Auto Insurers: Are You Customer Acquirers or Customer Retainers?

As auto insurance companies go, which are you: A customer acquirer, or a customer retainer?

Perhaps you’d like to say you’re both. According to Bain & Company, though, that’s unlikely. Last summer, Bain conducted surveys including almost 3,600 auto insurance consumers among its respondents, which showed “that it’s very difficult for a carrier to excel in both endeavors.”

The good news is that the auto insurance industry is generally pretty good at holding onto its customers, with U.S. retention rates averaging 90 percent. But there is a flip side: Those customers who are shopping, are serious about it.

So said Jeremy Bowler, senior director of the global insurance practice at J.D. Power, after the study his company conducted in 2013. To put it bluntly, of the 23 percent of customers who shopped auto insurance in the previous 12 months, 45 percent made a switch. That’s “the highest rate since the study first began measuring insurance customer retention in 2008.”

Which brings us to that perennial question: How can you keep the customers you have?

Price shopping versus experience-shopping

The answer boils down to what customers want. Customers aren’t just price-shopping these days; they’re experience-shopping. When given the option for a better customer experience, most customers – 81 percent, a 2012 Oracle study said – are actually willing to pay more.

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It seems that personalization is a big part of what they’re looking for. When Accenture conducted a similar study in 2014, it found that 54 percent of younger customers (aged 18 to 24) and 52 percent of slightly older customers (aged 25 to 34) said they’d go with a higher-dollar plan if it offered personalized service.

Personalization through technology

How to achieve a superior customer experience through personalized service? Smartphone apps present one answer. In an era when most smartphone users confess to keeping their phones on or near their person 24 hours a day, the options for providing personalized, experience-driven service have expanded. “Mobility and the cloud have created ultimate anytime, anywhere experience for consumers,” Property Casualty 360 observed.

Leveraging this technology to deliver a sleeker experience, while communicating with customers more clearly and more frequently at the same time, is an excellent start. It also blends very well with another important component of customer retention in today’s auto insurance industry: Insurance telematics.

How big has insurance telematics gotten? Deloitte University Press put it this way: “Carriers that choose not to go the UBI route will likely have to formulate and execute an alternative retention and growth strategy, if only to ward off the competitive threat posed by those employing telematics.”

Want to become an auto insurer that excels in both customer acquisition and customer retention? The key is using technology to deliver a superior, more personalized experience. How? Mobile usage based insurance.