Policy Works blog | Commercial lines bliss

Commercial-insurance: Search, experience or credence?

Written by Steve Pieroway | Apr 22, 2014 4:01:55 PM

Pop-quiz: can you tell if your lawyer or doctor is doing their job as effectively as possible? Even after you hear them explain their opinion on something, are you left wondering if it's the right call?

I often am. In fact, I have the feeling of, "I want to trust you, to believe you, but I just can't tell if what you're saying to me makes sense." The problem? I don't have the knowledge or experience to evaluate the service, whether it's a legal opinion or medical advice. 

Insurance, especially commercial insurance, is exactly the same way. How do you think insureds feel when they have to buy insurance? How easy is it for them to evaluate your service

Here's an excerpt from our eBook titled, The Customer Satisfaction Trap, that discusses the nature of how consumers view insurance products and services, and what brokers can do to build loyal customers:

Products and services are believed to exist along a search-experience-credence continuum. What does this mean? It means that the experience of consuming a product or service, and all of the thoughts and feelings associated with the entire buying process, varies greatly depending on what is being consumed.



Search
Search qualities describe those products and services that can be fully evaluated prior to purchase, such as a pair of jeans or a TV set.

Experience
Experience qualities describe those products and services that must be first purchased and consumed, or experienced, such as a haircut, before evaluation can be made.

Credence
Credence qualities, on the other hand, are those that the consumer can never fully evaluate even after purchase and consumption. Customers accept, on faith, that the outcome is good. This is due to the complexity of the service being rendered; lay people do not have the training or knowledge to effectively judge how well a service has been performed. Examples of credence services include automobile repair, medical surgeries and the provision of insurance service. As services become more difficult to evaluate, there tends to be more uncertainty, or from the consumer point-of-view, more risk.

Insurance brokering is a credence-based service. For many customers, it is nearly impossible to tell if an broker has done a good job, especially for the given price. In the commercial realm, risk managers at larger organizations may have some background in insurance and determining risk.

More often than not, however, risk managers are industry experts, not insurance experts. Thus, risk managers and business owners alike are left to rely on their insurance brokers as experts in determining their needs. This places the purchaser of insurance in a position of vulnerability. When consumers feel vulnerable, they’re more likely to be suspicious. And this can ultimately lead to mistrust.

If you'd like to read more, download the eBook in its entirety. 

Next week I'll look at how trust and commitment are critical in the relationship building process for credence based services like commercial insurance.