KEY TAKEAWAYS:
--How do you get better at retaining customers? Through a consistent, personalized omnichannel experience. When all customer access systems align — the IVR, web portal, mobile experience and customer service representatives — the customer experience is fluid, agile and modern.
--An omnichannel experience is within reach, even for small and mid-sized carriers, including those with multiple systems or legacy systems. Flexible SaaS options allow even the smallest insurers to give their customers a sleek, modern, digital experience without expensive systems overhauls.
----------
Insurance carriers, like other businesses, prioritize growth for several reasons. As insurance carriers grow, they can spread their fixed costs (such as administrative expenses or technology investments) over a more extensive customer base. This can lead to cost savings and improved operational efficiency, resulting in higher profits or more competitive customer pricing.
Insurance relies on the principle of spreading risk. With a more extensive customer base and a more diversified portfolio of policies, insurance carriers can better manage their exposure to risk. This reduces the impact of large claims or catastrophic events on their financial stability. Growth can lead to increased revenue and, ideally, greater profitability.
Growth is the key to survival in today’s insurance landscape, but it requires strategy and planning, especially as competition gets tighter. Mid-sized insurance carriers seeking to hit their growth goals are squeezed on all sides. They’re facing pressure from large incumbent carriers with deep pockets, as well as agile, digital-first startups.
Most insurers’ growth strategies revolve around customer acquisition and adding new risk products. These are wise initiatives, but they won’t be enough. Here are 10 reasons why customer retention must be part of a carrier’s growth strategy.
- Stable Revenue: Retained customers provide a steady stream of premium payments, ensuring a stable and predictable source of revenue for insurance companies.
- Cost-Effectiveness: Acquiring customers can be significantly more expensive than retaining existing ones. The insurance industry has one of the highest customer acquisition cost (CAC) ratios. It costs an average of seven to nine times more for an insurance agency to acquire a new customer than to retain one. Building and maintaining customer relationships can save on marketing and acquisition costs.
- Long-Term Profitability: Loyal customers tend to stay with their insurance provider for the long term, leading to increased profitability as they continue to pay premiums.
- Cross-Selling Opportunities: Satisfied and loyal customers are more likely to purchase additional insurance products from the same provider, leading to increased cross-selling and upselling opportunities.
- Referral Business: Happy customers are more likely to refer friends and family to their insurance provider, creating a valuable source of new business.
- Reduced Policy Churn: Customer retention efforts can reduce churn, which is the rate at which customers leave an insurance provider. Lower churn rates mean less business lost to competitors.
- Customer Data and Insights: Customer data is a gold mine for carriers in today's data-driven insurance industry. Retained customers provide valuable data and insights that can be used for personalized marketing, product development and risk assessment. Quality, reliable data from a long-term customer is more valuable to you than a newly acquired customer.
- Captive Audience: If customers are happy with your products and services, they’re less likely to shop around to other carriers when a new insurance need pops up.
- Robust Claims Experience: Satisfied, loyal customers are more likely to have a positive claims experience.
- Regulatory and Compliance Benefits: In some cases, regulatory requirements may be easier to fulfill with a stable customer base. Retained customers also tend to have lower cancellation rates, which can improve compliance records.
Customer retention is essential for insurance carriers to maintain profitability, reduce costs and thrive in a competitive industry. It's not just about retaining customers for the sake of it but also providing superior customer service, value and personalized solutions that build long-lasting relationships.
Omnichannel Engagement Leads to Retention
Now that we’ve established the value of customer retention, the question is, how? How can carriers invest more in retaining the great customers they already have?
Creating a consistent, personalized omnichannel customer experience leads to higher customer satisfaction, increased loyalty and improved business performance. In other words, growth.
We have some strong evidence to back this up. In a recent study my company commissioned with independent data scientists, we analyzed the behavioral data of 250,000 property and casualty insureds over two years and saw that a consistent omnichannel experience can boost policy retention by 21%. Having a single channel, such as a customer portal, also saw a lift to retention of 12%. Data shows that an integrated, multichannel experience provided the most significant boost to customer loyalty.
One of the study's most significant findings is that using multiple self-service channels significantly increases customer retention. For example, customers using an insurance portal are 12% less likely to cancel their policies compared with those who do not engage with a portal. Those who use multiple channels, such as phone, email and SMS, are 21% less likely to cancel their policies, and those who repeatedly use multiple channels show a 25% higher retention rate. Customers who use advanced features like policy document retrieval and ID card access exhibit even higher retention rates. Repeated interaction with the portal solidifies customer trust and commitment.
Building an omnichannel experience requires carriers to better understand their target audience, including their preferences, behaviors and needs. This will help you tailor your engagement and retention strategy to meet their expectations. For example, how often should you contact your customers? Using data about your customers can help inform you when and how often to send messages and on which channels. The time of day, day of the week and timing during the month are critical factors to consider when planning messages. Decisions all depend on who they are and what they need at any time in the relationship.
See also: Here’s Why Insurance Customer Engagement Needs an Extreme Makeover
Legacy Tech Can Be a Barrier
Providing multiple, tailored channels for your customers is a great start, but more is needed. These channels must be relevant to how customers prefer to communicate with you. The channels must suit their specific needs. At the same time, your communications channels should natively work together to create a unified ecosystem of success for the customer. That means consistency in your data, messaging and behavior across each channel.
For example, a saved payment method in the insured portal should be available when paying via SMS or IVR. Activity in any channel should reflect in any other channels in real time. Carriers will maintain the customer's trust when everything feels and acts consistently.
Legacy insurance systems often struggle to provide a consistent omnichannel experience. Because these systems can be disconnected and create data silos, the result is a lag time between the insured’s digital updates and the CSR system update.
For example, a customer who calls a carrier right after making a digital change online may need help being serviced immediately. If a CSR doesn't have the change in their system, this increases customer frustration and possibly causes them to shop for another insurer. It also costs the insurer more to make a second phone call to help the customer once its systems catch up. CSRs must have updated, synchronous systems to rely on when fielding customer calls to provide an outstanding customer experience, regardless of contact channel.
When all customer access systems align — the IVR, web portal, mobile experience and customer service representatives — the customer experience is fluid, agile and modern. Current, accurate data that is easily accessible by the customer changes everything. Customers can answer their questions, make payments and access policy information whenever possible. This self-service design gives control back to customers and saves time for insurers.
See also: Low Insurance Premiums Aren't Enough
A Great Customer Experience is Within Reach
When executed well, an omnichannel experience means an insurer's different tools and systems are connected. It means that whether customers interact over the phone or in a portal or respond to a text message, they enjoy the same consistent experience.
The good news is that the omnichannel experience is within reach, even for small and mid-sized carriers, including those with multiple systems or legacy systems. It used to be that the large incumbent carriers built their own omnichannel engagement solutions in-house, but that has changed dramatically as cloud-based customer engagement software has matured. Flexible SaaS options allow even the smallest insurers to give their customers a sleek, modern, digital experience without expensive systems overhauls.
All of this adds up to a stronger relationship with your customers, who, in turn, will reward you with their loyalty and long-term business. Growth may be the name of the game, but customer retention is crucial to helping you meet those growth goals.
