By Mario Passalacqua, Chief Growth Officer
In recent months, Insurance Carriers in the homeowner segment have been addressing profitability challenges through a willingness to exit geographies particularly prone to catastrophic incidents such as wildfires, extreme flooding, etc. It’s an understandable strategy but brings with it reduced revenues, regulatory challenges, and new footnotes in financial statements. Beyond this, there’s the lost investment in marketing/customer acquisition and the ongoing negative impact to reputation of the franchise – both in that state and in others.
In this environment, exercising other control points to address the revenue gap profitably is of key importance. As the target market for insurance products evolves, Customer Engagement has moved from a qualitative metric, once relegated to the “Other Benefits” section of a business case, to a strong, quantitative and verifiable difference-maker in growing the desired types of premium and attracting the best customers.
Engagement – the new core insurance business metric
Engagement has grown in its influence to core insurance business metrics as customer profiles have changed and expectations are reset. More so today, customers seek empathy with their insurance carriers – a closeness that is bridged even through a digital relationship. But herein lies the opportunity. Executed properly, carriers that build strong customer engagement will benefit from enhanced loyalty, trust and even advocacy from their customer base. Ultimately, these improvements manifest themselves through increased retention rates – with early indicators of a significant increase to renewal rates reaching +500 basis points and above. With a Bain & Company study highlighting that a 5% increase in retention generates a 25% increase in profitability, one must seriously consider Customer Engagement as critical to core business metrics.
As less than 10% of the P&C customer base will file a claim, most carriers today interact with the majority of their customers only through invoicing and renewal premium notifications which at best would be judged as a neutral engagement. It’s a rather ironic situation; carriers have focused on improving claims-processing engagements – achieving an overall satisfaction rating of 87%. Yet, the no-claim customer base where profits and lifetime value would be stronger, receive less engagement focus by the typical insurance carrier.
More engagement, a better homeownership experience
Identifying a means and topic of engagement with broad relevance to the P&C customer base while being of mutual value to both policyholder and insurance carrier is the challenge. From a practical and emotional standpoint, there is likely no better topic than that of Optimizing Homeowner Experience. Through establishing an ongoing dialogue and practice on home maintenance and loss prevention, carriers help customers enjoy greater home safety, fewer repairs, and unplanned events/outages thus improving the homeowner experience. At first glance, one would conclude carriers benefit from a portfolio of insured properties that are safer, less vulnerable to damage and therefore less risky to insure which reduces claims and improves profitability. This is true, but there is more.
Less obvious, but still important, is the opportunity to have an extended dialog with customers on the topic of home maintenance and prevention. Changing seasons bring specific suggested reminders for homeowners, expected severe weather poses unique recommendations that are especially valuable with sufficient lead times, selecting and installing Smart devices that provide enhanced fire and water damage protection. This is an area where homeowners need clarity and carriers have unique credibility to engage in a dialog. The takeaway here is customers want tailored, targeted engagement that is relevant to their desire for a positive homeowner experience and carriers are strongly positioned to be that engagement partner.
vipHomeLink provides a brandable Home Experience platform with which carriers can engage with their customers in a targeted, intelligent manner through a variety of content media types and at a cadence that the homeowner can select. Customers value the level of home-specific public information already present in the platform, the useful and vast library of recommendations and guides, the real-time home metrics regarding safety and value (Home Fitness Index and Home Value Boost), the integration into a smart home ecosystem and the customized alerts and reminders. Carriers benefit from the creation of a long-term customer engagement platform that measurably delivers the lift to customer retention and renewals to meaningfully impact core business metrics on profitability.
Data from the behavior of policyholders helps carriers segment customers into those that are less likely to have a claim (customers who take better preventative actions) and therefore are more profitable. It allows carriers to consider awarding discounts to incent policyholders to follow these actions, improve their HFI, and become more profitable customers. The platform also provides carriers with the opportunity to inform policyholders with lower home metrics of actions they can take to raise their home’s safety and value. Instead of losing customers through non-renewal, carriers can help to create a stronger portfolio of homeowning customers who keep their home running efficiently and prevent home disasters before they become claims.
In today’s data-driven world, this isn’t next-gen technology. It’s table stakes, and insurance carriers who come to the table with engagement and prevention in mind, will be the ones who survive and thrive tomorrow.
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