Are insurance customers less loyal? And why?

2 December 15, 2014 at 6:46 am by

One trend that we have seen of the past few IBV insurance studies that look into consumer behavior (from “Powerful interaction points” through “Insurers, intermediaries and interactions” to “Digital Reinvention for Insurers”) is that insurance customers seem to be becoming less loyal:

 

The question behind the chart is “How often did you switch your insurance provider in the past two years.” As usual, there is a difference between life and non-life here, but – also as usual – it’s smaller than conventional wisdom would have it (non-life is about 2 percentage points higher, life vice versa. Most of that difference is from motor insurance.)

Eighteen countries went into the comparison, and in 14 of them churn increased. Why? We will be looking into this question into more detail in our upcoming study for next year, but for now, some “informed speculation”.

It’s all about price

Three years ago, I wrote about this statement as one of insurance’s myths. Rechecking again this summer, I think we can safely state that is has stayed a myth – consumers are actually looking for more value, not lower price. Caveat: in some countries, and some parts of the industry, insurers are trying their best to reduce competitive parameters to cost and price. In that case, of course, all else is equal.

Trust matters

Trust in the insurance industry has hovered below 50% ever since the IBV started collecting data on this. Keep up a low trust rate for this long, and it is bound to affect loyalty.

Poor service

Why did our respondents switch? The second most frequent reason given was “poor service” (23.5%). Even assuming that all non-switchers got good service, it means that roughly 9% of our respondents had bad service by their insurers. Might factor into the the low trust from the previous point…

Insurers need to keep up with changing needs

The main reason for their switch given by those 36.9% above was “my needs changed and the previous provider could not meet my new needs” (43.9%). Customer value is strongly driven by understanding customer needs, being prepared for change and being comfortable with it – something insurers are traditionally not very good at.

What do you think are other reasons for increasing churn? And why did churn in the U.S. actually decrease across our two study years (albeit on a very high level)?



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