KEY TAKEAWAY:
--By communicating with policyholders in advance of premium increases, insurers give policyholders sufficient time to engage, ask questions and experience good customer service, all of which reinforce the relationship and can discourage churn.
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Over the past few years, inflationary pressures have made a notable impact on the economy – and on home insurance premiums. According to CoreLogic’s U.S. National Building Cost Trends report for Q2’23, building material costs for carpet, insulation, brick and concrete have continued to rise, increasing overall residential reconstruction costs by an average of 1.9% from February to May 2023 nationwide. In catastrophe-exposed states like Louisiana and Texas, reconstruction costs are even higher than the national average, at 3.1% and 2.5%, respectively. However, only approximately 30% of homeowners have sufficient coverage to account for the higher costs to rebuild their homes after a major loss.
This data underscores why carriers must price premiums to accurately reflect the true cost of reconstruction and repairs. Without accounting for the increased cost of building materials and labor, insurers run the risk of leaving policyholders underinsured, a phenomenon that’s not uncommon: The U.S. protection gap – or the losses insurance didn’t cover over the last 10 years – remains at 43%.
By communicating effectively with customers, insurers can adjust premiums to keep pace with inflation and ensure appropriate coverage while building better customer relationships.
Communicate Premium Changes Early On
Maintaining transparency about rate increases when the market shows signs of inflation can foster customer trust and help reduce sticker shock when new rates are implemented.
According to MarketWatch.com, 90% of homeowners saw their insurance premiums rise in 2022. By communicating with policyholders in advance of premium increases, insurers give policyholders sufficient time to engage, ask questions and experience good customer service, all of which reinforce the relationship and can discourage churn.
See also: What to Do About Rising Inflation?
Leverage Customers’ Preferred Channels
Better customer service begins with engaging customers in the way they prefer to be reached. Insurers that leverage both customer engagement analytics and multiple communication channels can refine outreach efforts and interaction cadences to meet customer expectations.
Accessible, reliable communication and customer service is imperative in any industry, including insurance. In fact, based on a study by J.D. Power, customer service — not price — is ultimately the driver behind long-term customer value in home insurance.
Educate Policyholders on Premiums and Protection Gaps
When customers understand the factors that influence their premiums – and the discounts available to them – they are better positioned to control the factors they can. For example, if homeowners understand how the age and condition of their roof affects premiums, they may be more inclined to fortify their roof to take advantage of available discounts.
In the same vein, when customers understand why insuring their home to value is important to making them whole after a loss, the benefit may outweigh their price-sensitivity.
Proactive conversations with customers about rate adjustments for inflation can result in stronger customer relationships and higher retention. Moreover, it’s the chance for insurers to demonstrate to policyholders that their protection is top of mind.
