Sold on price?

A happy customer will be a loyal customer, but many insurers have not yet worked out the magic formula for ensuring this. Des Robertson wonders if customer care is as high on insurers' agendas as they claim and whether they are brave enough to break with the perception that customers are sold on policy price alone

Many insurers claim customer care as a high priority, but a quote from one insurance executive in a recent Chartered Insurance Institute journal appears to contradict this: "We plan to lose about 30% of our customers every year. As an industry, we have been more about gaining new customers than retaining old ones."

Surely, if insurers cared for customers they would not leave in droves?

What business can sustain that kind of attrition rate? Sales and claims strategies are clearly misaligned with the concept of genuine customer care.

Some industry commentators claim that insurance is a commodity, therefore, it can only be sold on price. If this is true, why have suppliers in the fast-moving consumer goods industries been able to develop premium brands?

Do insurance customers not understand value?

Policy pricing

Insurance is marketed and sold on price and no other differentiating message is getting through to the public. In the mind of a customer, the logic follows that: 'To be low on price, you have to be low on cost and claims surely are the greatest cost to an insurer. To keep costs down, you have to keep the cost of claims down, so to keep the cost of claims down, insurers will try to cut my claim. Therefore, I have to fight my corner for the last possible penny at the time of a loss.'

The fact is that the insurance claim is the real product - not the policy.

In particular, the process - the experience - of claiming, along with the result, is the product. Insurance is only assurance if we really feel we are buying a process that will treat us with respect if we need it.

An insurer could not understand why customers who had had their claims settled in a manner that met all of the company's performance standards, were just as likely to leave at renewal. But one customer's experience reveals some more fundamental and underlying problems associated with the claims process.

The first message she heard when claiming on her insurance policy was a warning that the information would be cross-referenced on industry databases to reduce fraud. When waiting for settlement, she bought a new television to watch the world cup. The insurer then paid only that amount for which they could have replaced the set. Another customer was given vouchers to replace the lost goods, which limited her freedom of choice. And a cash-in-lieu offer was insufficient to replace the lost goods. The suppliers of the replaced goods were arrogant, unhelpful and patronising. The loss adjuster even asked the customer if she had a criminal record and then refused to return the presented receipts, implying that they may be used to claim again.

It is vital to remember that customer care is not just about insurers honouring their financial obligations within a reasonable time. What does £20 in compensation for a genuine complaint say to a customer? Does it actually compensate for their wasted time, aggravation and inconvenience?

Or could it be perceived as a cheap attempt to get rid of the complaint?

What if insurers made every effort to resolve a complaint to the customer's satisfaction and then consulted them on how things might be improved in future? Would a personal letter and gift voucher, thanking them for their contribution, still make them feel the insurer was trying to buy them off?

Customer care is a way of life - a journey, not an event. There are no silver bullets.

In virtually every other industry, it is accepted that retaining a customer costs around 10 times less than getting a new one. Why would insurance be any different?

What if insurers could reduce their annual attrition rate from 30% to 10%? The cost of retaining customers is significantly lower than the cost of finding new customers. Almost every industry can show these comparative costs very easily.

Lifestyle and aspirations

The branded consumer goods sector has demonstrated that the way to break out of being a commodity is to understand customers' experience. And reflecting their lifestyle and aspirations is the key to doing this. What if the most profitable customers were not price-sensitive? If this group became advocates of an insurer's brand, just imagine what its growth rate could be.

Importantly the insurance industry has two major advantages over other industries in developing this opportunity. Insurers interact with customers and have extremely valuable information about them; and, although a double-edged sword, insurers can demonstrate their true value at a time when their customers are at their most vulnerable.

Apparently, only 3% of people are fundamentally dishonest. Few other industries have as much information to identify, from the remaining 97%, those customers with whom can be built collaborative relationships to reduce risk and increase profitability, value and loyalty.

Insurers need a mind shift so they consider these customers as trustworthy, honourable people who have entrusted the insurer to help them overcome possible misfortune, and have been wise in making that choice.

It takes new ways of working and new processes, to better add value to customers. Clearly, it will take leadership, money, time and effort to bring about this change. Many executives will consider this to be too tough. Just as well, because this is a window of opportunity for those few with the vision, leadership and desire to set the pace in the market.

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