How can the insurance industry improve customer retention?by
With the AA predicting car insurance will rise by up to 10% over the next year, it is vital for insurance companies across the board to realise the importance of a strong and relevant customer retention strategy. And with figures suggesting that the cost of acquiring a customer is five times greater than keeping an existing one happy, insurers must ensure their strategy focusses on enhancing brand loyalty so that customers don’t walk away, should premiums rise.
Loyalty schemes can play a huge role in retention with our recent research finding that more than half of consumers (55%) rate loyalty schemes as important to them in their decision to stay with a provider. Yet nine in ten people are unaware of whether their home and motor insurance providers offer such programmes. With the insurance landscape inevitably changing, this suggests insurance companies could be missing out on keeping hold of loyal customers and acquiring new ones, by not implementing targeted and effective retention and loyalty programme.
Rewarding and recognising loyal customers in this increasingly competitive market is something that should be second nature to insurers. Their business success is dependent on being seen to go the extra mile to maintain customer trust in this time of change – otherwise they risk losing them for good.
By following five simple steps, insurers can design and implement a successful retention strategy to hold onto their valued customers and appeal to new ones.
1. Make rewards easy to redeem
Rewards provided to loyal customers must be quick and easy for them to use and benefit from. By offering customers lifestyle rewards and the popular point based loyalty schemes, the incentive becomes easy to redeem, with the financial benefits instantly available for customers to see. Key when premiums are rising.
2. Give the customer choice
It is important the customer sees a selection of rewards from which they can choose from depending on personal taste. Although the number of rewards offered depends on the programme itself, the driving force includes customer demographics, budget and programme objectives. Most importantly, they must be relevant to the audience and something they really do want in order to keep their interest and stop them from straying to your nearby competitor.
3. Keep the programme fresh
By being a loyal customer it means that the same loyalty programme is in constant use, so it is not surprising that customers tend to quickly get used to them. To prevent disengagement and boredom, it is important that a reward scheme does not become too familiar. Customers can also, over time, begin to view loyalty rewards as an entitlement rather than a gift. This can be avoided by regularly refreshing or enhancing a programme, bringing in topical hooks or new product launches, to ensure there is always something new and personalised to please and engage the customer.
4. Add the element of surprise
Providing a reward that a customer isn’t expecting can be a very powerful tool, especially with prices rising. The element of surprise is key - giving customers an additional incentive, such as enhanced service or a free gift, to stay with a provider. From this, the perceived value and memorability of the insurance company can be amplified.
5. Communicate and update the customer
Effective communication and understanding of customer experiences in this competitive environment is vital to the success of an insurance loyalty programme. It is important to ensure customers understand how they are benefiting from the initiative and see the true value of what they are being offered, with many likely to be disgruntled at increased premiums. Personalised points statements and programme enhancement updates are very simple and effective ways to communicate regularly with customers and drive their continued engagement.
Ian Horsham is divisional director for promotions and incentives at The Grass Roots Group.
Having worked in the promotional marketing arena for over 25 years with extensive experience in advertising and sales, Ian Horsham now heads up the Promotions & Incentives division within the Grass Roots Group, specialising in consumer promotions and channel incentives.
In addition to working for the UK’s largest performance...