staring down their next big hurdle: the holiday season. Regardless of their financial health, consumers will likely be going into spending mode during the next few months. That presents an urgent need for banks to step in and be proactive in offering personalized assistance.

With more than two-thirds (70%) of customers categorized as financially unhealthy, an influx of holiday debt could create significant challenges. Banks that show customers how they can help them navigate their existing financial situations and have new budgeting and repayment solutions to help mitigate their holiday exposure, will both improve their relationships and help keep clients from digging themselves a deeper hole. It’s a matter of time before the price of goods eases along with inflation, but banks will have to help customers bridge that gap to better days.     

Find out More

This Banking and Payments Intelligence Report is based on responses from 4,000 retail bank customers nationwide and was fielded in October 2023. It was authored by Jennifer White, senior director of banking and payments intelligence at JD Power. Please contact us at the numbers below to connect with Ms. White or to learn more about the underlying research.

Media Contacts

Brian Jaklitsch; East Coast; 631-584-2200; [email protected]

Geno Effler, JD Power; West Coast; 714-621-6224; [email protected]

 

^[1] JD Power measures the financial health of any consumer as a metric combining their spending/savings ratio, creditworthiness, and safety net items like insurance coverage. Consumers are placed on a continuum from healthy to vulnerable.

EV Adoption Trends: Not as Simple as Current Dealer Inventory Might Suggest

E-Vision Intelligence Report
November 2023

EV Adoption Trends: Not as Simple as Current Dealer Inventory Might Suggest

Key Findings

• EVs Still in Early Adopter Phase: New electric vehicle (EV) sales accounted 8.2% of total new-vehicle sales through October 2023, which is up from just 2.6% in 2020. While that is significant growth, it still represents a nascent market of early adopters. More notable is the fact that EV consideration, as measured by the number of consumers who say they are “very likely” to consider an EV for their next purchase or lease, has grown 3.3 percentage points in the last month alone to reach 29.2%. JD Power projects that EV sales will reach 13% market share by the end of 2024 and 24% total market share by 2026, putting the EV market firmly in the “early majority” phase of adoption.
• The Missing Mass Market: Availability and affordability are among the biggest factors influencing mass EV adoption but right now there is a lack of viable options in the biggest mass market segments. The largest segment in the industry is mainstream compact SUV, which commands nearly 17% of total industry share. Within this segment, EVs only account for 6% of total sales. Compare that with the compact premium SUV segment, which accounts for just 6% of total retail sales, and yet EVs account for nearly 50% of all sales in the segment. 
• A Different Type of Sale: EVs are taking dealers longer to sell than their internal combustion engine (ICE) counterparts, which reflects the unique challenges consumers face when considering an EV purchase. Currently, 7 of the top 10 reasons for consumers to reject an EV are issues that do not exist in ICE vehicles, including lack of charging station availability; time required to charge; limited driving distance; and inadequate performance during extreme temperature.

Executive Summary

To read the headlines and social media chatter during the past month or so, one might think consumers had suddenly turned their back on EVs: “EVs are piling up on car lots across the country.” “EV inventories increased more than 500%.” “EVs are sitting on dealer lots for much longer than gas-powered vehicles.” However, that’s not necessarily the case. While there have been some speed bumps on the road to mass adoption of EVs, the recent trend in dealer inventory is more of a reflection of the technology adoption lifecycle and current product mix than it is a referendum on EVs.

In fact, according to JD Power data, the number of consumers who say they are “very likely” to consider an EV for their next purchase or lease, has grown 3.3 percentage points from September to October, reaching 29.2%, its highest level of the year.

This E-Vision Intelligence Report dives into key data points trending in each monthly EV Index update, along with other data points gathered from JD Power studies and pulse surveys, to spotlight emerging trends and important shifts in EV consumer sentiment.

