An insurer that provides 2.5 P&C products to a customer owns 90% of their wallet share.1 It sounds simple; acquire new customers, offer them multiple products and keep them for life. But according to a recent study by Bain, few insurers excel at both customer acquisition and retention.2 The changing consumer demands across the insurance market make it difficult for insurers to be all things to all people, but with the right digital distribution platform, many are realizing the favorable economics behind owning the customer.
The Numbers Don’t Lie
Struggling for a grasp on a bigger share of the emerging market, many insurers still invest heavily in advertising, but while enticing customers is profitable with the right incentives, loyalty in the industry is at an all-time low. This means that without sufficient reason to stay, the new customer of today could easily be the new customer of your competitor come renewal time next year.
Of customers that switch to a new carrier, the majority are looking to save on premiums, making it difficult for insurers to compete. Then consider the fact that new customer growth in the P&C industry topped out at 2% last year.3 Divide that by the number of insurers and the new entrants taking up market share, and you begin to see the value in owning a life-long customer.
Loyal customers represent a premium to insurers. In a study evaluating the Net Promotor Scores (NPS) of customers from across the industry, those deemed promotors of their carrier stayed longer and gave more referrals. That benefits both acquisition and retention rates, but the biggest benefit comes over time. Customers ranked as promotors are worth triple in lifetime value over customers deemed as passives.4 Loosely translated, customers that have been wowed by their experience represent a threefold increase over those who are merely satisfied with their interactions.
Instilling Loyalty in a Cost-conscious Environment
While growth strategies typically focus on acquisition or retention, the only real way to continuous bottom line improvement in the current market is to excel at both. Engaging new customers and turning them into loyal promotors of your company requires insurers to make a fundamental shift from the see-you-next-year mode of operation to a more customer-centered focus. Interacting with customers only at renewal time or under the stress of a claim does nothing to create advocates and may actually create detractors.
In a recent survey, 57% of respondents wanted a minimum of semi-annual communications.5 Findings like these are based on the shifting needs of customers and their willingness to see insurers as a trusted partner on a life long journey, but to fulfill this role in a way that inspires long-term loyalty, insurers need to fulfill all of a customer’s coverage needs.
That brings us back to the beginning. Insurers supplying more than 2 products gain a 90% share of the customers’ wallet, but also realize stronger loyalty as evidenced in longer tenure.6 Considering the expanse of coverage options available to customers today, how can one insurer provide everything their customer is seeking? The answer for forward-looking carriers has been found in their digital distribution platform.
Say a customer wants auto, home, umbrella and even pet insurance, but the carrier only offers the first two. With the right digital distribution platform, the insurer can bundle their auto and home products with the umbrella and pet coverage of another carrier to fulfill all of the needs of the customer. In this scenario, customer satisfaction skyrockets and insurers can realize up to five new referrals for every bundled solution they sell.
Bolstering the Bottom Line for Years to Come
It’s simple economics in an era when numbers don’t always add up to bottom line benefits. Insurers who are capable of fulfilling the complete range of a customer’s coverage needs realize greater wallet share and higher retention rates, bolstering the bottom line through renewals for years to come.
1. Whelan, David, and Sean O'Neill. Customer Loyalty in P&C Insurance: US Edition 2014. Rep. Bain & Company, 2014. Web. 3 Apr. 2016.
2. Whelan, David, and Sean O'Neill. Customer Loyalty in P&C Insurance: US Edition 2014. Rep. Bain & Company, 2014. Web. 3 Apr. 2016.
3. Whelan, David, and Sean O'Neill. Customer Loyalty in P&C Insurance: US Edition 2014. Rep. Bain & Company, 2014. Web. 3 Apr. 2016.
4. Whelan, David, and Sean O'Neill. Customer Loyalty in P&C Insurance: US Edition 2014. Rep. Bain & Company, 2014. Web. 3 Apr. 2016.
5. Klein Wassink, Bernhard J., Kaenan Hertz, and Melanie Henderson. The Why and How of Simplified Customer Communications. Rep. N.p.: n.p., n.d. Web. 12 May 2016. <http://www.ey.com/Publication/vwLUAssets/ey-the-why-and-how-of-simplified-customer-communications/$FILE/ey-the-why-and-how-of-simplified-customer-communications.pdf>.
6. Whelan, David, and Sean O'Neill. Customer Loyalty in P&C Insurance: US Edition 2014. Rep. Bain & Company, 2014. Web. 3 Apr. 2016.