Customer retention is vital to success in any industry, but especially in the highly competitive insurance sector. The business has an exceptionally high cost of new customer acquisition, so retaining customers in insurance is a critical strategy for growing a business.

That’s why insurance carriers must improve their policyholder rates and invest in retention as a lever in their growth strategy. It’s also vital to understand how retention rates work, the consequences of suffering low retention rates, and how to retain insurance customers.

Retention Rate Trends in Insurance

The average insurance retention rate is 84%, but leading carriers enjoy a 93% to 95% customer retention rate, according to The Independent Insurance Agents of Dallas data. In fact, insurance retention rates have actually increased over the last 10 years from 73.6% in 2012, based on Organization for Economic Cooperation And Development statistics.

Maintaining these high levels of customer retention in insurance is becoming increasingly vital as technology evolves. Consumers have become savvier about their options, which puts pressure on carriers to better understand their changing demands and the services they expect.

Why High Customer Retention Rates Matter

Insurance customer retention rates are vital, as it’s easier to engage existing customers than try to win over new ones. Not only does the industry have the highest customer acquisition costs of any sector, but the data from the Independent Insurance Agents of Dallas show that it also costs insurance firms seven to nine times more to attract new customers than retain existing ones.

Achieving a high retention rate ensures carriers have satisfied customers, which delivers a range of long-term benefits, including:

  • Lower cost: Customer retention is typically a more cost-effective approach than acquiring and nurturing new customers.
  • Higher spending: Happy, loyal customers are more likely to increase their spending, purchase new products and sign up for new services.
  • Increased profits: Retaining customers in insurance will also have a positive impact on a carrier’s profits. Ensuring existing customers are happy and engaged is critical to growing a business.
  • Brand ambassadors: Establishing high insurance retention rates encourages customers to become brand ambassadors by sharing their positive experiences. This is vital in the age of social media, as new customers use reviews and word of mouth to guide their insurance carrier selection.

The Costs of Low Customer Retention Rates

On the other hand, failing to deliver on customer expectations and achieving low customer retention rates can have a significant negative impact. The most apparent effect is customers leaving their insurance carrier for a competitor, which leads to fewer sales and a loss of earnings.

Even worse, customers are more likely to share a negative experience with a brand than they are a good one. For example, Dimensional Research found people who have a bad interaction with a brand are 50% more likely to share it on social media and 52% more likely to share it in an online review site than those who had good experiences. So a low insurance customer retention rate will likely lead to negative online reviews that affect future sales.

3 Ways To Boost Your Retention Rates

Boosting retention rates relies on understanding customers, communicating effectively, offering great products and services that meet customers’ needs and more. Let’s look at three concrete ways insurers can boost retention rates.

Policyholder Discounts for Smart Home Programs

The growth of smart devices deployed in homes offers a tactic for carriers to retain insurance customers. Smart home technology provides carriers with access to dynamic data that helps them better understand their customers, the market and business transformation opportunities.

Carriers can encourage homeowners to sign up for smart home programs by offering discounts on their policies. Discounts are a tried and tested way to grow sales, increase demand, reach new customers and become more competitive.

Creating innovative discount programs enables carriers to bring something new to the market and offers a way to compete on more than price alone. Carriers also get something in return, as policyholders have to install and use their smart devices to qualify for an insurance discount. That creates a wealth of data for insurance carriers to understand their customers’ usage preferences, develop more relevant products and evolve how they calculate risk profiles.

Using smart tech devices also encourages homeowners to become more aware of the risks and threats their homes face, which in turn empowers them to better protect their homes. As a result, carriers can offer more exciting and innovative solutions and expand their coverage from reactive to preventative measures. This enables customers to monitor for problems and prevent issues that could cause costly damage.

‘Surprise and Delight’ Programs Around Claims

“Surprise and delight” is a marketing strategy that helps carriers attract and nurture customers by offering unexpected rewards. Sharing surprise gifts can increase customer loyalty and boost customer experience and engagement levels while also reducing churn.

When retaining customers in insurance, a “surprise and delight” program could involve offering product upgrades, coupons or a smart home package discount — especially around times of claims renewal. This tactic is also crucial to building brand awareness, as it encourages customers to share their experiences with their friends and family via social media or word of mouth.

Increasing Policyholder Engagement

Engaging customers with clear communication and delivering on their demands is vital to retaining customers in insurance. It’s essential to be proactive, stay in touch with policyholders and solve their problems or answer their questions as quickly as possible.

Insurance carriers can enhance policyholder engagement through various tactics. Here are three effective approaches.

Optimizing Customer Policies

Any engagement with a customer is an opportunity to identify their specific needs, which may not be covered by their current policy. Customer needs also tend to change over time, and their insurance policy needs to adjust accordingly. So carriers that optimize their policies to meet those needs can enjoy increased engagement and improved customer satisfaction levels.

Staying Top of Mind

One of the best solutions for insurance customer retention is to stay at the forefront of customers’ minds. It’s key to communicate via their preferred channels, whether those are email newsletters or social media, to share special offers, new products and services and answer customers’ questions. This approach also re-enforces customers’ positive perception of their insurance carrier and lowers the chances they’ll look elsewhere.

Proactive Communication

Ongoing communication is crucial to maintaining customer retention. For example, changes to a product a consumer owns could affect their daily life, so it’s important to communicate those changes in the right way. Proactive communication also provides insurance carriers a pulse on how customers feel about their products and services and early insight into whether they’re considering taking their business elsewhere.

It’s important to tackle issues of dissatisfaction proactively to correct potential problems as soon as possible. However, there’s a fine line between communicating proactively and over-communicating, which can drive customers away. It’s key to find the right balance and ensure every interaction has a meaningful and valid reason.

Retaining Policyholders with Notion

Boosting insurance consumer retention relies on understanding customer needs and delivering on their demands. It also requires carriers to be ahead of the game and provide innovative products and services to boost customer engagement.

Smart home technology can help insurance carriers boost customer engagement and experience. And to succeed with smart device programs, it’s vital to partner with a firm that understands the technology.

Discover how partnering with Notion enables you to accelerate smart home adoption, increase customer connections and boost your customer retention rate.