March 22, 2019

How to Improve Customer Retention in the Insurance Industry

customer retention in insurance industry

Improving customer retention can prevent billions of dollars of lost revenue in the insurance industry. Research from CallMiner revealed that avoidable churn costs businesses $136 billion in the U.S. alone.

What’s worse than losing billions in revenue is the amount that insurers have to pay to acquire new customers. According to Hubspot, the insurance industry is tied for the third-highest customer acquisition cost at $303.

Reducing customer churn requires insurance companies to think outside the box. Specifically, they can make two major changes to the way they present, offer, and market products and services.

  • Offer more than insurance
  • Cultivate an online reputation

Reduce Customer Retention by Offering More than Insurance

A 2018 report from Bain & Company revealed that customers look for value quality and ease of use from their insurer.

In other words, to truly stand out from the competition and retain customers, insurers must look to offer more value and a simpler customer experience. There are three main ways of doing so:

  • Provide a personalized experience
  • Create a product “ecosystem”
  • Expand your digital efforts

Provide A Personalized Experience

Insurers can create products and services that are tailored to the needs and lifestyle of each customer.

A 2017 Accenture survey showed that 44 percent of health insurance customers believe it to be important that their providers not just offer insurance packages but health advice as well.

The survey findings also allowed Accenture to put the respondents into specific groups such as the “Nomads,” which are “digitally active insurance customers” and made up 40 percent of the overall group. In terms of auto insurance, Nomads stated their interest in receiving customized adjustments to their insurance package depending on their car usage.

Creating these personalized packages for each customer pays off in the long run. It shows customers that you view them not as just another entry in the database but as a major investor in their well-being. Personalization is also one of the early building blocks of trust and value between the provider and consumer.

Create A Product “Ecosystem”

Personalized insurance packages also means that insurers have the means to provide additional products that are in tandem with existing packages. The Bain report cited above also showed that a growing number of insurance customers around the world want their insurance plan to include additional items that help them with everyday life.

For example, auto insurers might include assistance service when the time comes to buy or sell a car. Life insurance plans can offer additional support for senior citizens and home insurers can provide a home security bundle along with their insurance plans.

customer retention in insurance industry

A portion of this model already appears in U.S. markets, according to the report. Nearly 40 percent of customers who needed information on diagnostics or healthy living advice actually took advantage of the additional services available within their insurance plans.

Providing this “ecosystem” of services related to the insurance product not only helps keeps customers, but it further shows that an insurance provider cares about the customer to the point where the value of the product offered exceeds customer expectations.

Expand Digital Efforts (Where it Counts)

The customer’s reliance on digital platforms continues to increase, and it already has a major impact on the insurance industry.

The Bain report revealed that the amount of “digitally active” insurance customers increased with an average of more than 60 percent over the last four years. That’s not just in one country; that’s across multiple insurance markets around the world.

These digitally active policyholders are using mobile devices to engage with insurers. The same report showed that the use of mobile device for “research and/or interactions” increased by an average of over 70 percent in 2017 alone.

These numbers might prompt insurers to adopt a digital-only strategy, but that will negatively impact customer loyalty. The Bain report showed that customers actually gave lower loyalty scores to insurers who only engaged on a digital level. Instead, companies will need to create a digital strategy that compliments current offline channels of engagement.

To keep customers happy and loyal, the Bain report also suggests that insurers will need to have multiple, high-quality engagement with its customers throughout the year. Each contact with a customer must be substantial and informative to have any positive effect on the relationship between provider and customer.

Reduce Customer Retention by Cultivating an Online Reputation

Providing an ecosystem of personalized insurance plans and experiences that are transparent across multiple channels can be a boon for any insurer, but it won’t amount to anything without a robust online reputation.

To grow that reputation, insurance companies will need to actively monitor and respond to reviews because doing so can actually create loyal and retaining customers.

Our online reviews survey showed that 80 percent of consumers believe that a business cares more about them if management responds to their reviews. A simple response goes a long way in showing an insurer’s appreciation and value of each customer and their feedback.

Responding to reviews also allows insurers to tap into a highly-neglected portion of consumers. The same survey showed that over 63 percent of consumers never got a response to their online review. Taking the time to respond to both negative and positive customer feedback can increase both customer retention and acquisition.

The surveys also shows 61.2 percent of consumers see online reviews as influential when choosing a new insurance agent. Business responses to those existing reviews can further entice potential customers to visit the business to the tune of 45 percent.

The average star rating for the insurance market is the highest of any industry we surveyed, which includes restaurants, transportation, and healthcare. With excellent service, high-rated reviews, and a vigilant review monitoring and response strategy, any insurer can increase that average rating and retain more loyal customers.

Evolve your financial services business for a digital-first future.

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