Best Insurance

Policy shopping and switching behavior is growing,
resulting in a larger “at risk” market and increasing difficulty
retaining policyholders. Shoppers increased from 27 to 33
percent of total insurance customers between 2009 and
2011, and of those who shopped, switchers increased from
37 to 39 percent (10 to 13 percent of all customers) from
2010 to 2011. Shopping frequency is either “frequent” (at
every policy renewal point) or “infrequent” (because of a
negative experience, or every three to five years to ensure
they are paying appropriate market rates).3 Shoppers’
behavior is either “sequential set” (driven by the lowest
price) or “consideration set” (based on customer experience).
“Consideration set” customers value brand and policyholder
experience almost twice as much as price. Sequential set
customers are the most price sensitive, will switch for
any discount, and are the least profitable segment. As a
result, insurers are addressing the following realities when
determining the best ways to attract and retain customers.

• Customers are increasingly willing to switch channels;
defectors frequently switch to competitors who
exclusively use a different channel than their previous
carrier. For example, direct-channel GEICO lost 17
percent of defectors to agent-based carrier Allstate and,
comparatively, Allstate lost 24 percent and State Farm 19
percent of defectors to GEICO.
   • Most customers (54 percent) initiate contact online.
Follow-up is most often via phone, and then customers
proceed through whichever channel the carrier
routes them.
   • Customers want convenient one-stop-shopping, and 50
percent of customers want to buy at least two bundled
products at the same time or through the same carrier.
   • Customers requiring several policies will pay up to 23
percent more for their coverage if one insurer can meet
their needs.
   • Although brand and experience are relevant factors
for switchers, low price is the primary driving factor.
Although only 44 percent of switchers state that price
was the most important purchase factor, results prove
otherwise; across the industry, 88 percent of switchers
defected to the lowest price provider, and 81 percent
of retained customers’ current carriers offered the
lowest price.

The costs of marketing to a fickle customer base contribute
to a rising expense ratio and a higher product price. The
challenge for insurance carriers is to be high on potential
customers’ brand “call list” without increasing existing
marketing investments. Potential solutions for moving up
the call list are plentiful (e.g., improved organic search
results, social media engagement, and quote aggregators),
but require careful planning and tactics across channels
related to costs, risks, and ROI.4 It is important to note that
in-person transactions continue to decrease as shopping
preferences change, with in-person purchases dropping six
percent between 2009 and 2011. Beyond the web, mobile
is becoming more important, and top direct players offer
innovative and robust quoting capabilities. Moreover, social
media is important for both agents and direct businesses,
enabling more frequent engagement with customers.