Seeing the Forest for the Trees

The EV inventory and sales stats that have been dominating the news cycle for the past month are true. EV inventories have increased, and they are taking longer to sell, on average, than gas-powered vehicles. However, those two data points in isolation belie a much more complex combination of market dynamics driven by everything from current product mix to price changes and incentives. Most notably, they downplay the fact that, at 8.2% of total new-vehicle sales market share, the EV adoption curve is still very much in the early adopter phase when any small blip in activity will show an outsized effect on short-term trends.

When viewed from a longer-term perspective, at current rates of adoption, EV market share will reach 13% of the total new-vehicle market by the end of 2024; 19% by the end of 2025; and 24% by the end of 2026. While dips will likely be seen along the way—similar to the sharp decline in EV sales that occurred from May to June 2023—when viewed over a longer time horizon, EV sales will continue to rise steadily.

The Missing Middle in the Current EV Mix

One key factor that will drive the transition from the “early adopter” to “early majority” phase of EV adoption will be the introduction of new models in the mass market segment. Currently, the EV marketplace is dominated by premium vehicles. 

To put this in perspective, consider that Tesla, which is classified as a premium brand, accounts for 63% of total new EV sales and lease volume to date. Digging deeper into the data, we find that EVs account for just 6.0% of EV sales in the mainstream compact SUV segment, which is the biggest vehicle segment in the United States, accounting for 16.5% of total retail sales. By contrast, EVs account for 49.6% of sales in the premium compact SUV segment, which accounts for a smaller 6.5% of the total market. 

That gap in EV accessibility becomes even larger when price is factored into the equation. The average retail price for a mass market compact SUV is $52,000, while the average retail price for a comparable gas-powered vehicle is $34,000, a gap of $18,000. In the premium compact SUV segment, however, the gap between average EV prices ($58,000) and comparable ICE prices ($54,000) is just $4,000.

Not Your Father’s Purchase Experience

Another factor that will heavily influence the pace of the EV transition will be a recognition among the various stakeholders in the EV market—manufacturers, dealers, electric utilities, and government agencies—that they all have an important role to play in consumer education.

Currently, four of the top 10 reasons for rejecting EVs are infrastructure-related and seven of the top 10 reasons for rejection do not exist for ICE vehicles. Concerns about lack of charging station availability, time required to charge, inability to charge at home or work, power outage concerns and concerns about inadequate performance in extreme temperatures are all new challenges that consumers have not had to deal with before. The sooner EV stakeholders focus on consumer education and significant investment in EV charging infrastructure, the sooner mass market consumers will follow.

Methodology

This JD Power E-Vision Intelligence Report is based on data and insights from the JD Power EV Index, the JD Power EV Retail Share Forecast and the JD Power U.S. Electric Vehicle Consideration (EVC) Study. The JD Power EV Index is an analytics tool to benchmark the growing EV market in the United States. It tracks millions of data points aggregated into six categories—interest, availability, adoption, affordability, infrastructure and experience—to evaluate the progress to parity of EVs with ICE vehicles in the U.S. Each month, the JD Power electric vehicle practice will analyze these data points, and others to spotlight emerging trends and important shifts in consumer sentiment that are helping to define the fast-moving EV marketplace. 

Find out More

This report was authored by Elizabeth Krear, vice president, electric vehicle practice; Brent Gruber, executive director, electric vehicle practice; Stewart Stropp, executive director, electric vehicle practice; and Kristen Richter, senior manager, electric vehicle practice. The JD Power E-Vision initiative is a company-wide program focused on maximizing JD Power industry-leading EV data, analytics, insights and solutions. Please contact us at the numbers below to connect with the authors or to learn more about the underlying research.

