Tag Archives: customer loyalty

Fried Chicken and Customer Loyalty

I was perusing LinkedIn and came across this post from Emily Glanz, a commercial insurance adviser at Cottingham & Butler in Iowa:

“A few weeks ago, we had a death in our family. My husband’s 98-year-old grandpa passed away. We were sad, but we celebrated his long and happy life. Grandpa was a creature of habit and ate at KFC every day for the last 10 years until he passed away.

“One day after he passed, KFC in Dubuque, IA reached out to express their sadness. Taking it one step further, they updated their sign facing the busy street to pay tribute to Grandpa. Our family was so touched.”

I’ve worked in a client-facing role since the age of 16. I like to think I understand the power of strong customer service, client empathy and the resulting loyalty that comes with that… BUT this is a shining example of creating loyalty. This is powerful customer-service. Kudos to you, KFC. And thank you.

What a wonderful story and a lesson for the insurance industry, especially agents.

Growth comes from acquiring business; profitability comes from retaining existing business.

See also: Latest Insights on Customer Behavior

Customer loyalty, and thus retention and profitability, isn’t driven by cheap prices, AI bots, big data or nifty phone apps. Loyalty springs as much (or more) from the heart as the mind.

One of the first blog posts I ever wrote 4½ years ago was about customer loyalty. I explained why I had been with the same insurance agency since 1973. Here is my story:

How Do You Create Customer Loyalty? Why Do Consumers Stay With a Particular Agent or Carrier for Years?

11 Keys to Predictive Analytics in 2021

According to Willis Towers Watson, more than two-thirds of insurers credit predictive analytics with reducing issues and underwriting expenses, and 60% say the resulting data has helped increase sales and profitability.

That figure is expected to grow significantly over the next year, as the inherent value of predictive analytics in insurance is showing itself in myriad applications.

Predictive analytics tools can now collect data from a variety of sources – both internal and external – to better understand and predict the behavior of insureds. Property and casualty insurance companies are collecting data from telematics, agent interactions, customer interactions, smart homes and even social media to better understand and manage their relationships, claims and underwriting.

Another closely related tool is predictive modeling in insurance, such as using “what-if” modeling, which allows insurers to prepare for the underwriting workload, produce data for filings and evaluate the impact of a change on an insurer’s book of business. The COVID-19 crisis has shown insurers that the ability to predict change is invaluable, and “what-if” modeling is a great tool for carriers that know they need to make changes but want to ensure they are doing it accurately. The right predictive modeling in insurance software can help define and deliver rate changes and new products more efficiently.

Using the plethora of data now available, here are 11 ways predictive analytics in P&C insurance will change the game in 2021.

Pricing and Risk Selection

This isn’t exactly a new use for predictive analytics in insurance, but pricing and risk selection will see improvement thanks to better data insights in 2021. Given the increased variety and sophistication of data sources, information collected by insurers will be more actionable.

Why do these data sets help predictive analytics improve pricing and risk selection? Because they are largely composed of first-hand information. Data and feedback collected from social media, smart devices and interactions between claims specialists and customers is straight from the source. Data that isn’t harvested through outside channels (such as the typical demographic material used in the past, like criminal records, credit history, etc.) is more direct and can provide valuable insights for P&C insurers.

But just how much data are insurers collecting from IoT-enabled devices? Some reports estimate it’s approximately 10 megabytes of data per household, per day, and that figure is expected to increase.

Identifying Customers at Risk of Cancellation

Predictive analytics in P&C insurance is going to help carriers identify many customers who require unique attention – for example, those likely to cancel or lower coverage. More advanced data insights will help insurers identify customers who may be unhappy with their coverage or their carrier.

Having this knowledge in hand will put carriers ahead of the game and allow them to reach out and provide personalized attention to alleviate potential issues. Without predictive analytics, insurers could miss credible warning signs and lose valuable time that could be used to remedy any issues.

Identifying Risk of Fraud

P&C insurance companies are always battling various instances of fraud and oftentimes aren’t as successful as they would like. The Coalition of Insurance Fraud estimates that $80 billion is lost annually from fraudulent claims in the U.S. alone. Additionally, fraud makes up 5% to 10% of claims costs for insurers in the U.S. and Canada.

Using predictive analytics, carriers can identify and prevent fraud or retroactively pursue corrective measures. Many insurers turn to social media for signs of fraudulent behavior, using data gathered after a claim is settled to monitor insureds’ online activity for red flags.

