After a year of record price increases, many Americans are looking for ways to protect their bank accounts. For insurers, that means even the most loyal policyholders — those who bundle their home and auto insurance with the same insurer — risk dropping their policies and turning to competitors with cheaper rates.
Dubbed the “Robinsones” by Progressive Insurance, consumers who double up on their home and auto insurance policies are a valuable demographic for insurers, and losing them raises profitability issues in today’s market. Indeed, these customers reduce the cost of acquisition by offering the ability to sell multiple policies through a single transaction and are consistently among the most loyal – 45% have stayed with their current insurance provider for 11 years or more.
But soaring inflation and the growing popularity of usage-based insurance policies mean insurers must adapt if they want to keep the Robinsons, and the rest of their customers, on their roster.
When inflation rises, no one is immune
Like their customers, insurers have battled inflation rates that hit highs throughout 2022, last seen more than 40 years ago, according to the Bureau of Labor Statistics. These higher costs have hit auto insurers hard as used vehicle valuations soar and repair bills soar, forcing providers to raise premiums to effectively cover the rise. claims costs. The forecast for 2023 isn’t much better, with rates expected to rise by 8.4% and the average annual premium reaching $1,780, according to research by ValuePenguin.
These rate changes were not well received by customers. More than a tenth will shop when renewing, largely because of price, according to research published in December by Bain & Company. And better deals can be made easily. A separate ValuePenguin study found that 92% of people who switched car insurance providers saved money by doing so.
Most worrying for insurers, however, is that rising auto costs are unsettling the generally less price-sensitive Robinsons. These customers experienced the largest drop in price satisfaction with their current insurance provider, JD Power found, plunging 10 points on its scale compared to a one-point drop for non-consolidators. Nearly a third of Robinsons also told JD Power they would permanently switch home insurance providers if an insurer-initiated auto premium increase forced them to seek out a cheaper auto policy. This means many multi-policy customers are wondering if bundling their insurance is still a good deal.
Usage-based insurance has power for value-conscious consumers
As customers seek cheaper options in light of inflation, usage-based insurance (UBI) programs have become increasingly popular in auto insurance, where 16% of customers are now signed up for one, according to JD Power – twice as many as in 2016. That’s because these pay-as-you-go or behavior-based programs, as they’re also called, use telematics to monitor in time real a person’s driving habits and distance travelled, usually rewarding good drivers with discounts on their monthly premiums.
The steep declines in customer miles traveled during the pandemic may have prompted many to switch to usage-based programs, but now the option to customize your insurance and premium has taken a firm hold. Nearly 9 in 10 drivers told LexisNexis that they prefer pricing car insurance based on their actual driving habits, and 71% said it felt like a fair way to price their insurance .
The growing popularity of usage-based insurance poses a problem for insurers looking to retain the Robinsons. Increasingly, customers are so interested in using a UBI program that they are willing to unbundle their auto and home policies to insure their vehicles with a carrier that offers this option, according to JD research. Power.
Benefits help companies stand out
– Focus on customer experience
Providing a good customer experience, especially through renewal and complaints processes, can help offset price increases and boost loyalty, Bain & Company found.
Customers whose premiums have increased but who are still satisfied with their overall renewal experience, largely due to helpful and timely communication, are 3.5 times more likely to renew with their current provider than those who have had an experience negative. As long as their premium increased by less than 10%, they were also almost as likely to stay with their insurer as customers who had not experienced any price increase.
Customers also want clarity, speed and ease of use when it comes to all interactions with their insurer, from the initial inquiry to the filing of the claim. According to Insurtech Insights, around three-quarters of insurance professionals believe that difficult-to-fill claims, long approval times and long waits for claims payments are pain points for customers that need improvement. . Another 62% admit that difficulty in making a complaint is another major problem for their customers.
Speeding up the processing and completion of claims, improving customer understanding of monthly bill statements, and working with agents to facilitate better claims handling could all be successful ways to improve the customer experience, according to the latest index. of American customer satisfaction.
-Improving digital interactions
Today, delivering the best customer experience largely comes down to investing in technological innovations and seamless digital interactions through websites, apps, and other channels.
But it seems that insurers’ digital offerings are falling short of customer usability expectations. For the second year in a row, satisfaction with insurance companies’ digital claims processes has plummeted, largely due to “clunky interfaces, infrequent updates and frustrating workflows that force [customers] pick up the phone and search for information,” reports JD Power.
What makes or breaks the digital complaints process for the majority of customers? Numerical estimate. Policyholders were discouraged when, after submitting photographic evidence, they still had to arrange an in-person estimate, usually preferring to communicate electronically with the estimator via video chat. Additionally, customers who were able to notify their insurer of a claim through a website or app were more satisfied than those who had to do so through a call center.
The simplest change insurers can adopt is simply to communicate more through their existing digital and mobile channels. Customers were three times more likely to report that the claims process was slower than expected when they didn’t receive regular updates, says JD Power. However, those who did were twice as likely to say the process was faster than expected. Likewise, informing customers in advance of premium increases has helped to mitigate some of the negative sentiments generated by price increases.
Insurers that stand out from the crowd by offering easy-to-use digital tools that allow customers to apply for coverage, make claims, update accounts and renew policies while proactively communicating with their users have the best chance of keeping them. In fact, 2 in 5 clients who have experienced issues with their insurer told PwC that the lack of digital capabilities drives them to switch providers.
-Invest in value-added services
Insurers could improve their bottom line and improve their overall value proposition to customers by expanding their roles to include more active risk prevention and mitigation.
For example, policyholders enrolled in a usage-based insurance program might have the ability to receive real-time alerts such as bad weather notifications or warnings about dangerous driving habits. All customers could receive messages reminding them of vehicle registration renewal, notifying them of recall news, or providing updates on car health and recommended maintenance. These additional services go beyond the traditional role of insurance, but the majority of customers across all age groups expressed strong interest in them when interviewed by Insurance Innovation Reporter.
The same survey found that homeowners are looking for similar safety features from their insurers – policyholders of all ages were very interested in safety sensors, severe weather text alerts and home monitoring for elderly parents. Some insurers have already taken note. For example, Hiscox has partnered with a smart water leak alarm company to offer its policyholders a mobile app detection system, while Chubb, Travelers and American Family have partnered with Wildfire Defense Systems to create additional prevention services for homes threatened by wildfires.
These are just a few examples of how insurers can expand their services and help customers see them as more than just an emergency contact. Combined with an improved customer experience and frictionless digital communications, they can even help insurers keep Robinsons, as well as single-policy customers, on their books.
Maxim Croll ([email protected]) is a Principal at ValuePenguin, a subsidiary of LendingTree, specializing in the insurance industry. Previously, she was Director of Product Marketing at CoverWallet, a commercial insurance startup, and helped launch NerdWallet’s personal insurance business.
Related:
JD Power: Auto policy shopping, change in the fourth quarter of 2022
Ford Motor Co. expands user-based data services in the United States
Customers unbundle in favor of usage-based automotive programs