I dread September every year as that is when my car insurance renewal is due, which means I need to spend a number of hours trawling through comparison websites and phoning insurance companies to get the best deal.  As a customer I’m not rewarded for being loyal.  Often the renewal quote with my existing insurer is higher than I had previously paid.  And I’m not alone.  A recent BBC article cited numerous customers getting much better deals…with their existing insurers via comparison websites.

In fact, as an insurance customer, we often pay a penalty for being loyal.  Thanks to the rise of comparison sites and a general increase in awareness, customers are beginning to get a better deal by taking their business elsewhere.  But it’s still a pain to actively search for a better deal each year.

We all know loyalty is important (see Capgemini and EFMA’s World Insurance Report 2013).  Often cited benefits include it being much cheaper to retain existing customers than it is to acquire new customers, loyal customers are often brand advocates that spread the word amongst their friends thus increasing sales, loyal customers spend more… and according to Gartner, 20% of existing customers represent 80% of a firm’s future profits. 

Clearly loyalty is important but insurance customers are promiscuous, so how do insurers retain customers and build loyalty?

Reward loyal customers. Insurers need to incentivise their customers to stay loyal, by offering them the best (not necessarily the cheapest) deal to keep their business.  We already know it is more cost effective to retain existing customers than it is to recruit new customers; this should be factored into renewal quotes.  Thus, having a single view of customer, across products, underpinned by customer analytics is crucial to insurers, as it provides the insurer with the ammunition to trigger the next best action in the event of an interaction. Insurers will then be able to provide their loyal customers with their best offer. 

However, it’s not all about price.  I recently renewed my contents insurance and was offered much cheaper deals with a few lesser known insurers.  A quick Google search highlighted the poor customer service received by many a disgruntled customer, and I was instantly put off.  Essentially, I needed to know that if I were to make a claim in my distressed state, I would be provided with excellent customer service.  And I was willing to pay a premium for that.  For a product like insurance where there is little to distinguish the product between one insurer and the next, this step is key – differentiate your service.  The importance of great customer service should not be underestimated.  Recent research conducted by themarketer found strong correlations between customer satisfaction and a propensity to recommend and make repeat purchases.

There are limited opportunities for insurers to get to know their customers and engage with them, as buying insurance is usually a once per year conversation.  However, the growth of social media provides insurers with a new vehicle to build loyalty: engage with customers via social networks.  According to research conducted by the Internet Advertising Bureau, interacting with customers via social media improves sentiment, and social media is particularly effective in positively shifting likelihood to recommend, propensity to trial new products, and loyalty.

Customers can be promiscuous, but many just want to be acknowledged as a loyal customer by getting a fair deal. Engaging with customers via social networks, building a strong reputation for excellent customer service and utilising insight to provide customers with the best deal will help reduce this promiscuity.