Insurers can halve churn by aligning customer retention across all functions and ensuring it is founded on a real understanding of customer behaviour.
Across insurance, competition remains intense, the costs of doing business are increasing and technology is making it ever easier for consumers to find the best (or at least cheapest) products. When analysis shows that the value from a customer retained for three years can be more than 10 times that for a single year, it is unsurprising that the focus on retention is high.
Even so, depending on the geography and product, annual retention levels vary greatly. Many insurers in commoditised lines see up to 50% of their customers lost at renewal each year. Even those who perform best can expect 10% losses across their customer base.
This scale of ‘value leakage’ is not inevitable. In PA’s experience, by managing retention across the business, and properly understanding the reasons customers leave, insurance companies can halve the number of lost customers.
First, retention activity must be aligned across all functions. Typically, programmes are owned by marketing or sales or operations divisions, with the result that solutions are focused in one function, implemented inconsistently, and without end-to-end understanding or measurement. A single owner, working across the marketing/sales/operations triangle and providing direction and leadership for the rest of the business is crucial
Second, understanding of customer behaviour must be stronger. Many organisations jump to seemingly good solutions but, in practice, customers will often look for alternatives, feeling the current service is not good enough. Using techniques such as systems thinking, which map customer (and intermediary) behaviours and their interactions, is highly effective in developing the appropriate tactics
By focusing on retention in this way, a rapid and lasting positive impact can be made. At PA, we believe this provides the best organic opportunity available to insurers today to realise top line growth.
To find out more about improving customer retention in insurance and realising top line benefits, please contact us now.