Preventing Market Churn in the Insurance Industry

Introduction

Lowering market churn is critical for many insurance providers—it’s one of the industry’s major challenges. Churn is becoming especially important as providers face increasing competition from new players entering the industry and as disruptive technologies change how to do business.

Market churn happens when customers switch providers. It can occur because consumers are dissatisfied with their current service or because they’re looking for a better price. It may also occur when consumers simply forget to renew their contract or have trouble contacting their provider to renew.

Levvel’s 2021 Insurance Consumer Report found several factors that influence market churn. Here are some of the top insights, as well as strategies insurance companies can use to prevent churn.

Market Churn Varies by Sector

Market churn affects some insurance sectors more than others. According to Levvel’s research, consumers tend to switch insurance providers only about once every 10 years for products in the property and casualty (P&C) sector, including home, auto, and health insurance. Volatility is much higher for renter’s insurance and term life insurance, where consumers tend to switch about once every five years.

Strategy: The insurance industry may want to diversify their products so they offer at least some products that tend to have less churn.

Market Churn Varies by Consumer

The type of consumer matters, too. For example, Levvel’s report found that Millennials are more likely to switch providers whereas Baby Boomers and Gen X tend to be more stable customers. At the moment, Baby Boomers and Gen X are a much larger segment of the market than Millennials—but that will shift over time.

Strategy: Achieve customer loyalty and lower customer churn in the short term by ensuring older generations are satisfied with their service and choice of products. In the longer term, retaining Millennials by catering to their specific needs.

Millennials Want Digital Solutions

Millennials are most attracted to companies that offer digital self-service platforms for their insurance needs. Levvel’s consumer data also suggests that Millennials care most about the transparency of their insurance products and access to personalized offerings.

Strategy: Prevent Millennial attrition by offering a robust suite of web and mobile applications for self-service purchasing. Ensure products are transparent and tailored to each customer’s needs.

Make It Easy to Repurchase Products

Some customer churn is involuntary—customers may like to buy a product again, but some barrier prevents them from doing so. For example, they may forget to renew their insurance or their credit card may expire, preventing autorenewal.

Strategy: Create systems that help customers easily renew their coverage. Digital platforms are especially effective at automating reminders and providing an easy way for customers to make payments.

Attract Stable Clients

Levvel’s report found that stable clients look for well-known brands and extensive coverage. Baby Boomers and Gen X consumers, who are also typically more stable customers, tend to value in-person service at a brick-and-mortar branch.

Strategy: Attract stable clients by offering well-known products with a variety of coverage options. While physical locations are becoming less important in the insurance industry in general, consider maintaining brick-and-mortar locations to retain clients from older generations.

Ensure Agents Offer Excellent Customer Service

Levvel’s report also found that while consumers are increasingly interested in using digital self-service tools, agents continue to be important. Consumers prefer to use agents for more complex tasks like filing a claim and understanding the difference between product options.

Strategy: Agents can help reduce customer churn by providing high-quality customer service and using effective sales techniques. Ensure that agents offer excellent service and help customers regularly reevaluate their coverage needs.

Evolve and Adapt to Reduce Customer Churn in the Long Run

Reducing customer churn is among the most important challenges facing insurance companies, and it will be increasingly difficult as new insurtechs with improved technology disrupt the industry. Existing insurance companies can compete by evolving their products, improving service, leveraging existing data, and upgrading their technology.

Read Levvel’s full 2021 Insurance Consumer Report to better understand how the industry is changing and identify opportunities for growth.