Insurers are also relying on insurance predictive modeling for fraud detection. “Where humans fail, big data and predictive modeling can identify mismatches between the insured party, third parties involved in the claim (e.g. repair shops) and even the insured party’s social media accounts and online activity,” according to SmartDataCollective.

See also: What Predictive Analytics Is Reshaping

Triaging Claims

Customers are always looking for fast, personalized service. In the P&C insurance industry, that can sometimes present a challenge. But with good predictive analytics systems, carriers will be able to prioritize certain claims to save time, money and resources – not to mention retain business and increase customer satisfaction.

Predictive analytics tools can anticipate an insured’s needs, alleviating their concerns and improving their relationship with their carrier. It can also contribute to tighter management of budgets by employing forecasted data regarding claims, giving insurers a strategic advantage.

Focusing on Customer Loyalty

Brand loyalty is important, no matter the product, and now insurers can use predictive analytics to focus on the history and behavior of loyal customers and anticipate what their needs may be. How important is brand loyalty? About half of customers have left a company for a competitor that better suited their needs. Also, this data can help insurers modify their current process or products.

Identifying Outlier Claims

Predictive analytics in insurance can help identify claims that unexpectedly become high-cost losses — often referred to as outlier claims. With proper analytics tools, P&C insurers can review previous claims for similarities – and send alerts to claims specialists – automatically. Advanced notice of potential losses or related complications can help insurers cut down on these outlier claims.

Predictive analytics for outlier claims don’t have to come into play only after a claim has been filed, either; insurance companies can also use lessons learned from outlier claim data preemptively to create plans for handling similar claims in the future.

Transforming the Claims Process

With predictive analytics, insurers can use data to determine events, information or other factors that could affect the outcome of claims. This can streamline the process – which traditionally took weeks and even months – and help the claims department mitigate risks. This also allows insurers to analyze their claims processes based on historical data and make informed decisions to enhance efficiency.

Advancements in artificial intelligence and other analytical tools have also become increasingly important in the claims process and are transforming how carriers do business.

Data Management and Modeling

Data is one of the most valuable assets an insurer can have, and predictive analytics have been helping businesses make the most of that data. From forecasting customer behavior to supporting underwriting processes, predictive analytics and data have been working together to provide valuable insights to insurers for years now.

However, making the most of your data is only possible with excellent data management and modeling capabilities. If data is scattered across disparate systems and there isn’t a strategic plan in place, all of that data is wasted. With data management solutions, predictive analytics tools can build a robust customer profile, provide cross-sell and upsell opportunities or even forecast potential customer profitability. And with insurance data models, insurers can deliver on-demand services to their customers via the cloud, using the data-driven insights gathered from their data management platforms.

Identifying Potential Markets

Predictive analytics in insurance can help insurers identify and target potential markets. Data can reveal behavior patterns and common demographics and characteristics, so insurers know where to target their marketing efforts.

Because there are 3.2 billion people on social media around the world, these platforms have become increasingly important when it comes to identifying potential markets. The platforms also influenced customer service: about 60% of Americans say that social media has made it easier to obtain answers and resolve problems.

Gain a 360-Degree View of Customers

TechTarget defines the 360-degree view of a customer as “the idea that companies can get a complete view of customers by aggregating data from the various touch points that a customer may use to contact a company to purchase products and receive service and support.”

Using predictive analytics, insurers can quickly and accurately consolidate data and generate insights that paint a more complete picture of a customer. What are their buying habits? What is their risk profile? How apt are they to buy new or expanded coverage? Before predictive analytics, insurers could estimate or take guesses at these questions, but now they are able to accurately and effectively service customers, which ultimately results in happier customers and increased revenue.

See also: How Analytics Can Tame ‘Social Inflation’

Providing a Personalized Experience

Many consumers value a customized experience – even when it comes to shopping for insurance. Predictive analytics in insurance provides the capability to comb through IoT-enabled data to understand the needs, desires and advice of their customers.

More and more insurers will use predictive analytics to help forecast events and gain actionable insights into all aspects of their businesses. Doing so provides a competitive advantage that saves time, money and resources, while helping carriers more effectively plan for a future defined by change. After all, data is only a strategic asset when you can actually put it to work.

Text Your Way to Customer Loyalty

The average person sends 15 texts per day, and 90% report that they read incoming texts within three minutes. Text is the channel many people — especially younger consumers — use most often to communicate with friends and family. And text can be a great way for insurers to communicate with customers and build relationships.