 

Media Contacts

Shane Smith; East Coast; 424-903-3665; [email protected]

Geno Effler, JD Power; West Coast; 714-621-6224; [email protected]

Financial Malaise Forces Bank Customers in the U.S. to Revamp their Holiday Plans

Banking and Payments Intelligence Report
December 2023

Financial Malaise Forces Bank Customers in the U.S. to Revamp their Holiday Plans 

While the United States economy experienced virtually an across-the-board rally in November, financial sentiment among bank customers in the U.S. remains stubbornly low, and it is leading to many re-thinking their 2023 holiday plans.

According to JD Power, the percentage of U.S. bank customers that are financially healthy^[1] has fallen to an all-time low. As a result, some customers are pumping the breaks on their plans to spend and travel this December. 

Financial Erosion Continues                         

Customers’ financial health has sunk to an all-time low. Just more than one-fourth (28%) of respondents are financially healthy, while 48% fall into the vulnerable category. Those numbers paint a bleaker picture than two months ago, when the previous grim benchmarks were established.

Customer sentiment regarding financial health status, stress levels and empowerment to improve one’s financial situation all remain stubbornly low, as a sense of malaise has begun to affect a wide swath of consumers.

Santa Maybe

With the holiday season upon us, 35% of customers say they plan to spend less on holiday shopping than last year. That is down from 40% a year ago, but still reflects a significant number of customers looking to cut costs by skimping on the holidays. Just 17% said they plan to spend more than a year ago. Somewhat confoundingly, the overextended population (29%) is the more likely to say they plan to spend more than they did in 2022.

Despite persistent price concerns and eroding financial health, the proportion of customers who budget for the holidays is not increasing over time. Nearly one-third (31%) said they do not budget for holidays spending, a rate that included 36% of the vulnerable population and 32% of the stressed population. 

Home for the Holidays

Customers appear to be content to remain in their own homes for the holidays, as 39% said they do not plan to travel during the season. That’s in line with two years ago (41%), but it’s worth nothing that the 2021 season still included widespread lingering concerns about the pandemic, a variable that is likely not a factor with the bulk of customers anymore. 

For those that have decided to take a holiday trip, the majority are changing the way they travel. Nearly one-fourth (23%) of customers that intend to travel are changing their destination to somewhere local and/or less expensive, while 18% say they are changing when they travel, and another 18% say they are changing how they travel (i.e., driving instead of flying).

Early Financial Resolutions

Just like a month ago, it seems like there is a disconnect between the positive financial reports from the press and the muted reality that many customers in the U.S. are living. Holiday spending and travel are usually good indicators of how healthy most Americans are, and these data make that a sobering thought.

Still, as the calendar prepares to turn to the new year, there are plenty of opportunities for banks to help their customers navigate their way through a tenuous time of year. For example, budgeting solutions are desperately in need for the bulk of the population. Customers that find that this assistance can be beneficial now may develop healthier habits, which can help banks forge more meaningful relationships and customers into better financial situations. 

Find out More

This Banking and Payments Intelligence Report is based on responses from 4,000 retail bank customers nationwide and was fielded in November 2023. It was authored by Jennifer White, senior director of banking and payments intelligence at JD Power. Please contact us at the numbers below to connect with Ms. White or to learn more about the underlying research.

 

Media Contacts

Brian Jaklitsch; East Coast; 631-584-2200; [email protected]

Geno Effler, JD Power; West Coast; 714-621-6224; [email protected]

 

^[1] JD Power measures the financial health of any consumer as a metric combining their spending/savings ratio, creditworthiness, and safety net items like insurance coverage. Consumers are placed on a continuum from healthy to vulnerable.

Insurers Eye Efficiencies and Technology as Ways to Offset Rising Premiums in 2024

Insurance Intelligence Report
December 2023

 

For the insurance industry, 2023 was the year of disruption. Surging rates made stakeholders re-think everything, from underwriting to carrier selection to the channels through which customers can access their policies. And with 2024 bearing down on carriers and policyholders alike, there’s bound to be much more in the way of sharp turns and quick pivots.

