Customer retention is a distant consideration behind growth and profitability for insurers, yet each percentage point of retained business can amount to millions of dollars in premium revenue. Even the best-in-class commercial carriers achieve retention rates in only the mid to upper 80s, and most insurers lag 4-6 points behind that mark. Carriers are needlessly leaving a lot of money on the table. But they can change that by defining and executing a dedicated strategy on customer retention, just as they do for growth.
In the Accenture report, Hanging on: A new look at commercial insurance customer retention, we outline the four distinct areas that a customer retention strategy should address simultaneously to be effective: distribution management, customer stickiness, the renewal experience and responses to agency mergers and acquisitions. In this series of blogs, I’ll examine each of these areas separately.
The ease of doing business with a carrier is important to all agents. But in examining distribution management, it’s clear that all agencies do not have the same operational priorities or exhibit the same behavior. Accenture’s Independent Agency Survey identified four agency segments separate from the traditional size- and growth-driven agency segmentation. The survey found that some agencies:
- Are conservative and risk averse.
- Emphasize competitive advantage.
- Are more willing to switch carriers.
- Prioritize HR, focusing on internal operations or HR competencies.
This underscores the first thing a carrier should understand about customer retention strategies: No single strategy will be effective with all agents in a carrier’s distribution system. By analyzing agent and retention data, carriers will find distinct retention behaviors among their agents. That analysis then will allow carriers to develop individual retention strategies for each agency segment.
For example, for agents with low switch rates, an effective strategy would be an outreach program which underscores that the carrier’s underwriting strategy remains aligned with the agent’s books of business and that the carrier continues to focus on providing quality service and strong protection. For agents with higher switch rates, a carrier would need to take a more active approach that both highlights the value the carrier provides and creates barriers to transitioning their customers to competitors.
To learn more download the report: Hanging on: A new look at commercial insurance customer retention
Next time: Customer stickiness.