But, because the channel is so central to personal communication, it’s critically important for insurers to get customers’ permission and understand their communication preferences before reaching out via text. Managing consent has been a major focus for the past few years because it’s a privacy issue. Customers appreciate the chance to opt in and want to understand how you plan to use their number.

Managing permission is critical, but it’s just the first step. The text platform has specific qualities and limitations that don’t apply to other channels like social media or email. Texting has enormous potential if you understand the context and expectations people have around the messages they receive.

Here are three tips insurers can use to build meaningful relationships with customers via text:

1. Change up your messaging. If you look at recent text messages received from a friend, you’ll probably see questions, statements, tips, links, photos, etc., all in one thread and all in a single voice. A text communication strategy from an insurance brand should look like that, too: The content should vary. It shouldn’t be a series of cross-sell pitches (though pitches have their place).

See also: 3 Ways to Build Digital Relationships  

Customers don’t want to feel like a number when they’re dealing with any type of business, especially an insurer. You collect a lot of data on customers. Consider using it in a non-intrusive way to build relationships. If your customer has boat insurance, consider sending boat care tips. Above all, curate your text feed so that it’s interesting and valuable.

2. Limit the use of five-digit codes. If you receive texts from organizations, you probably don’t know who it is until you click because it arrives on your phone under a five-digit code instead of a name. Some businesses use multiple codes to send out different types of texts: one code for sales, another for customer service, a third for claims, a fourth for renewals, etc.

Try to limit the use of five-digit codes to two or three at maximum, and, if you can, use only one five-digit code for all text communication. Your subscribers may add you to their contact list under your brand name; if you use multiple codes, you will dilute the impact of being in the contact list. Remember that customers expect to be able to reach you by responding to any of the codes you use to send texts.

3. Use centralized message control and analytics. This is a basic tip, but too many insurers who are savvy about marketing and sophisticated about communication on other platforms make the mistake of not analyzing incoming text messages to see what customers are saying, and some fail to respond appropriately when customers text back.

Text analytics can be incredibly revelatory and serve as a valuable snapshot of customer sentiment. For example, if you send customers a notice about a new safe driver discount program and a customer responds with a question, you gain valuable insight about your message and an opportunity to respond quickly and consistently on the same channel — text.

Insurance is about being there for customers when they need you the most. Text messaging is a great way to meet customers where they are, using the same channel they use to communicate with their friends and family. It’s important to get customers’ consent for text communication and understand their expectations. Once you have permission, the success of your text campaign is up to you.

See also: How to Improve the Customer Journey  

Insurers will continue to look for ways to strengthen their bond with customers and relate to them on an individual level. Texting can be an excellent channel for personalization. When you know what kinds of messages resonate on text and understand what customers expect in return, you’ll be texting your way to stronger customer relationships.

Keys to Loyalty for P&C Customers

In a rapidly changing industry, some P&C insurers are pulling ahead of their competitors by focusing on customer satisfaction and retention.

“The insurance industry as we know it is at the edge of a new business environment,” says  Michael Costonis , head of Accenture’s global insurance practice. “Breaking away from the pack and capturing new revenue opportunities requires a shift in business mindset – a shift from product-focused to customer-focused.”

Customers want extra benefits, and one way to provide them is to offer value-added services. Travel companies and other insurance branches are already exploring the benefits of value-added services for retaining customers, as  Jamie Biesiada  at Travel Weekly points out. Because P&C insurers have been slower to adopt this strategy, however, many opportunities for capitalizing on this strategy remain.

Here, we look at some of the most popular value-added services in P&C insurance, which of these services focus on building loyalty and how to create the right service offerings or packages to encourage your customers to stay with your company in the long term.

Value-Added Services: The State of the Industry

For many years, P&C insurers have struggled with the challenge of selling a product that is substantially similar to their competitors’ products. “Because customers don’t discern much difference between insurers, companies end up competing largely on price,” write Bain & Co. partners Henrik Naujoks, Harshveer Singh and Darci Darnell . A downward spiral occurs, in which costs and profits are cut and customers jump ship the moment they see the same coverage for a few dollars less.

See also: How to Build Customer Loyalty in Insurance  

When insurers compete on price, customers do what Brandon Carter at Access calls the services shuffle: quitting or threatening to quit their insurance providers to access the same price-lean deals that new customers receive. “My goal is to pay less in a system that actually punishes people for being loyal customers,” Carter explains. Focusing on cost decimates loyalty. Focusing on value can boost it.