According to data collected by JD Power, 2024 will present plenty of new challenges and shifting trends in the insurance industry. From an evolution in the way customers shop for their policies to the way insurers service those policies, we have gleaned some key insights into what may be on the horizon for the year ahead.

Unbundling for Savings

“Bundle and save” has been a point of emphasis for carriers for years. But with premiums increasing across the board, customers are starting to uncover that decoupling their carriers may boost their savings. 

According to JD Power research, customers are increasingly interested in usage-based insurance (UBI). That interest is disrupting the decision to bundle auto and homeowners insurance, with many customers finding their best deal is to have a UBI-based auto policy and a homeowners policy with a different, lower-priced carrier. In 2023, 66% of customers with less than one year with their home insurers bundled their home and auto insurance. That’s down from 76% a year ago.

Customers with more than a year with their home insurer showed more willingness to bundle, with 77% bundling home and auto, up slightly from 76%. But with no signs of premiums slowing down, we expect UBI to play an even larger role in insurance shopping in 2024, as customers become more agnostic about their carrier willing to unbundle and price shop their coverage.

Offsetting Cost with Value

In the face of heightened emphasis on rate adequacy, insurance carriers are left with no other option but to increase premiums. But that means it’s essential that carriers show an overall value proposition for auto and home insurance policies.

For customers who either want to stick with their current carrier or who don’t find a better option, the focus shifts to reducing the costs of their policies. If the carrier hasn’t already conducted proactive outreach offering a policy review, customers will be reaching out to their agents or insurer seeking ways to mitigate their higher premiums. This presents an opportunity for carriers to highlight the existing and potential value of the policy and the advantages of being their customer. 

Strategic partnerships between insurers and other companies are one way we have seen carriers bring additional value to their offerings and we expect to see more of this moving forward. For example, starting in 2022, one carrier began partnering with a mortgage company to provide its customers savings on a home loan or refinance. Another carrier partnered with a home security company to provide their homeowners free smart home security systems, sensors, and installation as well as a reduced rate on monitoring.

Insurers are also just unlocking ways to harness the power of artificial intelligence and machine learning as well, hoping that can alter the cost-benefit equation for customers. Insurers have begun factoring in this powerful new technology into their product pricing, internal operations, sales, and servicing. Carriers who figure out how to do this quickly and effectively are positioned to reduce costs through better risk assessment, claims handling and fraud detection, while increasing sales through expanded distribution channels, acceleration and automation of the underwriting process and more personalized pricing and product offerings. Ultimately, this will improve the customer experience and give insurers more tools to provide faster responses to customer requests and issues—including initiating claims—and ease the burden on agents and contact centers. 

Digital Adoption Surges

Longer claim timeframes and rising claims costs are also putting pressure on carriers to find efficiencies in their claim operations. Loss ratios remain high after two years of double-digit increases and are forcing insurers to focus on speed, efficiency, and accuracy—buzzwords we are hearing in conversations with claims teams. The challenge here is to not lose sight of the customer experience, which is already strained by very long repair times, and digital solutions present a key opportunity. For example, in total losses, industry leaders are using tech to determine totals notably quicker and seeing positive results in both cycle time reductions and improved customer experiences. 

We’ve also seen increased usage of digital channels for claim reporting and communication and expect growth to continue. More than one-third (36%) of respondents say that they texted their insurer, while 30% have used website/apps. That makes texting the second most-popular digital method behind email (50%) and is among the most satisfying channels.

However, not everyone wants to engage in digital channels throughout every aspect of their claim so another challenge for insurers is to engage with customers in their preferred interaction channel, which is key to overall satisfaction. In fact, we find that less than one-quarter of customers want to manage their claim entirely using digital channels, but those that do have high levels of satisfaction, suggesting the tools work well for those that prefer them. But nearly 40% of customers have equal preference for both people and digital interactions, so even in this digital age, carriers will have to continue to have claim staff be available, responsive, and keep customers informed. That could prove challenging with high caseloads and longer-tailed claims continuing in the future.

