Based on a recent Market Strategies International study, 31 percent of American households feel obliged to do business with one or more financial services companies they distrust. Market Strategies’ national omnibus study explored trust in a variety of financial services product categories, including banking, credit cards, home mortgage, investment services, auto, home and life insurance.
The proportion of customers who distrust their current provider varies by category, with only 12 percent of customers indicating they distrust their bank, compared with 24 percent of all homeowners who distrust their mortgage lender. As a frame of reference, 61 percent of Americans indicate they generally distrust the federal government. Yet although many may feel they have little ability to choose or change the government’s direction, this is not the case when it comes to choosing or making changes in personal finances and insurance: Most households are presented with more choices today than ever before, Market Strategies stated.
“The fact that so many consumers are working with a financial services institution they don’t trust has significant financial implications,” Market Strategies Senior Vice President of Financial Services Jeremy Bowler said in a press release. “It creates greater opportunity for disruptive change, and with financial technology solutions rapidly emerging, this is a pool of consumers who are ripe for the picking.”
For the personal insurance industry, the very product is a promise — to help restore your car or home in the event of an accident or loss. Because the average American household only files an auto insurance claim once every seven years — and a homeowner’s claim once every 10-15 years — many have never had the experience of filing a claim with their current insurer. So although the level of trust consumers feel toward their personal insurance providers may be stronger than that for a mortgage lender, the insurance industry has reason to be concerned at the proportion of policyholders who distrust that their carrier will live up to its promises.
Customers who don’t trust their service providers represent a significant risk to the profitability of those businesses. Survey results reveal the overwhelming majority of distrusters are significantly more likely to dissuade friends and colleagues from doing business with a company they use. This is critical because personal recommendations are one of the most trusted information sources cited by consumers when shopping for a new bank, insurer or investment firm, the report stated.
When it comes to trust, the survey showed a significant variation by age. On average, consumers over age 55 tend to be more trusting of their financial services providers than customers under age 35. For a financial services firm, correctly identifying those customers who lack trust in their brand or service representatives can often be challenging. For instance, not all mllennials are distrusting, as 69 percent say they trust all of their financial services providers.
However, a number of factors can influence a customer’s level of trust; among these are service consistency and quality. Customer-perceived service failures are often likely to seed distrust, such as a mortgage servicer’s year-end escrow statement, which often causes client confusion, or an auto insurance company that never communicates with its clients except to send a bill or renewal notice.
“Among auto insurance customers, those who recall receiving even just one non-bill related communication are, on average, 12 percentage points more likely to be very trusting than those recalling no such interaction with their carrier,” Bowler said. “A similar pattern exists for banking, life insurance, mortgage lending, credit cards and even investment firms. Meeting expectations is just part of the trust equation. Consistency is the true catalyst; few people are going to buy a car, wristwatch or door lock that only meets expectations most of the time.”