The P&C insurance industry has always been a little obsessed with using personas as a proxy for desirable customer segments. None of these has received more attention than the Robinsons. Based on a consumer profile that contains households who own a home and a car and place the insurance on both with the same insurer as a bundle, the Robinsons represent the crown jewel in customer lifetime value. Accordingly, they have become the objet du désir for carriers of every type.
Progressive disclosed as much in its Q2 earnings report, calling out the Robinsons segment by name as a key growth target. However, despite the interest in courting the Robinsons and, more generally, getting high-value customers into bundled insurance relationships, the segment is very much at risk right now. Thanks to a combination of rising premiums and increased adoption of usage-based insurance (UBI) programs, customer retention in this prized segment is at risk of a divorce.
Bundlers at Risk
In fact, according to the J.D. Power quarterly Insurance Loyalty Indicator and Shopping Trends (LIST) report, quotes on new auto insurance policies have held steady at 12% during the past two quarters as customers continue shopping for alternatives to steadily rising premiums. On top of that, we’ve found that customer frustration with those rising auto premiums is driving significant declines in customer satisfaction with home/auto bundles, with 31% of bundlers now saying that they “definitely will” switch their home insurer if they switch their auto insurer after an insurer-initiated auto premium increase.
Put simply, the data is telling us that insurance bundlers—without question the most valuable segment of P&C insurance customers—are starting to fall out of the Robinson family tree as they search for cheaper alternatives. And that’s a problem.
You see, insurance executives have been working for decades to find ways to deepen customer relationships at a household level, and the current customer reaction to rising prices flies in the face of that strategy work to expand customer lifetime value.
Companies that have invested in analytics that help them understand insurance decision-making for every household situation on a near-real-time basis have committed to a strategy to find ways to react quicker to changes in the most valuable customer households to retain them and sustain a strategic profitability advantage.
The most advanced companies in this space have been pushing to make every interaction a moment of both trust and advice where they actively listen for changes in a household to deepen the relationship with the customer. Sometimes that advice is “you need lower insurance costs” – enter UBI, where your amount of coverage/insurance can stay the same or go up, while you pay less due to driving less, driving better or both.
See also: From Risk Transfer to Risk Prevention
Keeping the Robinsons in the Family Tree
If insurers are interested in stemming the tide of defections among the Robinsons segment, they need to get serious about tracking every aspect of the Robinson customer experience and act quickly to close any gaps where they are losing them to cost pressures and other variables.
In a word, they need to get serious about personalization. The ability to make great advisory recommendations often comes at key transition points in the life stages across insurance neighborhoods. What’s new is the focus on the continuum of household living situations expressed in terms of the people living in spaces, with cars and drivers.
This vaults the simple view of four basic types of households to upward of 48 different combinations that describe an “insurance neighborhood” in every realistic scenario—from a family with a basic home-and-car bundle to a multi-generational household with cars, boats and home policies—and can be seen uniquely. Even someone who is currently without an insurable asset can count as part of a family tree. There are a lot of reasons for being between homes and not needing a car that don’t mean you are not still a member of the family, a loyal customer or someone who may become one.
This new expression of personalization extends the industry’s reach to achieve their obsession with potential super bundlers and lifetime loyalists. Yet, now more than ever, product decisions of necessity may be putting strategic retention goals at risk. That focus needs to shift from short-term, product-centric gains to long-term, lifetime value.
Increasingly, the path to delivering on that goal is rooted in real-time, granular customer data that lets insurers understand the detailed behaviors occurring within their most desirable customer segments and intervene before it’s too late. Retaining customers when they are getting a different car or a different house or driving a different amount shows personalization that counts