Price Doesn’t Earn Trust: Could Auto Insurers Be Getting the Customer Retention Equation Wrong?

The explosive success of platform economy companies and their digital, customer-centric business models have begun to ricochet at breakneck speed across other major industries – the auto insurance industry included – impacting the ability of even well-funded carriers to retain customers. As a result, a number of new insurtech companies have risen to the challenge of creating the first “Amazonesque” auto insurance experience and have created an offering based entirely on reduced policy prices and digital engagement. In response, and in order to remain competitive, auto insurers must simultaneously meet the attractive and digital pricing models offered by insurtechs, playing into a highly commoditized market based on price, and thereby leaving little room to disrupt the market or invest in on-going customer experience. The result is that many auto insurers feel that are eating their own tail while trying to retain customers with competitive pricing.

 The one key area that auto insurers seem to be forgetting, however, is the policyholder’spost-quote experience. In addition to providing them with an attractive quote to get or keep them on-board, auto insurers should invest in personalized service offerings at key moments of the policyholder’s journey in order to retain and satisfy customers for the long-term. Recent survey data collected by MDgo in the U.S. supports this assertion, finding that that 66% of respondents would be more likely to renew their auto insurance policy if they were offered complementary services in the event of an accident; services that could bring efficiency, speed of resolution and a tailored experience into the regular course of the auto policy journey. It’s possible that through the provision of personalized services in the auto policy journey insurers can keep customers engaged for the long-run, while also winning over new business that’s built on something stronger than just price – trust.

Investing in customer satisfaction pays off

 This one may seem obvious, but with auto insurers challenged to meet a certain price points, the emphasis on customer experience is heavily placed on the under writing and renewal phases. The scope and extent of events, or lack of events, is examined by most insurers according to their impact on policy price, and this impact is considered heavily by consumers too when choosing to engage with their insurer. However, if the onus on price was removed and instead placed on the customer experience during the policy journey, auto insurers can attract new customers and retain existing ones.

 In the same U.S. consumer survey mentioned above, conducted by MDgo in December 2020, more than half of respondents expressed interest in receiving personalized and automated services following an accident, and over half expressed that they would be likely to switch auto insurance providers if they were offered such services. Therefore, by shifting the focus to the customer experience during the policy journey auto insurers have an opportunity to close the rather significant policy retention price gap that they currently face - LexisNexis research shows that it could take between three to seven years for a new policy to reach the value of the average lost policy. This is meaningful time and money that auto insurers can’t stand to lose in the current market climate.

Engaging with customers doesn’t have to be a number crunching exercise

 As mentioned, price tends to overwhelmingly be the name of the game in winning over auto insurance customers, but in cutting out the valuable middle of the customer journey, insurers are forgetting one important thing – trust is built on showing up. When it comes to offering a lower policy price or adjusting payment conditions, auto insurers know how to deliver, but this may not be enough to keep customer on board for the long-run. How can auto insurers leverage the customer journey to deliver personalized services that will make renewal a no brainer for policyholders?

 It starts with understanding that, in order to build trust with customers, auto insurers should digitally engage their policyholders with a focus on efficiency, effectiveness and personalization. All of these aspects together are likely to improve the speed, level of service and the consistency and strength of customer satisfaction. These services should be delivered at key moments in the policy journey, such as following an accident, in order to have the greatest effect. With features like automated notifications for first responders and detailed bodily injury and vehicle damage reports following mild to severe accidents, customers know that their carrier has their back in their greatest moments of need. Carriers can further leverage data insights on the accident scenario to create opportunities for personalized engagement that serves drivers’ needs, such as sending drivers a message to direct them to the nearest repair shop or sending them a tow truck immediately following impact. Therefore, delivering lifesaving potential and ease of care at key moments is made possible with data – insurers just need to know how to use it.

 Customers are eager for personalized interaction – Can insurers deliver?

 While it’s clear that price is not the only determining factor in auto insurance customers shopping decisions, auto insurers continue to adopt value-added services with a certain degree of caution. However, in realizing that customers are not only eager for deeper engagement with their auto insurer - only 46% of insurance customers surveyed by LexisNexis in Sept. 2020 were contacted by their carrier in the course of their policy term - auto insurers should look to deliver data-driven personalized services at scale. By investing in this customer-centric strategy, carriers can solve the retention challenge and earna loyal base of satisfied customers that, above all, trust their auto insurer to be there for them when they need help the most.