The Auto Insurance Loyalty Puzzle: Is Usage Based Insurance the Missing Piece?

In any industry, customer loyalty is a precious commodity. That’s no less true in the world of auto insurance. As Bain & Company puts it: “Loyalty improves a carrier’s economics and leads to sustained, above-market growth.”

But what do we mean by “loyalty” exactly? What does it take to make customers stay with an auto insurer for the long-term?

Customer retention isn’t just customer satisfaction.

When a customer chooses to stick around because of the benefits an insurer provides, their actions are driven by positive experience. You could say, then, that the key to customer retention is customer satisfaction.

You’d be mistaken. A new survey released by Accenture Global found that while 86 percent of insureds who filed a claim were satisfied with how it was handled, 41 percent of those customers are still likely to switch insurers in the next 12 months.

In fact, the data shows that the very act of filing a claim makes a customer more likely to switch insurers, even when they’re completely satisfied with how it went.

It’s not to say customer satisfaction in the claims process doesn’t matter – speed and transparency being the two most important factors, according to 94 percent of Accenture survey respondents. Having access to digital channels also ranks high on the satisfaction requirements.

However, if having a claim tends to trigger the insurance shopping process, the most important question may be how to prevent the claim altogether.

Use UBI as a tool to prevent claims and build the relationship.

By harnessing usage based insurance data, insurers can define strategies to help customers manage risks and even reduce the number of claims they file. As a result, insurers not only lower claims costs, but may gain an advantage in customer loyalty, says Bain & Company.

However, usage based insurance isn’t just about data collection. In fact, it offers insurers the opportunity to go far beyond information gathering to the state of relationship nurturing. UBI provides a chance to communicate with customers every time they drive in a positive and constructive manner. It’s the ultimate digital connection – not hinging on potentially negative touch points like claims or billing, but rather facilitating quality, helpful coaching on an ongoing basis.

And here’s the great thing: The relationship nurturing capabilities start immediately. Insurers can provide helpful driving tips as soon as UBI policyholders install the app and take their first trips. Insurers don’t have to wait for data, actuaries and new rating tables. They have an instantaneous ability to provide coaching and thereby start a new kind of insurance relationship.

They say that when you teach a man to fish, you feed him for a lifetime. What happens when you teach a man, or a woman, or their teenagers to drive more safely and avoid the pain of accidents? They appreciate it and remember it. And, greater loyalty, retention and referrals just might ensue.

Click here to learn how usage based insurance works for insurers.