How to cross-sell and retain insurance customers
Super-bundlers, those households that purchase multiple policies with one provider, are the most coveted group of customers in insurance.
These high-value insurance customers are considered stickier. They buy more coverage and tend to have higher customer satisfaction scores. Customers who bundle their auto and homeowner or renter policies have retention rates of 95%, according to a J.D. Power. Among non-bundlers. retention rates drop to 85% for homeowners, and 82% for renters. Bundlers are also the largest customer segment in the U.S. market where they account for $198 billion or 52% of total personal lines insurance premiums annually, according to Progressive in the second quarter of 2022.
However, retaining bundlers is going to be challenging. Auto insurance rates have increased by a jaw-dropping 14% between 2022 and 2023 bringing the national average annual premium for full coverage from $1,771 to $2,014, according to Bankrate. In some states like Florida and New York, average annual premiums exceed $3,000 per year. The J.D. Power study found home and auto bundlers are leading overall declines in satisfaction scores. Auto bundlers reported a 10-point decline in price satisfaction, compared to non-bundlers’ 1-point decline, according to the study.
Simon-Kucher expects customer churn and switching behaviors in auto-insurance to increase sharply in 2023. In a recent Simon-Kucher project, 74% of personal P&C insurance customers said they are comparison-shopping more frequently in response to inflation. More than half of these customers said they are likely to switch providers, and nearly 60% of customers said their policies included features they did not need or valued.
What should insurers do to retain their high-value bundlers, and how can insurers increase their share of multi-product customers?
Recalibrate products for new priorities and sensitivities
Premiums are rising at a time of plummeting consumer confidence. High inflation, credit tightening, and mass layoffs are also hitting consumers’ pocketbooks. New customer segments are emerging and priorities are shifting. Old assumptions about what bundlers value may no longer hold true.
Insurers must re-examine their offerings to determine if they are still aligned with customers’ evolving needs, priorities, and pricing sensitivities. Insurers must also work to identify high-value customers who are at risk of churn or unbundling, for retention efforts. These customers usually exhibit certain behavior patterns like dissatisfaction during a recent interaction with the insurer or are actively researching lower cost options.
Insurer’s products and offers must have the right market fit, be compelling when compared to competitors’ offers, and communicate clear value to the target customer segment. Packing too much or too little into a product means insurers are either not meeting their clients needs or the appropriate price point. Feature bloat is an unfortunate but widespread phenomenon in personal insurance. Executives include product features or attributes they assume are valuable to their customers, when in reality these extra ‘bells and whistles’ cost too much, overdeliver, confuse and overwhelm customers.
Data driven approaches including advanced segmentation, split testing, and AI-led experimentation can optimize product offer design as well as uncover new opportunities for growth as demand conditions change.
Nurture relationships early
In addition to retaining high-value bundlers, insurers must also find ways to convert single-product policy holders into multi-product relationships.
Customer loyalty, retention and cross-selling efforts must begin as soon as customers acquire their first insurance policy. Most policyholders have already addressed a large part of their insurance needs by the time they are 35 years old, according to Simon-Kucher research. For example, the typical age of first-time homebuyers in America is 36 (it was 33 in 2021). Americans start driving between 16 and 18 years-old, and typically rent for the first time between ages 18 and 29 years. Simon-Kucher research also shows young policyholders are just as willing to bundle their policies with one provider as older policyholders.
Insurers must lay the foundation for a multi-product relationship early. Ideally, more than one product can be sold at the initial consultation or sale. At the very least, first interactions or conversations should include an additional ‘teaser’ product.
Unfortunately, it is increasingly common to have a situation where insurers fail to notice when an existing customer receives a promotion, gets married, has their first child, or buys their first home. These windows-of-opportunity for cross-selling are increasingly getting missed because of the rise of digital channels. An insurance company’s website or comparison search engine – not the broker – is now the most likely first touchpoint when a customer is in the market for a new insurance policy.
Insurers must find ways to stay in relationship with their customers. Digital channels are critical to the customers’ buying journey and can be optimized for cross-buying. One large insurance provider introduced a protection-check feature as part of its digital channel experience. Customers are invited to interact with an automated protection check digital tool to identify gaps in coverage. Customers are given a visual representation of their current insurance protection like auto and homeowners, as well as future coverage needs like pet, travel, recreational vehicle coverage, and more. The visual also integrates with the insurer’s loyalty rewards program to incentivize loyalty and cross-buying.
By all accounts, consumers recognize the advantages of having multiple policies with one insurance provider. However, the insurance provider must create a customer journey of seamless experiences, gentle nudges, and relationship-building. Cross-buying should be easy, simple and straightforward. Bundled products should still be desirable unbundled, and loyalty should be reinforced and rewarded.