Yet insurance companies aren’t making value-added services their first choice when it comes to customer retention  Tom Super, director of the P&C insurance practice at J.D. Power, adds that many P&C insurers are turning to digital tools to court customers, particularly in the auto insurance business.

But digital technology is only a tool. The insurers that will stay ahead of their competitors in the race for customer retention and loyalty are the ones that best leverage that tool to provide the value customers want, says Mikaela Parrick  at Brown & Joseph.

Which Value-Added Services Boost Customer Loyalty?

Value-added services provide an extra benefit that enhances the core product or service. This additional service may be offered at little or no cost for the customer, yet it may make both the customer’s and the insurer’s work easier.

Connecting experience-based services to the product and brand can be a powerful way to encourage loyalty, adds Roman Martynenko , the founder and global executive vice president at Astound Commerce. While this approach is most commonly seen in retail, P&C insurers can adapt it to their needs. A top-of-the-line mobile app or a personalized starter kit featuring smart tools for each customer’s home can make customers feel like they’re part of a family.

Unique, innovative or specially tailored value-added services can also help encourage loyalty and boost customer interest by becoming a cornerstone of an insurance company’s brand.

Value-added services don’t have to be expensive or complex, suggests Mike McGee of Investment Insurance Consultants. For instance, a disaster preparation email sent at the start of tornado or hurricane season can help customers take loss-prevention steps, address safety and feel supported by their insurer, at very little cost to the insurance company.

Partnering with other companies can boost loyalty for both organizations while providing value-added services that attract customers, digital transformation executive Fuad Butt says on the IBM insurance industry blog. For instance, working with telecommunications providers to offer reduced-rate packages can help both companies succeed.

A highly specific partnership that uses existing technology to add value for both customers and companies is the recently announced alliance between Hyundai Motor America and data analytics firm Verisk.

“Hyundai customers will have access to their portable Verisk driving score, which can lead to discount offers on UBI programs and support driver feedback that helps improve their driving,” says  Manish Mehrotra , director of digital business planning and connected operations for Hyundai Motor America. A similar arrangement through an auto insurer can help both insurers and drivers have access to more information to improve safety and make better choices.

Choosing and Implementing Value-Added Services in P&C Insurance

The changing landscape of insurance offers one significant advantage to companies seeking to improve their value-added services: access to data about why customers remain loyal.

“The connections that enable excellent customer experiences aren’t always easy to make,” says Chris Hall of Pitney-Bowes. Siloing fragments customer information, leaving staff without a complete picture of each customer. This fragmentation makes it difficult to determine which value-added services will actually pique customers’ interest.

If data access is an issue, start by de-siloing information to get a better sense of each customer. Then, find the services that best support your organization’s key differences from your competitors.

Kirk Ford , compliance and T&C manager at RWA Business, suggests first considering how you’d like your clients and customers to perceive your brand in relation to competitors. Balance your differences against your similarities so that customers see they’ll receive all the services they need, but with the value-added extras that make their relationship with this particular insurance company meaningful.

See also: The Future of P&C Distribution  

However your insurance organization chooses to add value, resist the urge to announce it to customers merely as being higher-quality. “It doesn’t matter whether or not a company can pull off quality or exceptional service because quality and customer service rarely are differentiating strategies,” adds  Mac McIntire , president of the Innovative Management Group.

Instead,  Ryan Hanley  formerly of Agency Nation, now at Bold Penguin, recommends finding ways your value-added services can improve customer lives. When customers feel a sense of shared values, they’re more likely to stick with their insurance company, rather than risk their luck with a company that may not share those values—even if the prices are lower.

One way to connect with customer values is to change your company’s language surrounding insurance. “If you can sell insurance and not talk about insurance, it’s a win-win,” says  Rusty Sproat , founder of Figo Pet Insurance. He notes that many customers find insurance language obscure and frustrating. That’s why Sproat’s company focuses on providing quality information on pet care and health, switching the conversation to insurance only when necessary to complete a transaction.

Finally, don’t shy away from technology—but use it as a tool rather than a cure-all. Smart home sensors, telemetrics for vehicles and other tech tools are increasingly common in U.S. households, plus they can greatly improve the customer experience, says  Ramaswamy Tanjore  at Mindtree. Consider the best ways to manage telemetric or other data, as well as how to position these tools to best showcase their value to loyal customers.

How to Build Customer Loyalty in Insurance

Always the same story: 11 months after a costly customer acquisition, crafty price comparison players and other intermediaries helpfully knock on the customer’s door, show a smorgasbord of supposedly better value options and outline how easy it is to switch.

