When it comes to indicative business metrics, the customer churn rate is an important one to analyse. The churn rate, also known as the rate of attrition, is essentially the rate at which customers stop doing business with you.
Customer churn is one of the factors most responsible for potential loss of revenue for a company. And unfortunately, the insurance industry comes in third for the highest average customer churn rate. According to a CallMiner study in the UK, the average ‘planned’ customer churn rate for the insurance sector is 22.5 per cent. Keep in mind that this number doesn’t account for the unplanned churn rate, which contributes to an overall higher percentage. To put it into a broader perspective, the global average value of one lost customer across all industries is US$243, meaning that businesses lose up to $1.6 trillion per year when their customers decide to go elsewhere.
How can insurance providers improve customer retention?
While some attrition is to be expected regardless of the industry, a consistently high churn rate can mean potentially a loss of millions, sometimes billions, of dollars for a company. This becomes even more problematic for insurance companies, especially since there are fundamental differences that set the insurance sector apart from industries that can intrinsically count on high customer retention rates. Some of the primary differences between traditional companies and insurance companies are as follows:
Regulation: unlike mainstream consumer industries, the travel insurance industry is highly regulated. Other industries can encourage repeat transactions by utilising coupons or promotions, which is usually not allowed with insurance.
Singular transactions: typically, customers only purchase travel insurance when they need it, and it’s purchased for a finite amount of time (the length of their trip). The travel insurance industry runs on transactional purchases instead of recurring purchases, such as subscription-based services. Even other types of insurance such as auto, home, health, or life insurance are recurring, often lifelong purchases.
Global competition: travel insurance is a fiercely competitive industry. Instead of local businesses competing with other local firms, the competition is global. Traditional insurance companies are now having to compete with new providers that focus on innovative business models and advanced technology.
In order to compete and stay relevant in the industry, travel insurance providers need to analyse their corporations in order to understand how they can work to retain their customers. One of the best places to start? Customer service.
Poor customer service is a key cause of customer cancellation
Research shows that 39 per cent of Americans who cancelled a contract with a company in the past two years said that poor customer service was the main reason for their cancellation. Eleven per cent of these cancellations were insurance specific. The most frequent complaints by customers in this survey included:
- Companies wasting their time
- Customers had to follow up more than once with the customer service team
- Company representatives had negative attitudes
- Self-service options were inadequate and unhelpful.
While this means that many customers are dissatisfied with customer service, it means there is huge potential for companies that wish to embrace excellent customer service. From a business perspective, companies that intentionally focus on delivering a superior customer experience bring in five- to seven-times more revenue than competitors in the same industry, one study finds. And from a customer perspective, 87 per cent of customers who had a great customer experience say that they would make another purchase from a company. Not only that, but 70 per cent of Americans say they would actually spend more money if it meant dealing with a company that delivers a better customer service experience. To ensure your customer service experience is exceeding expectations, take the time to address the following questions:
- How are you maintaining your brand value?
- Why would someone choose to come back to you and not someone else?
- Are you being consistent?
- Are you engaging your customers through modern methods?
- Are you there for your customers when they try to reach out to you?
Communication and ease of use leave an excellent impression
In a perfect world, your customers would never have to file a claim, assuming their itineraries and travel expectations went perfectly to plan. But the unexpected happens. If a customer has to begin the claims process, how easy is it? Are you communicating with the customer through each stage of the process? Are there resources that guide them through the process and answer any questions?
Claims can be a main contributor for customer frustration within the travel insurance industry. Some customers think that the claims process is a trap – that the process takes too long or that claims are automatically denied no matter what. Because the process can be confusing, make sure that there is a clear process for filing a claim, and also an organised structure for making sure it gets fulfilled.
How easy is it for your customers to find you?
If your customers have a hard time finding your business, it’ll be much harder to count on their recurring business. Although travel insurance was traditionally sold through travel agents and other in-person salespeople, most insurance policies are now purchased online. Why? These companies often promise a quick and easy transaction process. Not only that, but they usually have a dedicated customer service team, often with 24/7 accessibility.
Any business in the modern world needs a website, regardless of the size or stature. But more important than that is the frequency with which you keep it timely. Are you keeping your website up to date? Are you prioritising the user experience, even from the standpoint of the layout and structure of your site? Are your online services on a par with the expectations of the modern customer? The more you focus on accessibility and overall customer experience, the more you can count on your customers coming back.
A good reputation is built on reliability
When people buy insurance, they’re essentially buying a promise from you. Customers will keep doing business with companies that they consider to be reliable and trustworthy. The best way you can achieve this is by keeping your promise.
If you say that you’ll respond to any customer query within an hour, make sure you can deliver on that. If the homepage of your site states that a transaction will take less than five minutes, make sure that’s true. Whatever you’re promising or claiming, be sure that you can deliver on those promises.
Some customer churn is inevitable no matter the industry. However, when it comes to travel insurance, it’s all about the customer experience. Because the industry is so competitive, the travel insurance companies that will withstand the test of time will be the ones that prioritise delivering a great customer experience.