Keep it together


The insurance industry often professes the importance of its clients but seemingly spends more time chasing new ones than retaining existing clients, says Ben Bolton

In an increasingly competitive market, insurers and brokers need to seek to retain their most profitable clients but how should companies go about making sure they improve client management?

In a recent study, the most frequently mentioned reason for brokers selecting a particular insurer was price. In that same study, nearly 25% of placing brokers were unable to name a preferred Lloyd's syndicate. This emphasises how commoditised the market is and how difficult it is to provide service that creates client loyalty.

There are some London market insurers and brokers that recognise their most valuable asset is the loyal client. These organisations are reassessing their client service strategies based on this conclusion. New distribution channels, improved access, client/broker relationship programmes, and measuring service performance are all part of the changing emphasis on delivering more value to clients. They are also developing key client programmes to identify, retain and grow their most valuable clients.

A handle on claims

Ultimately, policyholders are demanding more understanding and those that respond best to these needs will do better in the long run. As one insured in the US puts it: "With the complexity and size of the company, it's really about getting a better handler who can have a clear knowledge of our risks and can write these in a better way."

As Bain and Co has demonstrated (see graph opposite), gains from keeping hold of clients can be substantial, with brokers looking at a 48% profit from just a 5% growth in client retention. However, many insurance organisations struggle to create successful team-based programmes, finding it difficult to use client knowledge effectively or to make the cultural shift from individual to team working. So how do key client programmes work?

The first step is that of identifying the most valuable clients. Failing to differentiate between these clients and the rest could lead into the trap of selling everything to all, creating a situation where no clients get what they really want. Insurers are naturally segmenting their business this way, with one Lloyd's underwriter explaining: "For specialty lines we now go to clients rather than wait at the box. This way we can differentiate ourselves on our sector knowledge."

The choice of key clients may be made on an empirical or subjective basis, or a combination of both. In terms of numbers, it is best not to be too ambitious, starting with relatively few clients, maybe four or five, and building on the momentum of success.

Frederick Reichheld, in The Loyalty Effect, isolates six components that go into quantifying the value of loyalty: the cost of acquiring the client; the base profit that can be expected of them; the revenue growth to be anticipated from the relationship; any cost savings that may accrue from serving the client; any referrals the client may make as a result of excellent service; and the price premium that a first-class relationship allows you to charge.

Cleaning data

Expect information to be in a complete mess or the wrong format; for example, accounting systems often measure transactions not relationships.

But stick with it and the resulting analysis will reveal a great deal about what drives profitability. One insurer recently spent nearly six months cleaning data before it could even begin to identify its most valuable clients/brokers.

Step two involves establishing a committed team. Key client planning must be undertaken as a team activity. In order to overcome individualistic tendencies, it is vital to agree a set of roles for team members. The core team should then be responsible for developing the plan.

Step three requires the development of key client plans. A facilitated workshop is an essential part of a client planning programme. The core team draws together information from billing and contact management systems, as well as information from external information sources. The team then collaboratively develops a key client plan using the information from the planning sessions and workshop. The plan needs to be agreed and owned by the core team that will be held accountable for its delivery, and it also needs regularly updating. Early on, there will be 'quick wins' where the team can act immediately. This helps generate goodwill and momentum, as well as pinpointing areas for more thorough work.

Means test

Step four is about measuring and reviewing performance. Organisations invest considerable time and money in key client programmes and it is, therefore, important that a means of measuring and reviewing progress is instituted.

Be careful about what is measured. All the evidence suggests that the most important test of client loyalty is the decision to repurchase. Unfortunately, many of the ways used to measure loyalty, such as satisfaction ratings or market share, have a weak correlation with the propensity to repurchase and may be misleading.

In terms of useful, practical information, analysing defections is extremely valuable. And where the value chain is complex, market mapping is an excellent way of pinpointing areas where service improvements will have the greatest impact on clients.

In conclusion, technology will undoubtedly help to improve service efficiency; however, insurers and brokers will only gain an edge by improving their understanding of client needs. The most successful insurance businesses will establish strong client management programmes that in turn create clients that are more loyal and more profitable.


"You can do everything right as far as the clients' spoken needs go and still lose the customer. You must learn to satisfy unspoken needs and go beyond expectations. This comes from understanding what makes customers tick.

"In the end, long-term relationships are built by human beings not databases."

Jim Billington, Harvard Business Review, 2004.

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