Is "clever" marketing in the
insurance sector building a legacy of customer dissatisfaction with their new
business and renewal strategies?
It seems that the online insurance industry
is so desperately driven by the new business disease that their endeavours to
feed the insatiable hunger for new premium income is seen by many customers as nothing short of a
con when it comes to the first renewal.
Customers are encouraged by media pundits
and comparison websites to shop around, and millions do, and are often rewarded
for their efforts by a reasonable saving on the cost of their policy. However
after a claim free year are shocked by the size of the renewal premium
requested from their insurer and so search the web again and inevitably find
another lower cost option. Some just move on to a new supplier others go back
to their original insurer and give them
a second chance and often, lo and behold,
find the lower quote can be matched. It may be an old fashioned view point but
isn't such an action at best a con and at worst downright dishonest sharp
practice? As if to imply "Now
we have lured them in let's see what we can get away with!'
It also appears the "clever" new
business fanatics are also confusing themselves as well as their customers with
their propositions through different supply channels. A report from a Saga Insurance customer, a business
specialising in products for mature customers, was shocked by his renewal
premium so searched on line and found a much cheaper quote from, wait for it,
Saga Insurance! He rang them to be told that the quote was only available via
internet sites, so he lapsed his renewal with Saga and reinsured with them via
the internet!
How does that make any sense as either a
commercial or customer experience proposition? I can recall when my company did
business with our clients in the insurance sector they calculated the cost of
new customer acquisition meant that profit was unlikely until year two's
renewals had been made. Have things changed to the degree that the industry can
afford every policy to have a life expectancy of only one year? Is the game
simply to get as many customers as possible regardless of quality rather than
to get and more importantly to keep loyal the number of the right kind of
customers to support the organisation’s growth agenda?
But what effect is this having on the
market overall? Is it not reducing insurance from a service to a commodity
where product and service differentiation is imperceptible and price is the key
driver of customer behaviour? Some may argue why not, after all grain, cement
and coal et al are still traded on that basis but these traditional commodities
are much more homogenous and rarely touch the individual lives of individual
customers in the way that insurance does and must.
So what of the experience of the customer
and the effect of these policy policies on customer loyalty?
The impact of technology in the form of the
internet and price/performance comparison websites has undoubtedly moved the
balance of power towards the customer who is now able to research their options
to a far greater extent and with much greater ease than ever before. Is the
gamble that the insurance sector is making based on a cynical view that once a
customer is lured in true loyalty will be replaced by renewal inertia by enough
customers to make the equation work? It
is well researched that of the 5 P’s of service quality management “Policy” is
the one in which it is the most difficult to recover from a customer service
failure. So is the strategy of “Buy them
in and bash them at renewal” creating a sour customer renewal experience
and breeding a customer culture whose first instinct is not to renew with their
existing insurer but always to look for a lower cost? If so what does this mean
in the long term for the insurance sector?
Philip Forrest
