Transcript PRESENTATION NAME

Arthur Middleton Hughes
PIMA Conference
How to retain insurance customers
November 17, 2009
Last year many shopped around
• More than one third of auto
insurance customers shopped
around in 2008*
• 15% switched
• In 2009, that number has
increased
• What can you do? – We have
some ideas.
* JD Power & Associates
You have to be proactive
• Among the 15 percent of customers who
defected, only one-third intended to switch
carriers when they first started to shop.
• Carriers could have retained up to two-thirds
of all defectors.
• However, only 30 percent of defectors report
that their previous insurer* made any attempt
to keep their business
* Is this you?
What JD Power Says…
• Incorporating customer attitudinal data—such as
their shopping habits, investment style, and
affinity to new products and brand names—
improves a carrier’s effectiveness in modeling
long-term customer retention and value
• The most cost-effective approach is to anticipate
which customers are most likely to look for a new
carrier and engage a retention strategy before
they even begin the shopping process.
How Travelers retains customers
• Uses a modern marketing
database
• Creates personalized direct mail
and e-mail
• From the agent to the customer
• At least six times per year
How a Modern Database Works
E-mail and
direct mail
Customer
Transactions
Marketing
Campaigns
Inputs from retail,
phone, web
Marketing
Database
Analytic &
Campaign
Software
Modeling &
Analytics
Data Cleaning
Standardization
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Marketing
Staff Access By
Web
Website
Appended
Data
Travelers Insurance philosophy
Costs 20 times as much to acquire new
customers as to retain existing ones
Customers want communications
Contacts should be conducted locally
1% increase in retention is worth $ millions
7
What the retention database program
provided
Systematic process
Turnkey operation
Customer segmentation
High quality communications at minimum cost
Personal, professional
Building a customer relationship
Agents paid all the expenses
8
Database Analysis to support Travelers
communications
Profile the customer base.
Who is staying? Who is leaving?
Establish measure of customer desirability
Determine profitability
Determine lifetime value
Use these to drive segmentation and retention
strategy
9
What happens during a year
Letter or e-mail 60 days before annual
renewal
Annual review letter, e-mail or phone
call
Thank you card or email in 1st quarter
Cross sell card or email in Q 2
Newsletter in Q 3
Seasonal card in Q 4
10
Results…
Increased the customer retention rate from 85.1%
to 90.5% -- compared to controls. Worth millions of
dollars to Travelers.
In this program, the agent paid for all. In prior
programs, the agent risked nothing
62% of customers who left, never talked to an agent
first
80% of people who talked to an agent did not leave.
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Non
One-to-One
One-to-One One-to-One
Gain
Customer Households
250
250
% Remain after 1 Year
85.1%
90.7%
5.6 points
Policies after 1 Year
213
227
14
Premium for retained business
$213,000
$227,000
$14,000
Agent Commissions (17%)
$36,210
$38,590
$2,380
Annual One-to-One Cost & ROI
$672.50
$2.54
The importance of bundling*
• Only 25 percent of customers with bundled
packages—auto and home insurance policies—
shop for a new insurance provider.
• 40 percent of non-bundlers shop.
• Of the shoppers, only 25 percent of bundled
insurance customers defect, while almost 50
percent of single policy shoppers switch.
* JD Power 2008
Survey
How to bundle insurance
Customers who have more than one product
have a higher retention rate.
Two reasons for second product:
– Profit from the new product
– Retain customers for the existing one.
An insurance company with independent agents
used a model to predict the Next Best Product
for each customer
Offered a 10% discount on first product if second
is purchased
13
Create personal notes from agents
14
Automatic follow up note
15
How did it work out?
89% of agents invited went to web and participated.
52% created personal notes
Recipient HH bought 11% more than the controls
Follow up letter created 8% more sales
Follow up phone gained 43% more.
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Conclusion: This method works!
Personal notes increased sales by 140%
over messages that had no personal notes.
17
Long term customers are better
All customers are not alike
Long term customers
– Have lower attrition rates
– Have higher spending rates
– Have higher referral rates
– Are less expensive to serve
– Buy higher priced policies
Long term customers – really loyal
So, how do you get loyal
customers?
Concentrate on renewals
Communicate often
Reward agents for renewals more than just for
acquisition – everyone wins!
40/4/4
Commission Plan
Retention Rate
Customers
Acquisition
Year
65%
400,000
Second
Year
20/20/20
Commission Plan
Retention Rate
Customers
Acquisition
Year
70%
400,000
Second
Year
70%
260,000
75%
280,000
Third
Year
75%
182,000
Third
Year
80%
210,000
Start Early and do your research
Identify customers who are most likely to switch
carriers early enough to allow time to try to
salvage the relationship
Educate them about their policies and provide
thorough policy reviews on a regular basis
Initiating proactive contact with customers after
they initially sign on can help prevent them from
falling into the at-risk category in the first place,
Create a risk revenue matrix
Use analytics to determine lifetime value and
likelihood to defect – Focus on Priority A and B
Create triggered messages
Allstate Insurance adopted a triggered email strategy tied
to major customer events, such as policy purchases,
renewals, claims filing and payments.
In a test, one set of messages was sent batch-style to the
entire list, and another set was sent triggered by policy
purchases
Open rates for the triggered email messages increased 84
percent over the batch messages.
Click-through rates for the triggered email messages
increased 32 percent.”
Allstate’s triggered campaigns boasted a 42 percent open
rate compared to a 20 percent open rate for standard
campaigns.
Rules for e-mails to customers
Make it easy for customers to contact you. A
phone number and e-mail should be on every
page
Ask customers to provide reviews of your service.
Reviews in e-mails get read.
Use abandoned shopping cart e-mails for website
visitors who do not complete forms
Include lots of surveys. Thank them for
responding.
Use all channels
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Use the most effective channel
Most e-mail marketing is hunting
E-mails are so cheap to send that most
marketers do not bother with a database
“Mail ‘em all. Someone will buy.”
Instead of studying the subscribers, marketers
work to sharpen their e-mails. Result: open
rates falling
27
Successful emailers are farmers
Build a customer database – sending relevant e-mails
to people you care for and know a lot about.
Result: opens and conversions increase.
28
Understand Customer Attitudes
Adapt Sears Customer Attitude Survey Approach
PRODUCT PREFERENCES AND SHOPPING INTERESTS
Let us know which of the following best describes you when shopping for home products.
How I feel about brands
o
o
o
I typically buy top of the line name brand products
I buy name brand products at a moderate price
I am always looking for a bargain. I will try any brand if the price is right.
How I feel about technology
o
o
o
I buy products with the latest features and innovations
I buy products with mainstream features and technology
I am not interested in technology. Keep it simple for me.
.
Summary: how to keep them
Learn who are your high
value customers
Predict who will defect
Concentrate on the
right ones
Use triggered e-mails
Bundle your policies
Build a database
Make the e-mails from
agents
Study your customer’s
attitudes
Communicate at least
six times a year
Revise your agent
commission plan
Read the books
Arthur Middleton Hughes
[email protected]