An Opportunity Awaits

With their wallets taking a hit due to rate increases, customers are going to be more discerning and less brand loyal to their insurers. That means they are going to be looking for the tools and information to help them better understand their policies, the reasons for the rate increases, and what they can do to bring those costs down.

For proactive companies, that can present a golden opportunity. Insurers can both increase their customer base and boost retention by empowering their customers, whether that’s explaining their rates, alerting customers to discounts they may be eligible for, and allowing them to self-service their policies. By meeting customers where they are in 2024, insurers can find a way to earn a new level of loyalty, even amid harsh conditions. 

Find out More

This Insurance Intelligence Report is based on responses from the JD Power 2023 U.S. Insurance Shopping Study, JD Power 2023 U.S. Home Insurance Study, JD Power 2023 U.S. Auto Insurance Study, and JD Power 2023 U.S. Auto Claims Satisfaction Study. It was authored by Stephen Crewdson, senior director; Mark Garrett, director; and Breanne Armstrong, director of insurance intelligence at JD Power. Please contact us at the numbers below to connect with the team or to learn more about the underlying research.

Media Contacts
Brian Jaklitsch; East Coast; 631-584-2200; [email protected]
Geno Effler, JD Power; West Coast; 714-621-6224; [email protected]
 

With 2024 right around the corner, we connected with leaders from our P&C Insurance Intelligence practice to get their take on what we should expect to see across the insurance customer lifecycle in the new year.

Read the blog post >

Utilities to Face Reckoning on Price Increases in 2024

Utilities Intelligence Report
December 2023

The nation’s electric, gas and water utilities are headed for a referendum on price, reliability, and sustainability in 2024. As we come out of a year that saw record-high prices and record-high demand, there are currently 63 electric and 52 gas rate cases pending in 37 states and the District of Columbia^[1]. Meanwhile, as tensions continue to escalate around utility safety and the timetable for transition to more sustainable energy sources, all eyes are turning to utilities to see how they will navigate this volatile period and what changes they will need to make along the way.

JD Power has been tracking consumer sentiment with all aspects of utility service and delivery for the last two decades, evaluating everything from customer satisfaction with the price, reliability, and service of local utilities to opinions on sustainability and clean-air initiatives. Based on those accumulated insights, below are JD Power’s predictions for the biggest trends to watch in the year ahead.

Electric Utilities Face Consumer Backlash on Rates

Customer satisfaction with electric utilities has been trending down for the past two years as average prices rose 14.3% in 2022 and 27% through the first half of 2023. Now, as many of those same electric utilities are pursuing rate cases that add up to a combined $23.7 billion in increases nationwide, many consumers are reaching a breaking point.

That’s going to create a ripple effect of challenges for electric utilities. In fact, when tracking the correlation between utility customer satisfaction and utility profitability, JD Power has consistently found that utilities with higher overall satisfaction scores are far more likely to receive rate increases that are closer to their actual request than those with low satisfaction scores. Conversely, lower levels of customer satisfaction correlate to lower returns and lower rate case approvals. Utilities in the bottom quartile of customer satisfaction scores typically receive an approval rate that is between $2 million and $8 million lower than utilities in upper quartiles.

Utilities need to get out in front of this issue. While there’s little they can do about the costs they are incurring, there are things they can do to offset the negative sentiment their customers are feeling by ramping up communications, delivering more personalized service and making sure customers are aware of infrastructure improvements. Right now, that’s not happening at most utilities. 

Uneven EV Adoption to Define Utility Leaders and Laggards 

Nationwide, total electric vehicle (EV) market share is now at 9% as growing numbers of consumers transition away from gas-powered vehicles. At the state level, however, a stark division is emerging between the top 10 states for EV adoption, where EV adoption rates are growing steadily, and the bottom 10 states for EV adoption, where year-over-year average adoption rates are declining. This division line is creating a very different dynamic for electric utilities in different states, with some quickly emerging as EV pioneers and others being cast as the old guard.

