How to have rate conversations with customers

Every broker has fielded this phone call: “I’ve just gotten my insurance renewal. The price is way higher than last year! Get me a better price!”

As the cost-of-living crisis continues to impact Canadians, it’s imperative that customers feel they are paying the “right” price for their insurance. And they need to trust that their broker got them the right price for the right product – with the right market.

Given the evolution of rating algorithms among insurers, and the differences in price and coverage among markets, this isn’t as simple as it once was! Still, to have a successful remarketing conversation is an opportunity both to build trust with the customer and to find them a long-term, sustainable insurance solution.

And brokers don’t need to become rating algorithm experts to do so.

Multi-variable rating: Complex but tailored

The first and perhaps biggest barrier to effective remarketing conversations is the complexity of multi-variate rating now prevalent in the industry. Most insurers use sophisticated algorithms, in both personal and commercial lines, to arrive at pricing tailored to each specific risk. In a commercial lines property policy, an insurer like Intact may consider as many as 50 different variables. In a simple personal lines property policy, we lean on flood mapping, geocoding, decades of historical weather patterns and other risk data, to create premiums crafted for pinpoint-specific locations.

Tailored pricing benefits most customers

For most customers, this evolution of rating is a good thing – that’s why insurers like Intact invest so much in our rating technology and processes. More data – and more accurate data – means individual risks are better understood and more precisely priced. Customers pay for coverage based on their specific profile – not a generic neighbourhood profile or commercial class profile. They get a personalized price:  Customers with average – or low risk – profiles pay lower rates than customers with higher risk profiles.

Practical scenarios demystify algorithms

Explaining how insurers calculate price does not mean that brokers need to explain every carrier’s algorithm in technical detail to customers. Rather, they can rely on practical scenarios relevant to the customer’s unique situation – for example, the location and age of their home or business property and the impact of renovations (or lack of renovations!). They can discuss how close a customer is to that beautiful riverwalk – and its history of bank breaches. Instead of talking about meta industry and economic trends –  say, inflation – the conversation can focus on the specific impact those trends have on customers’ daily lives – how they’ve already noticed they’re paying more for groceries, for utilities, for life.

Apples and oranges and tennis balls

Here’s where it gets complicated: Each insurer’s algorithm varies. Each insurer’s product varies. This is, of course, good for customers because it offers choice. But it does make comparing quotes from different markets a bit like comparing apples and oranges – or apples and tennis balls. When a customer asks a broker to remarket a risk, it’s critical to take them through what it is they need and want, what’s covered under their existing policy and what’s not covered under that cheaper policy.

With underinsurance still an issue across Canada, having those “this is not covered – let’s talk about the implication” conversations helps brokers deliver even more value to customers.

Long-term stability key

The most frustrating thing about remarketing – both for brokers and customers – is what happens the next year at renewal. Many insurers chase new business aggressively and may offer unsustainable rates for new customers – then adjust them, also aggressively, upwards at renewal. When rates increase, they usually increase across the industry: Whichever market is the  first-mover, others inevitably follow suit. Customers benefit most from a long-term pricing strategy that tries to buffer against extreme rate swings. Knowing and trusting that their broker has achieved that for them may reduce the need for a remarketing – or “What the heck happened to my premium?” – conversation the following year.

No market likes to lose business

Insurers don’t like to lose existing business. Before getting seven apples and oranges quotes and moving a risk to another market, brokers can work with the current market’s underwriter to ensure the customer is getting the best possible price. The insurer’s algorithm provides us with data. The broker supplements the customer’s story and advocates for the quality of the risk. A long-term market like Intact wants to keep the business. Underwriters may work with the broker to update customer information, leverage untapped discounts or find another solution that works for the customer – and eliminates the work of remarketing, this year and in the future.

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Additional resources, exclusive to Intact brokers

Need more resources to support your rate and pricing conversations with customers? These Pathways courses, available on the Intact Portal, can help:

Pricing It Right – This 30-minute eLearning prepares you to give your next personal lines customer the most accurate quote possible.
Commercial Lines Submissions Essentials – This 1-hour eLearning shows you what information underwriters need to get your business customers that best price.
How to Approach Renewals – This 20-minute eLearning will make your renewal conversations with customers easier and more efficient!