A report released Feb. 20 by the University of Michigan’s American Customer Satisfaction Index showed that while property/casualty insurance customer satisfaction received its highest score in years, Americans’ customer satisfaction with the goods and services they buy declined in the fourth quarter of 2007.

The property/casualty insurance industry improved 2.6 percent to 80, its highest score in more than a decade. Progressive made the biggest jump of any company, up 8 percent to 79. Various website improvements and rate cuts helped fuel the recent surge in customer satisfaction. State Farm tied for the top with the “All Others” category at 81. GEICO and Farmers were the only two companies to slide since 2006. GEICO slipped 4 percent to 80, while Farmers fell 3 percent to 76. Allstate remained unchanged at 78.

But consumer spending growth slowed in the fourth quarter as predicted by the third quarter drop in the ACSI. The index fell to 74.9 on the ACSI’s 100-point scale, down 0.4 percent to its lowest score of 2007. A second consecutive drop in customer satisfaction, combined with increasing unemployment, plummeting house prices, tighter credit, high levels of household debt, and inflating fuel and food prices, is likely to pose even more challenges this quarter for consumer spending growth.

“Falling customer satisfaction has a dampening effect on consumer demand, and household debt to income ratios affect consumers’ ability to spend. Both are moving in the wrong direction, brewing up a double-whammy that may hit the economy hard,” said Claes Fornell, head of the ACSI and author of The Satisfied Customer: Winners and Losers in the Battle for Buyer Preference. “In such an environment, customer satisfaction becomes even more important because satisfied buyers tend to reduce sellers’ cash flow volatility.”

Amid fears of a recession, the looming mortgage crisis, and high insurance premiums, the finance and insurance sector dropped 0.7 percent to 75.5, a retreat from the gains last year that put the sector at its highest level since 1994.

ACSI measures retail, finance and insurance, and e-commerce every fourth quarter.

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Source: American Customer Satisfaction Index news release

© Copyright 2007, National Association of Mutual Insurance Companies (NAMIC).