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The Effects of Customer Satisfaction on Company Profitability: Evidence From the Property and Casualty Insurance Industry
Author(s) -
Pooser David M.,
Browne Mark J.
Publication year - 2018
Publication title -
risk management and insurance review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.386
H-Index - 16
eISSN - 1540-6296
pISSN - 1098-1616
DOI - 10.1111/rmir.12105
Subject(s) - customer profitability , profitability index , customer satisfaction , business , customer equity , customer retention , marketing , customer delight , revenue , customer advocacy , customer lifetime value , finance , service quality , service (business)
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.