Insurers must strengthen consumer relationships to reduce customer turnover

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Dec 05, 2014, 10:49 ET

NEW YORK, Dec. 5, 2014 /PRNewswire/ -- High levels of customer turnover in the North American insurance industry could be countered with improved communication, a more responsive approach to customers and being easier to deal with, according to EY's 2014 Americas Consumer Insurance Survey: Reimagining customer relationships, released today.

The survey of approximately 24,000 people in 30 countries, including 2,342 in North America, between May and July 2014 found that low levels of trust in insurers and the simplicity of switching providers has resulted in high levels of customer turnover. In fact, globally, two in five customers have left their insurers within the past 18 months. While value for money is the primary factor that determines what insurer a consumer chooses, there are other non-monetary considerations, particularly in North America, that influence whether a consumer will switch:

Although it is possible for insurers to win long-term loyalty by seizing opportunities to communicate with their customers, 54% of North American customers report having no interaction with their insurers in the past 18 months.
North American customers place much stronger emphasis on client service characteristics than global customers do. In particular, being "easy to deal with" is more important than "value for money" (60% vs. 53%, respectively) in North America.
Being responsive is also viewed as a more important relationship characteristic in North America than globally, especially for non-life products, where 50% of respondents cited responsiveness as an important characteristic, compared to just 33% of global respondents.
Unlike other industries, just because a customer leaves an insurer it doesn't mean they don't still love them. In fact 20% of North American customers closed a policy in the past 18 months despite more than half of this number saying they are likely or very likely to recommend their former insurer.

"The results of this survey should give insurers cause for concern and hope," said Kaenan Hertz, US Insurance Customer Leader at Ernst & Young, LLP. "While the survey confirms industry-wide concern about customer turnover, the steps insurers need to take to improve their relationships with customers to combat this turnover are clear and achievable. In essence, insurers must take control of customer relationships and put their customers at the heart of their operations."

Insurers suffer from a unique challenge; their products are typically "out of sight and out of mind" and as a result, they have very few interactions with their customers. The rarity of these interactions means each one becomes "a moment of truth" that can easily change the customer's perceptions of their insurer or broker, either positively or negatively. It's in these moments that responsiveness and being easy to deal with is so crucial, especially in North America.

Outside of these moments of truth, insurers must increase the quantity and quality of communication with their customers. Only one in five North American customers report being very satisfied with communications they receive, with other data supporting the call for more frequent communication: Thirty-two percent receive information about special deals and promotions once a year but 49% want this information semiannually. Thirty-nine percent receive policy updates once a year but 57% say they want these updates more frequently.

However, frequency of communication is distinct from relevance. Insurers must greatly improve their knowledge of the customer by embracing advanced analytics. Tomorrow's top performers will be notable for having accurate and actionable insights into shifting consumer needs. Further, they will gain the ability to act predictively, precisely and nimbly in advance of key decision points, and offer relevant and timely information.

Embracing advanced analytics will not only help insurers meet the challenges they are facing today, but will also position them to capitalize on the technologies that are likely to impact the industry in the future.

"Although customer turnover is the immediate reason why insurers need to improve customer relationships, the future of the insurance industry creates longer term and arguably more pressing reasons for change," Hertz continued. "Telematics, wearable technology and other advancements are redefining the 'art of the possible' in terms of what we know about how people live and behave. Without an analytics led, customer centric organization, the insurance industry will be vulnerable to disruption from new entrants in the market who are equipped to serve the customer of the future. For insurers, the time to act is now."

To read the full report, visit www.ey.com/insurance: EY 2014 Americas Consumer Insurance Survey: Reimagining customer relationships

Notes to editors

About EY
EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.

This news release has been issued by Ernst & Young LLP, a member firm of EY serving clients in the U.S.

About the survey
To provide more insight into current consumer preferences and attitudes, EY surveyed approximately 24,000 people in 30 countries between May and July 2014 about their relationships with insurance providers. Building on the inaugural 2012 survey, this year's survey focused on what matters most to consumers in these relationships, how they interact with their providers and how satisfied they are with a range of offerings from insurers. Along with EY's 2013 Global Insurance Digital Survey and thought leadership concerning customer centricity, these findings present an overview of strategic opportunities and specific tactical choices insurers face in what many industry stakeholders recognize as a new, customer-driven era. For a copy of the report, go to ey.com/insurance.

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SOURCE EY