Insurance Customer Retention: A Tale of Two Agencies

It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness….sorry, wrong story.

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Here are two real stories with similar insurance customer retention issues but very different results (names have been changed to protect the innocent).

Story #1: Jones Insurance resides in a medium size Midwestern town. Due to market conditions, their companies contracted leaving them with only a couple of companies. Their largest company has had major internal changes as well increased loss pressure because of bad weather.

The result is that prices have increased dramatically over the last year, causing customers to shop and move. This has led to a 3 year decline in customer count.

What would you do?

Here’s what Jones did. They contacted the carrier to discuss rate activity. The company said there was no room to lower rates because of loss activity. The company did provide the agency with a list of upcoming renewals and the potential price increases. They also increased the deductible credits, because a lot of the agency’s customers were at a 250 home deductible.

Nothing happened….customers still left, and the agency was frustrated.

The next time I ran into this agency, I asked how things were going. He mentioned that his main company was killing him, because all their customers were leaving due to price increases. I asked a lot of questions, and discovered the information above.

My next questions was whether he was proactive in calling customers ahead of time.

He responded, “We don’t have time.”

I asked about sending out postcards since the phone was so time-consuming. He was afraid of the cost.

“What about email?”, I asked. “I don’t have a list”, he said.

I walked away from the conversation as frustrated as he was, but for very different reasons.

How would you have responded?

Here are my thoughts:

You can only control what you can control. The agent can’t control the company rates. The marketing rep can’t either. Even if their complaints take root, it would probably be 6 months before new rates would hit the street. So continuing the current path would continue to lead to customer run-off.

So what can he control. He can control how he helps his customer respond to the increases. He can’t control their reaction, but making an attempt to contact, sympathize  explain, etc. may not save every account but it is action in the right direction and would save more than doing nothing.

He can control his access to markets, and now may be a good time to look for more. He can’t control whether they appoint him, but he can stack the deck in his agency’s favor. Look professional, demonstrate activity in the agency, and feel modern with an online presence.

Story #2: The Smith Agency is larger than Jones but facing a similar problem. Like Jones, they have had markets contract on them in the last several years. One particular market left the agency, forcing them to roll to a current carrier. Thankfully they had a carrier willing to take on the business, but that is when things get interesting.

The carrier that took the book transfer setup a price match on incoming business. This made the transfer fairly seamless, unfortunately at the first renewal, a storm hit. Pricing jumped from the matched price to the “natural” rate which was dramatic.

Customers were jumping ship, and when they called, they were angry. The agency immediately called the carrier frustrated and disillusioned at what could look like a “bait and switch”. The company listened, but wasn’t able to make any pricing concessions.

The agency was short-staffed and did not have the manpower to requote every renewal, so they had to get creative.

What advice would you give?

They assigned one person to reach out to the customer and walk them through the renewal increase. They did everything to avoid shopping the renewal, no matter the increase. They looked at deductibles, discounts, replacement values, and potential cross-sells.

Yes, they lost customers, but more amazingly their policy count went up, because they found cross-sell opportunities. Premiums went up because the majority of the customers kept the rate. They just wanted an agency that cared.

The process changed the agency as a whole, and they implemented the same strategy throughout the PL department, and had similar results.

Knowing both these agencies, I learned valuable lessons: Action trumps inaction, don’t let fear ruin your retention efforts, and control what you can control.

What are your thoughts?

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