Customer retention is critical to sustaining a business in today’s competitive insurance market. When you consider that the insurance industry has the highest customer acquisition costs, being loyal to your clients is a great way to maintain your profit margins.
Table of contents
- Why is customer retention important?
- How to retain customers in insurance?
- Bottom line
Successful insurance agencies have a higher retention rate than the average ones. A typical agency retains its clients at a rate of 84%, but the industry’s top agencies can keep 93-95% of their customers. By maintaining a 5% increase in customer retention, the agency’s profits can double in five years.
In the U.S., it’s a more than $1.8 trillion industry. With time, companies are adding new products, features, and facilitation, and it will grow at a fast pace in the coming years. According to data from 2020, insurance companies fall into three categories: property and casualty (P&C) – mainly auto, home, and commercial insurance; life and annuities – life insurance and annuities and private health insurance – written by insurers that specialize in health insurance.
Health coverage can also be written by life/annuity and property/casualty insurers. The industry wrote 3.1% fewer net insurance premiums in 2020 compared with 2019. The net premiums written on life/annuity products fell 7.9%, while net premiums written on P/C products rose 2.1%.
Why is customer retention important?
Customers used to be loyal in the insurance industry, but now they are savvy. It’s important to retain customers in this sector since acquiring new ones is more costly than keeping existing ones. IBM has reported that acquiring new insurance customers has become increasingly expensive. In 2022, it’s projected to increase to 17.9% from 15.8% in 2018. Insurance customer retention is falling, and despite losing more than 16% of customers each year, insurance companies are actively investing in acquiring new customers rather than retaining old ones.
In the insurance industry, the quality of the services is tested when claims are filed. Customer relationships between insurers and policyholders are at their height during this period. So resolving complaints with dedication and facilitating customers is the key.
How to retain customers in insurance?
Individual insurers recognize that the best way to grow their brand is by taking market share away from other brands while maximizing customer retention.
Insurance brands can grow their customer base in three main ways:
- A reduction in existing customers’ shopping around when their contracts are up for renewal
- By minimizing the number of customers switching insurance brands at the time of renewal
- The number of new customers acquired must exceed the number of customers who leave
- Optimizing customer acquisition
1. Onboarding process
A streamlined onboarding simplifies the process and minimizes frustrations and irritations at the outset. The customer will form a favorable opinion of you and your agency when the first contact is pleasant. As long as you cultivate this positive relationship, they will continue to stay.
Secondly, by reviewing the onboarding process from beginning to end, you can identify ways to improve it. How can you make the process more user-friendly? Identify any rough spots in past onboarding experiences and rectify them.
Put the customer’s needs at the center of the onboarding process. You may be surprised at the challenges your clients face when they come on board if you change your viewpoint from what you want to what your clients want. Step by step, review the process and, if necessary, ask someone you trust to review it from a fresh perspective. After the customer has completed the onboarding process, request feedback. It might provide insights into areas that are difficult or confusing.
As an insurance agent, you offer the same thing as anyone else. The carriers and rates available to you are the same as others. So, to differentiate yourself from your competitors, you must demonstrate why your agency is a better choice. Look for ways to enhance your offerings. Taking these steps will help set your agency apart from others.
Personalizing your products and services is one of the best ways to achieve this. If you want to retain your customers, it’s of utmost importance to demonstrate how your products and services can fit their needs.
3. Overdeliver on your promises
Making a promise that you can’t keep will adversely affect your relationship with a customer.
You do not have to climb a mountain to build trust. It can be built by even simple things like emailing a document. It’s important to be sure that you can deliver before you commit to something.
Consider over-delivering and exceeding your customers’ expectations. Keeping your promise by delivering ahead of schedule can enhance your client satisfaction.
4. Prioritizing customer needs
The ability to solve a client’s problem effortlessly and painlessly will ensure their satisfaction. You will be able to learn valuable information about your customers when you talk to them. It may lead to making relevant changes in your business. This way, you can gather feedback from your customers. Consider the feedback as a challenge to improve your services instead of taking it personally.
Making minor changes can show customers you’re listening to their needs and responding accordingly. You can, for instance, ask your customer how they would like to be contacted. Because knowing how they prefer to communicate helps you personalize your interactions with them in the future.
5. Include automation in your processes
It’s not uncommon for businesses to lose customers due to simple mistakes such as forgetting to pay their monthly payments. Wherever possible, automate the payment process to avoid the cancellation of policies due to missed payments. It can help prevent policy lapses. If you offer a discount, your customers may also be enticed to switch to an automatic system.
Automating payments is just one way to improve efficiency. Auditing your processes for other ways to streamline tasks can help, too. Retaining clients long-term is especially easy if you automate lead generation or implement a self-service platform where customers can request a quote.
6. Add value by upselling
Customers who have more policies with an agency are more likely to be retained. In most cases, agents try to sell additional policies to their existing customers. The second policy’s value may be greater than the additional revenue that it generates. People who own two or more policies are more loyal than those who only own one.
Make your customers more loyal by offering them different carriers, lines of insurance, etc., and better products. They appreciate agents that go the extra mile to meet their needs and protect their interests.
Utilize data to see if you can come up with a better policy to address your customers’ concerns. Make sure to offer them options at different price points so they can choose one that suits them best. Offer them adjacent policies as well to provide additional value to them.
7. Acknowledgement and interaction is vital
Acknowledging customers upon the completion of small milestones creates a strong bonding. Rewarding for being loyal and appreciating their contribution can go a long way. As a result of every interaction with your agency, your customers have either a more positive or negative experience. By delivering top-notch services, providing customized products or services, and responding promptly to client feedback, you can make your clients return again and again.
8. Use of technology
Technology has become an expectation for customers in the modern age. Your business will be more efficient and provide a better customer experience when you use the right technology.
If you don’t have it already, consider offering do-it-yourself servicing tools to your customers, such as a mobile app. They can perform basic tasks such as checking their policy or making a payment quickly and easily. You will save time, and your customers will appreciate the convenience.
Using data to improve your service is also highly beneficial. Make smarter decisions by analyzing your data to find insights that will allow you to anticipate your clients’ desires.
Your revenue and profitability can be increased dramatically by increasing retention. Make sure you are using technology to encourage client loyalty, leveraging data to see coverage gaps and client needs, and creating a better experience for customers.