While many electric utilities have been sitting on the sidelines of the EV evolution, some leaders have positioned themselves as EV advocates. Recognizing their critical role in delivering the infrastructure to support EV transformation and the huge potential upside that could come from widespread EV adoption, utilities such as Xcel Energy in Minneapolis and Colorado, PG&E in San Francisco and Austin Energy in Texas have launched aggressive community outreach programs that are making headway. Events like EV ride and drives and efforts to educate consumers on incentives and infrastructure improvements are helping utilities step out of the shadows and take a more active role in leading the EV transition.

Gas Confronts its Own Mortality

Despite threats to ban gas stoves and looming questions about the future of natural gas, consumers still like gas. In fact, according to JD Power data, 50% of gas utility customers have a fuel preference for natural gas in their homes, with 77% relying on natural gas for heat and 59% using it to cook.

However, with the average gas bill in America up 37% through June 2023 and price satisfaction down 49 points (on a 1,000-point scale) from a year ago, that consumer preference might not be there forever.

Gas utilities are confronting a difficult scenario in which several outside forces are conspiring against them, and most are doing very little to combat that with proactive communication, active community outreach and widespread visibility as a source of comfort and safety. Gas utilities have some major image work to do and that all starts with customer communication. Will this be the year they get on the right track? Time will tell, but so far, the outlook is not terribly promising.

Utilities Find Religion in Branding

The common bond in all of the challenges that utilities face, from high prices to concerns about sustainability, is that they can all be addressed with proactive communications efforts. In fact, in the inaugural JD Power Utility Brand Appeal Index (BAI) Study, we found that utilities with the highest brand appeal scores have average overall satisfaction scores that are more than 300 points higher than those with weak brand appeal scores. The utilities with the strongest scores rank in the top quartile in customer satisfaction and enjoy greater loyalty and advocacy. These brands also outperform on customer trust, marketing execution and company reputation metrics.

The concept of branding in the consumer-packaged goods sense of the term is a relatively foreign concept for many utilities that grew up in an era where reliable gas or electric delivery were the only priorities on the corporate mission statement. Now, as consumers increasingly look to utilities for guidance on everything from public safety to energy transition, these brands are facing an enormous opportunity to level-up their customer touchpoints and experiences to earn a premium brand value in the process.

Utilities Finally Embrace Digital

To say utilities have lagged on digital adoption is like saying it took a while for the Chicago Cubs to win their third World Series. As recently as this year, 30% of the largest utilities in the nation still did not offer a mobile app. However, as the number of customers who have signed up for an online account is now up to 71% and the number of customers signed up to receive an e-bill climbing to 62%, utilities are finally starting to realize that digital is where their customers live. This could be the year they seize that opportunity to up their digital games.

Pressure Builds on Water Utilities

Local water authorities throughout the nation have been under enormous pressure to remediate any trace of lead and copper from public water supplies as they’ve raced to comply with the Environmental Protection Agency’s (EPA) Lead and Copper Rule. The rule, which needed to be implemented between December 2021 and October 2024, introduced strict requirements for corrosion control treatment, source water treatment, lead service line inventory, lead service line replacement, public notice, monitoring for lead in schools and childcare facilities, and public education. In many cases, that meant literally going door-to-door to root out old infrastructure and test water samples.

Now, water authorities will be under pressure to deliver on the promise of clean water. One key litmus test for success will be whether customers will drink it. According to JD Power data, roughly 21% of residential water utility customers say they never drink their household tap water. However, customer satisfaction levels are significantly higher among the 36% of customers who do drink their water all the time. The proof of how well water utilities are delivering clean water and communicating that to their customers will reveal itself in the trajectory of this metric during the course of the year.

