How to retain insurance customers November 17, 2009 Arthur Middleton Hughes PIMA Conference

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 From the agent to the customer At least six times per year

6 How a Modern Database Works Marketing Database Analytic & Campaign Software Customer Transactions Marketing Staff - Access By Web Inputs from retail, phone, web Appended Data Modeling & Analytics Marketing Campaigns Data Cleaning Standardization Website and direct mail

7 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

8 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

9 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

10 What happens during a year Letter or 60 days before annual renewal Annual review letter, or phone call Thank you card or in 1st quarter Cross sell card or in Q 2 Newsletter in Q 3 Seasonal card in Q 4

11 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.

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

13 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

14 Dear Bob & Kitty: As I figure it, you could save about $206 per year on your auto premium. Call me today! Susan Create personal notes from agents

15 Automatic follow up note Dear Bob & Kitty I haven’t heard from you on the letter on the new homeowner’s policy. The savings on your auto policy are terrific. Call me. Susan Hughes

16 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.

17 Conclusion: This method works! Personal notes increased sales by 140% over messages that had no personal notes.

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!

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 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 messages increased 84 percent over the batch messages. Click-through rates for the triggered 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 s to customers Make it easy for customers to contact you. A phone number and should be on every page Ask customers to provide reviews of your service. Reviews in s get read. Use abandoned shopping cart s for website visitors who do not complete forms Include lots of surveys. Thank them for responding.

Use all channels 25

Use the most effective channel

Most marketing is hunting s 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 s. Result: open rates falling 27

Successful ers are farmers Build a customer database – sending relevant s 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

Summary: how to keep them Learn who are your high value customers Predict who will defect Concentrate on the right ones Use triggered s Bundle your policies Build a database Make the s from agents Study your customer’s attitudes Communicate at least six times a year Revise your agent commission plan

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