Updated: Mar 1
Lower prices, negative experience with customer service, negative claims experience, major life changes - these are all factors that impact insurance customer churn.
If you’re reading this, it’s safe to assume that you know the insurance industry has higher acquisition costs than other industries.
I’m also assuming you know that reducing defections by 5% can boost profits by 25% - 85%! (Harvard Business Review)
To reduce cancellations, you need to know why your clients are canceling in the first place.
While not all causes of customer churn are within your power, the most influential factor is in your control!
Perception of Indifference
Simply put, the biggest reason your clients cancel and go with another company or agent is that from their perspective, you don’t care about them.
Notice, I don’t say that the reason is you don’t care about them, but their perception that you don’t.
You might think a bad customer service experience would be a significant reason, but when it comes down to it, exceptional service only prevents less than 25% of clients from churning. (Agent Pipeline)
Over 50% of clients leave because they think you feel indifferent about them. (Agent Pipeline)
And that’s only the clients that leave - how many of your clients haven’t canceled yet, but feel that you don’t care that much?
How are you supposed to alter the perception they have to assure them that you care?
Consistent and frequent communication.
Rocket Referrals found in a recent study that, of clients that leave their agent, 81% say it’s because “they lack regular and meaningful communication” with their agency.
When you ask your clients their reasons for cancellation, a significant portion of them probably say they’re going with a cheaper option.
While price seems to be a significant factor in customer churn, it’s not necessarily the leading cause for cancellation.
From a survey, TechSee found that while 50% of customers who left their agent actively searched for an alternative insurer, an equal amount churned passively, either because they were disengaged with their current insurer or were offered a better deal from a competitor (or both!).
These clients weren’t necessarily unhappy with their previous insurer, but slipped through the cracks.
How many of your customers are slipping through the cracks right now as you read this?
Rocket Referrals likens this common scenario to a weak immune system. When your clients perceive that you’re indifferent toward them by not initiating regular communication, their loyalty degrades, and, “like a weak immune system that begets sickness, clients defect at the first opportunity that presents itself. If a cheaper option presents itself, they will certainly take it, but this doesn’t mean that’s necessarily the reason they leave.”
A weak relationship (or lack of) will quietly drive your customers away. (EverQuote)
How to implement proactive, consistent communication with your clients
It might seem like a daunting task if you’re not already reaching out to your clients regularly.
However, there’s a simple way to kill a few birds with one stone - annual customer insurance reviews.
By holding regular customer insurance reviews with your current client base, you implement proactive communication, sell more policies, get more referrals, and decrease customer churn.
To get these appointments, you’ll have to regularly reach out to your clients to schedule them.
Even when they don’t agree to the appointment, you’re chipping away at any perceived indifference by calling to offer in the first place.
The review is also a valuable tool to educate your clients (which increases customer satisfaction).
Mikaela Parrick from Brown & Joseph says,
“Customers want to know how their coverage benefits them. Currently, only 67% of insurance consumers — about two in three — believe that their insurer helps them understand their policies thoroughly…When insurance companies put effort into helping customers connect coverage to personal benefit, however, their overall customer satisfaction scores increase by an average of 9 percentage points.” (Insurance Thought Leadership)
Remember, you’re in luck. The biggest reason your clients leave is within your control!
If proactive customer outreach isn’t feasible in your agency, consider outsourcing to an approved vendor like Engagex to keep your clients from slipping through the cracks.