How Insurance Agencies Can Improve Their Client Retention
Client acquisition is tough for any company in any industry. Client retention doesn’t have to be, once we understand how important it is and why clients leave.
In the insurance industry, the average customer retention rate is 84%. This indicates that every year, the average insurance agency needs to generate 16% more business just to maintain its current levels.
As a decision maker of an insurance agency, you don’t have to accept this rate as a fact of life. There are proven exceptions; the top five companies in any industry have a 93%-95% customer retention rate.
For an insurance agency, striving for a higher client retention rate is critical. This is because the insurance industry has one of the highest customer acquisition costs of any industry, in fact, seven to nine times more to gain a customer than to keep one.
Why do policy holders leave insurance agencies?
Purchasing an insurance policy from a broker or agency can be a very personal decision - you’re leaving your peace of mind in someone else's hands. Therefore, like many other service-based industries, trust and communication is an essential factor in the purchase decision.
Rocket Referrals found that of clients surveyed that switched agencies, “81% do so because they lack regular and meaningful communication from the business”.
If your agency is slow to (or just doesn’t) return calls, check on its clients periodically, and keep its clients in the loop, policy holders perceive that you don’t care about them.
If they feel that you are indifferent towards them, their trust may go to an agency that cares, regardless of price.
So what could you do to prevent your clients from leaving?
Customer loyalty is correlated to the number of insurance products purchased.
According to Database Marketing Institute, the odds of a client staying with your agency increases based on the number of products they purchase from you (see diagram below).
Retention rate based on the number of products owned.
Source: Database Marketing Institute
This makes perfect sense. If a client purchases auto, homeowners, and commercial insurance from you, switching brokerages seems like much larger task than it would be if they only held a single policy.
It’s nothing new. Insurance agencies have always been trying to cross-sell policies. However, it is important to understand that the value of selling that extra policy is much larger than just the profit. You’re also mitigating the 7x-9x cost it would take to sell that policy to a new client.
Utilizing InsureTech to make your retention efforts more efficient.
Just like marketing, you can spend your time, efforts, and therefore money on pursuing cross-selling opportunities with everyone. Or, you can take a more efficient route by utilizing software such as Alstar Brokerage Solutions’ ATOMS™ digital all-in-one system to identify accounts with the most potential and focus your efforts there.
As Insurance Business Magazine explores,
““The idea is for the technology to flag accounts that need attention or accounts where there are potential opportunities. For example, you might have an account with home and auto insurance, but the customer has their life insurance with someone else. Agents need to make sure that, as far as their customers are concerned, they are meeting any insurance needs they might have.””
Once again, efficiently cross-selling will reduce your cost-per-policy-sale and increase the loyalty you have amongst your clients.
Providing the service that clients want through a hybrid human-digital experience.
McKinsey reports that over 80% of insurance purchases use a digital channel at some point in the buying journey. However, 75% of policy holders also report troubles in purchasing insurance online.
Digital steps, whether they be research on policies, comparing options, or purchasing, are a necessary part of shopping for insurance. However, the intricacies and process can be very complicated in the eyes of a shopper. The role of a human agent, someone who helps them sort through the information with the client’s best interests in mind, is still irreplaceable.
What does this mean for client retention?
Your insurance agency can benefit from providing at least a basic digital experience, such as a client portal, to keep up with what the client expects from every aspect of their lives. However, keeping human contact and ensuring that your clients feel appreciated is important as well. It shows them that you haven’t handed them off to a robot.
For example, while providing a client portal to access their information instantly, you can also use a software such as Alstar’s ATOMS™ to automate reminders to your agents, making sure that they send birthday greetings, recommend age-related products or services, and calls to remind the client that their policy is coming up for renewal.
