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Building loyalty in times of crisis: How insurers can foster long-term customer relationships

customer engagement

As the cost-of-living crisis persists, customers reduce insurance coverage, yet premiums are rising. In the inaugural segment of this three-part series, Insurance Post and PayPal collaborate to examine how insurers can retain customers during economic downturns by offering cost-effective products that cater to their needs. Eleanore Robinson investigates.

The cost-of-living crisis and its impact

The current cost-of-living crisis is leads customers to reconsider their insurance coverage – sometimes cancelling it altogether. Analysis from Fair4All Finance found that 49% of those in financially vulnerable circumstances, equating to 8.6 million people, said that increasing costs affected their ability to afford insurance. Additionally, a recent ABI survey found that only 57% of respondents felt they were getting the best deal.

Consumer Insight’s Cost of Living Behaviour Tracker for November 2022 found that 6.6% of people reported cutting back on their insurance cover in the past three months. Appliance, pet, combined buildings, and household insurance were most likely to get cancelled, while motor insurance was most likely to be switched to cheaper options.

This is at a time when ABI’s latest tracker found that the average premium paid for private motor insurance was up 8% in the fourth quarter of 2022 compared to the previous three months.

Furthermore, despite home insurance premiums being at a record low, ABI warns that a rise in subsistence claims, a surge in frozen pipe pay-outs, and the rising building material and labour costs could put pressure on premiums in 2023.

With premiums rising when money is tight in many households, how can personal lines insurers meet the needs of their customers and foster a sense of loyalty so that they retain their policies?

Retaining customers in times of economic downturns

Lorna Whalley, head of proposition and change at Aviva, said that keeping policy prices down in the current economic environment is critical.

She said: “Customers are very price driven. So the price is paramount, and anything we can do to keep those prices low and give those customers options is key.”

Yet, studies show that retaining customers can be more challenging during economic downturns. Recent research from the Current Account Switch Service found that, for the first time, many people are considering whether switching away from their favourite brands could help combat increasing costs.

In its latest research, the Current Account Switch Service found that 55% of consumers remain just as loyal to their preferred brands as before the Covid-19 pandemic began, dropping to 18% when it came to insurance providers.

Jo Lloyd, customer and propositions director for AXA UK, said: “To retain customers, it is vital that we provide them with products and services that meet their needs. At AXA, we know that customers need to see that we value them.”

Strategies for fostering loyalty among customers

Meanwhile, Aviva offers different products with varying service levels to give customers that flexibility. Whalley added: “Service on their terms also resonates with customers.”

Furthermore, honest conversations about what cover a customer needs and can afford can make all the difference when it comes to securing and retaining clients. Jo Lloyd said that by building loyal relationships and adapting product offerings in line with their feedback, insurers could retain current and show future customers why they should choose them.

She said: “With the Consumer Duty deadline approaching in July, insurers should be putting themselves in their customers’ shoes to get to grips with the requirements.

“This is entirely consistent with running a business oriented towards the customers it exists to serve and is ever more important in the face of new risks and challenges.”

Research from Experian found, in the face of the current financial squeeze, consumers are increasingly opting for basic insurance products and topping these up with value-added offers, such as a courtesy car.

The data firm expects this trend to grow even further, and more people may decide to forgo protecting a no-claims bonus and seek to reduce their premiums with higher excesses. It said that in this environment, insurers need to be very clear about what is (and isn’t) included in their policies, as customers contact insurers at some of the most stressful times.

It’s about ensuring we have flexible payment options. Mobile first is a trend that keeps growing, so how can we ensure we offer customers digital wallet payments?
Lorna Whalley, head of proposition and change at Aviva

Discovering that they’re not covered, don’t have enough cover to replace or repair items, or face a more significant excess than expected adds to the stress, the data firm found.

In response to the cost of living crisis, Aviva’s staff have been trained to identify the right service for vulnerable customers. Whalley said: “We make sure customers know we are there for them to have a conversation, to see if we can do anything to help them. Customers appreciate it; helping them in their moment of distress will help the relationship and, hopefully, drive loyalty.”

With the General Insurance Pricing Practices (GIPP) reforms, customers can expect to see the same product prices at renewal or buying for the first time. Cost is not the only factor when choosing a product in the current climate.

The importance of frictionless journeys

A frictionless journey is also important when choosing an insurer; a good payment experience can help foster loyalty and trust.

Whalley said: “During the purchase journey, when a customer comes to pay is when they become nervous, thinking ‘have I made the right decision’, and that’s not just in insurance but in all purchase journeys. So, making it as easy for customers as possible is very important.

“It’s about ensuring we have flexible payment options. Mobile first is a trend that keeps growing, so how can we ensure we offer customers digital wallet payments?”

She said that services such as PayPal, and other popular digital wallets are all options customers prefer to use as it makes it easy for them to pay via their mobile phones, leading to higher authorisation rates due to the security checks these companies have.

“This makes it slick and easy for customers and removes any pain from the journey,” Whalley added.

Axa is also alive to the need for more technological innovation in insurance to retain current customers and attract new ones too.

Lloyd said: “Many people now live online and expect seamless interactions, regardless of what they’re buying or services received. This means insurers cannot shy away from becoming agile and adaptable to digital change.”

Vincent Belloc, vice president at PayPal UK, believes customers want to engage with insurance companies by “using devices and channels of their choice while using payment methods they prefer and trust”.

He said: “As new payment methods continue to emerge, insurers will need to evolve their payment experiences to align with consumer expectations.

“Payments are a critical step in the customer journey which can help create new opportunities for customer acquisition, increase customer loyalty, and drive revenue.”

Belloc believes that strong payment strategies will lead to competitive advantages for insurers by creating better customer experiences while reducing service costs.

Axa recently soft-launched Moja, its first digital-only brand, for people who live via their smartphone or tablet. It also uses insurtech to handle home insurance claims via video calls so that they can assess claims on the same day.

“This was a direct response to the changing needs of customers and enabled us to branch out to a wider audience,” Lloyd added. “These streamlined processes simplify customer interaction, and if consumers trust that we will handle their claims quickly and fairly, they are more likely to stay.”

In times like these, insurers must keep their customers at the heart of everything they do and aim to reassure people by providing support and helping protect against various risks.

Lloyd said: “Insurance becomes even more important because it provides an essential safety net during uncertain times. This means the industry can play its part and build loyalty by supporting businesses and customers when they need us most and by providing the right products and services for them.”


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