Find out More

This Utilities Intelligence Report is based on data and insights gathered across all JD Power Utilities Intelligence studies conducted over the course of 2023. It was authored by Andrew Heath, managing director; John Hazen, managing director; Chris Oberle, managing director; Adrian Chung, director; Mark Spalinger, director; Ramah Vaughn, director of Utilities Intelligence at JD Power.

Please contact us at the numbers below to connect with the team or to learn more about the underlying research.

Media Contacts

Brian Jaklitsch; East Coast; 631-584-2200; [email protected]
Geno Effler, JD Power; West Coast; 714-621-6224; [email protected] 

^[1] S&P Global Market Intelligence https://www.spglobal.com/marketintelligence/en/news-insights/research/us-energy-utilities-seek-almost-24b-in-pending-rate-cases 

Even as Financial Health Remains Troublingly Low, Bank Customers in the U.S. Resolve to Improve in 2024

Banking and Payments Intelligence Report
January 2024

Even as Financial Health Remains Troublingly Low,  Bank Customers in the U.S. Resolve to Improve in 2024

As the U.S. inflation rate continues to hold steady, bank customers in the United States are hopeful to take charge in 2024, even in the face of their current economic struggles.

According to JD Power, while the percentage of U.S. bank customers that are financially healthy^[1] remains near the all-time low, four-in-five customers plan to eliminate debt, improve their budgeting and set specific savings goals in 2024.

Financial Woes Continue                                

Customers’ financial health remains troublingly low. Just more than one-fourth (29%) of respondents are financially healthy, while 46% fall into the vulnerable category. These numbers are in line with the previous three months.

Customer sentiment regarding financial health status, stress levels and empowerment to improve one’s financial situation also remain virtually unchanged from the previous month. What’s more, 40% of customers remain extremely worried that the prices for common goods will continue to rise.

New Year, New Budget?

With the start of the new year, many customers are inspired to improve their financial health. More than one-third (36%) of customers say they plan to pay down debt throughout 2024, while 33% say they will create a budget or spending plan, and 29% say they will establish an emergency fund. All these response levels reflect year-over-year increases from December 2022. Notably, customers under the age of 40 were more likely to say they would make these changes. 

When asked which tools that banks provide are particularly helpful to achieving these goals, credit score reporting (66%); spending summary or analysis (66%); and savings goals and budget trackers (60%) rank high. Financially health customers are more likely to find tools helpful, and younger customers are more likely to utilize these tools.

The Stress Test

When customers who do not use tools that banks offer to improve their financial situation were asked why, 49% said they already have their own system to monitor their finances, while 25% said they get this support from outside their bank.

Interestingly, there is also an emotional barrier to tool adoption. About one-fifth (21%) say that looking this closely at their finances causes them added stress, and another 17% say these tools make them feel worse about their finances. In fact, when asked what drives their overall stress, 31% of customers say finances, which is the highest response rate of any reason. 

Judgment-Free Zone

As customers look to dig out of their respective financial holes, they need to feel like they have a partner in their climb. Banks can be integral to that journey, but only if customers feel that they are not being judged and that their financial institution has a real plan to move forward.

Staring down a big debt number on a spreadsheet or working with a budgeting tool that creates a plan that doesn’t feel realistic can create a divide between the customer and the bank. And when that happens, customers feel like they must turn elsewhere. But these financial institutions are uniquely positioned to help, and in the process, build relationships that will continue toward better economic times. Banks that can find a balance in their constructive criticism will be rewarded.

Find out More

This Banking and Payments Intelligence Report is based on responses from 4,000 retail bank customers nationwide and was fielded in December 2023. It was authored by Jennifer White, senior director of banking and payments intelligence at JD Power. Please contact us at the numbers below to connect with Ms. White or to learn more about the underlying research.

 

Media Contacts

Brian Jaklitsch; East Coast; 631-584-2200; [email protected]

Geno Effler, JD Power; West Coast; 714-621-6224; [email protected]