For example, 16% of Americans shop around for car insurance every year, saving up to 47% of the previous year’s insurance cost. This represents an impact of up to $40 billion on the $500 billion car insurance market.

What’s great for the consumer is a major headache for the insurance provider, which often has to join in the dreaded price war to keep a customer.

In many other industries, having a good brand is a bulwark against a price race to the bottom. But for immaterial and low-involvement products such as insurance, this is easier said than done. It’s hard to stand out in the customer’s mind and become a provider of choice.

But there are a few things insurance providers can do to survive the first-year itch and give the customer an experience that will greatly increase the odds that they’ll stick around for another year.

Before we get into the specifics, it’s important to understand one key principle of loyalty, which is best illustrated by Maya Angelou’s famous quote:

“People will forget what you said, people will forget what you did, but people will never forget how you made them feel.”

That’s why discounts don’t lead to loyalty. Sure, it’s sweet to get a $150 bonus for staying with your current life insurance provider, but once the money hits the bank account it just dissolves into the family budget, never to be seen again. It’s not memorable, and it sure as heck doesn’t make the recipient feel much of anything.

Contrast that with what you could actually DO with $150:

What if you gave your customers an experience such as a kayaking tour or a candle light dinner for two? The cost would still be some $150, which is close to what a bonus or discount would amount to — but the effect is far stronger.

Why?

Because the customer associates the experience with you. In the back of their minds, they know, as they’re tucking into their entree or dipping their oar into the turquoise waters, that this experience comes courtesy of Insurance Co. And that association works on a subconscious basis and lasts far longer than any discount could.

You may argue: Why wouldn’t customers be able to do it themselves with the $150 check they received from you? After all, they just received a discount of $150, so you might as well encourage them to spend it on that kayak tour, right? All without going through the hassle of organizing it on your end.

Not really. Most people don’t operate that rationally, and hardly anyone would take a windfall gain and spend it on something specific. It’s more restrictive to give them $150 in kayak or dinner vouchers, but that restriction means that they are far more likely to use it. And you WANT them to use it.

See also: What Really Matters in Customer Experience

The effect is obviously not limited to dinner experiences, although that one is quite the front runner when it comes to a memorable experience at an affordable price.

Other perks that suit an insurance company’s first-year-itch-avoidance budget would be:

  • A luxury case of wine
  • Two tickets to a rock concert or musical of the customer’s choice
  • An afternoon at the local spa
  • A cooking class
  • VIP cinema tickets for the entire family (customize it by asking them how many tickets they want and providing any number of them — within reason)

It’s important that the item or experience you provide be non-utilitarian. A new vacuum cleaner or blender won’t do the job as well as a cheese and wine tasting night out. To be a memorable experience, it needs to be non-quotidian and give a hint of luxury or, dare I say, décadence. Yes. French spelling.

So how much can it cost?

Well, that depends on how much you can afford. If you, with a heavy heart, normally provide a discount of $150 to keep a customer with itchy feet, providing an experience worth $150 is the starting point.

More bang for your buck through breakage and volume discounts

But that $150 can go a much longer way and you’ll be able to magically turn it into $200 or more in the following way:

First of all, if you do this at scale, you’ll be able to secure discount rates from the vendors. A restaurant chain will gladly give you a discount if you buy 100 candlelight dinners from them.

Second, there’s breakage. We’ve written extensively about the concept — in short, breakage is the rate of unredeemed dinner experiences (if we can stay with the dinner example). Some people will end up not redeeming their gifts. How should you deal with this, though?

On the one hand, if you want to focus on short-term profit, this is good for you, because the user has accepted to stay with you for another year without creating any cost — because they haven’t redeemed, you can now use their voucher for someone else.

On the other hand, if you are focusing on brand building and are willing to forgo the short-term profit for long-term customer loyalty, nudge customers toward redeeming, so that they can indeed build that positive association of their experience with you.

Whichever route you choose to take, industrywide breakage rates are around 30% and, even if you nudge people toward redeeming, are unlikely to drop below 5%, so make sure you are including this in your calculations.

See also: It’s All About the Customer Journey

And the results?

Our clients experience an average 15% reduction in customer churn by offering personalized gift cards to their customers.

For more on how to boost loyalty and retention among subscription customers, read our brand-new ebook, “The Ultimate Guide to Loyalty and Retention.”

The key message is: Stand out. Provide an experience. Do what others don’t. Give the customer a positive feeling for staying with you, even if you are not the cheapest option on the market.

Here’s to the end of the first-year itch!