In an insurance industry battling rising costs and losses, the struggle to attract and maintain customers is real.
Fortunately, studies show that existing customers value good service and meaningful relationships even more than low rates. This means that, to maintain the customer relationships they already have, insurers must focus on customer experience and engagement.
Here’s why customers leave after a closed deal, and what you can do to forge stronger, more profitable, long-term relationships.
Why Customers Leave (and Why They Stay)
New customers often shop on price, but even the best insurance rates don’t retain customers who experience poor customer service.
In Gladly’s 2018 Customer Service Expectations Survey, 92% of customers polled said that they would stop doing business with a company after three or fewer bad customer service experiences — and 26% said it would take only one bad experience to make them leave, says Shep Hyken
, chief amazement officer at Shepard Presentations.
“Your customers no longer compare you just to your direct competition. You are being compared to the best service they have ever received - from any company or any person,” Hyken says.
That’s a tall order for insurance companies, which continue to lag behind other sectors in customer service, the Actuary’s Chris Seekings
writes. The insurance industry’s customer satisfaction index score fell in 2018 while the scores of a majority of sectors rose, says Affinion Vice President Karen Wheeler
Insurance customers’ needs are relatively simple: They want policies that meet their needs at prices they can afford, and they want good communication with their insurance company, says Bain's Darci Darnell
. “They expect their insurers to help alleviate their anxiety, not add to it.”
In practice, however, insurance companies aren’t delivering on these basic needs. Bain’s fourth annual Customer Behavior and Loyalty in Insurance report, written by Henrik Naujoks
and fellow researchers, found that most insurers are not delivering the quality products or ease of use their customers demand. The study found that 80% of insurance customers ages 25 to 40 rated their insurer low on the items that mattered most to them.
See also: How to Enhance Customer Service
The transition to a digitally based customer service world remains racked with growing pains. Mark Breading
describes an attempt to cancel a magazine subscription that required three phone calls, two web forms and an online chat session. In the end, Breading says, he contacted his credit card company and blocked the transaction — a process that was simpler than contacting the magazine itself.
Unlike magazine subscriptions, however, insurance coverage is often a requirement. Customers may already feel that dealing with their insurance company is a chore; when the available communication tools are tough to manage, the relationship can be damaged beyond repair.
“The challenge (and opportunity) is to enable the smooth transfer of those interactions and the related information between different channels in real time, so that the customer is provided with choice, and the use of digital and human capabilities can be optimized,” Breading says.
How Insurance Companies Respond to Customer Variability
Emboldened by easy information access and driven by a desire to save money, insurance customers are quicker than ever to switch carriers when their policy anniversaries arrive. To combat the regular shift in customers, insurance companies have leveraged a number of tactics.
These tactics include leveraging data to improve personalization and employing new tools and strategies to make it easier for customers to purchase property and casualty insurance, says Tom Super
of J.D. Power.
However, digitization and its corresponding personalization no longer make companies stand out from their competition. In fact, companies that don’t
offer a simple, personalized on-demand experience stand out from the crowd by falling short of everyday customer expectations, says Kevin Haydon
, who works at the digital insurance platform EIS Group. While customers understand that buying insurance isn’t as simple as ordering pizza, they expect the same relative level of ease and personalization from both transactions.
When prices rise but communication doesn’t get easier, customers feel the pressure to switch insurers from two directions at once. That customers place such high value on ease of use sends a strong message: Insurers' understanding of value must also extend beyond the bottom line, says marketing automation manager Brandon Carter
“Value doesn’t necessarily equal cheaper prices or more stuff. It simply means enhancing the customer’s ability to solve problems and reach their goals,” Carter says.
Customers have made it clear that they value insurers who help them solve problems and reach their goals — and who make it easy to do so. These two elements thus become a powerful focus area for insurers.
Helping Customers Find Value in Their Insurance Relationship
Understanding how different policy options will affect their lives is the biggest factor influencing customer satisfaction in insurance, says Mikaela Parrick
at Brown & Joseph. Customers want to know how their coverage benefits them.
Currently, only 67% of insurance consumers — about two in three — believe that their insurer helps them understand their policies thoroughly, Parrick adds. When insurance companies put effort into helping customers connect coverage to personal benefit, however, their overall customer satisfaction scores increase by an average of 9 percentage points.
The process of learning how to communicate value to existing customers teaches insurance companies more about those customers, as well. This understanding helps insurance companies retain existing customers, attract new ones and boost their own bottom line, says David Pieffer
, who works in property and casualty insurance at J.D. Power.
“Since insurance is a ‘must-buy’ product for most customers, the reason they buy the product is straightforward; however, why they buy a particular insurance company’s product is not so obvious,” Pieffer says. Failing to understand a customer beyond their risk profile is a big mistake for insurers hoping to adapt to current demands.
Think Big With Omni-Channel
Omni-channel in insurance offers benefits to the insurer by enabling more streamlined service, and it offers benefits to customers in the form of easier communication and transactions with their insurance companies.
Yet one of the biggest values of omni-channel for customer retention remains largely untapped: the power to leverage an omni-channel platform as a tool for customer engagement.
“Companies with the strongest omnichannel customer engagement strategies retain an average of 89% of their customers,” says Kris Hackney
of Applied Systems. Companies at the weak end of the spectrum, however, retain only 33% of their customers on average.
Enabling customers to contact their insurer via their preferred channel is a form of personalizing the customer experience, and it doesn’t require investments in big data.
See also: Building a Customer-Service Culture
Build Networks as an Insurer
Insurance companies are busily building digital networks to improve the customer relationship. The value of human networks, however, should not be underestimated — particularly when today’s platforms offer the opportunity to add valuable perspectives to the relationship between insurers and the insured.
An approach that incorporates insurance agents into the company’s overall de-siloing may have a stronger impact than merely improving technology, says Casey Gustus
, CEO of Apliant. Agents remain the single best way to maintain the level of human personalization insurance customers want — and they make it easy for customers to get their questions answered, building a relationship customers want to maintain.
Expanding beyond traditional relationships can help bring insurance customers into the fold and keep them there. For instance, insurance companies can partner with financial advisers to reach potential P&C customers who turn to their financial adviser for coverage assistance, says Brian O’Connell
at Insurance News Network.
Research from Chubb and Oliver Wyman reveals that 40% of customers who seek the help of financial advisers would consider switching to a financial adviser who also provides help with acquiring insurance, says Annmarie Camp
, executive vice president of sales and distribution at Chubb Personal Risk Services.
Partnerships like these, boosted by technology, help customers feel that their personal needs are met and that receiving the insurance assistance they need is easy. This sense of support provides significant value and strengthens the bond between insurers and their customers.