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Even Insurers' Best Customers Are Leaving

Cost pressures and ease of doing business are leading customers to leave even insurers they like for better deals, according to EY research.

Insurers worldwide are struggling with customer churn due to an increasingly competetive and commoditized market and the increased ability to research and change carriers, according to Ernst & Young LLP's latest Global Insurance Consumer Survey of 24,000 people in 30 countries.

Globally, about 40% of customers left an insurer in the past 18 months, though the percentage is lower in North America. However, significant numbers of "brand advocates" -- those likely to recommend a former insurer -- are leaving carriers regardless of how much they like them. Though policy cost is the No. 1 driver of change globally, in North America, where attrition rates are lower, customer-centric initiatives pay off with greater customer retention.

"The results of this survey should give insurers cause for concern and hope," Kaenan Hertz, US insurance customer leader at EY, said in a press release. "While the survey confirms industry-wide concern about customer turnover, the steps insurers need to take to improve their relationships with customers to combat this turnover are clear and achievable. In essence, insurers must take control of customer relationships and put their customers at the heart of their operations."

For example, respondents in North America were more likely to identify ease of doing business with an insurer (60%) than "value for money" (53%) as an important factor, EY said. How responsive an insurer is to customer inquiries is a major differentiator, especially in P&C, according to 50% of respondents, who cited responsiveness as an important characteristic.

Being responsive is a challenge for insurers, which traditionally do not interact with their customers too often. But when there is an opportunity to interact -- for example, at the point of claim -- being availabile in all channels is crucial. Fewer than half of North American policyholders have interacted with their insurer over the past year and a half.

"Given the scarcity of interaction, each contact point takes on increased importance as a moment of truth, or an experience that positively or negatively changed customer perceptions of his or her insurer or broker," the EY report said. "By handling these interactions effectively, insurers can seize opportunities to strengthen customer relationships and increase revenue."

Emerging technologies also offer an opportunity to interact more, and insurers should be thinking about how to provide innovative solutions to increasingly connected customers.

"Telematics, wearable technology and other advancements are redefining the 'art of the possible' in terms of what we know about how people live and behave," Hertz said in the release. "Without an analytics-led, customer-centric organization, the insurance industry will be vulnerable to disruption from new entrants in the market who are equipped to serve the customer of the future."

[More from Hertz: Internet of Things Under the Radar, But Coming to Insurance]

Nathan Golia is senior editor of Insurance & Technology. He joined the publication in 2010 as associate editor and covers all aspects of the nexus between insurance and information technology, including mobility, distribution, core systems, customer interaction, and risk ... View Full Bio

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User Rank: Apprentice
8/18/2017 | 7:06:03 AM
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User Rank: Author
12/8/2014 | 10:10:49 AM
Re: Insurance "was" social
That's true; interesting point, as most people no longer see insurance as a social industry. It's a shame to see the decline of in-person interactions, but even the most traditional insurers have to rise to the expectations of today's customers.
Anshu Biswas
Anshu Biswas,
User Rank: Apprentice
12/6/2014 | 9:58:26 PM
Insurance "was" social
Indeed a wake up call. Very interesting, Insurance a decade back was the most social form of business via Insurance agents who interacted at a personal level with policy holders. Seeing the same industry suffer from decreased customer interaction is nothing but a sheet wake up call.
User Rank: Author
12/5/2014 | 2:09:23 PM
Re: Call to action
Is the turnover policyholders leaving one insurance company for another insurance company? Or leaving an insurer for some other kind of non-insurance financial protection provider (that obviously would be more likely in life, annuities, etc. than in P&C)? That makes a huge difference in terms of assessing these trends. If customers are starting to do more business with non-insurers -- a trend we are seeing more dramatically in banking, where more consumers are handling financial services with non-banks -- that calls into question the industry's entire business model. If customers are more actively departing one insurer for another that better meets their needs (financial, contact, customization, tech-enabled, whatever) that definitely is significant but I would almost say it is good news because it suggests that some companies really "get it" and are making the right kinds of investments in customer experience/engagement, multi-channel, infrastructure, etc.
User Rank: Author
12/5/2014 | 1:52:54 PM
Call to action
I was pretty surprised by the statistic that fewer than 50% of North American policyholders have interacted with their insurers in the past year and a half - the scarcity of interaction really doesn't leave any room for error. This research is a wake-up call to insurers that aren't taking big steps to improve their customer experience strategies.
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