Over the past few months we’ve spent time talking with leaders in Financial Services (FS) firms and listened hard as they shared with us the opportunities and obstacles they see for 2023. We talked with leaders in CX, Group Transformation, Group Innovation, Customer Operations, UX, Planning & Performance and CEOs, MDs and Heads of business lines in a range of retail banking and insurance firms. We listened and learnt about their priorities, opportunities and challenges, and where they see the space for technologies -- including those we specialise in here at ContactEngine to help them get stuff done, better, faster and with predictable, use-based costs.
Insurance Renewals in 2023
If you’re in Motor, Home, Life, Health, Pet or SME Insurance in the UK, you already know that 2023 is going to be hard (to say the least) on your renewal rates. The Cost of Living Crisis is the final nail in the coffin for any lingering growth plans based on expansive consumer discretionary spend. At least for another 12 months.
No surprises either that cutting Insurance cover is a go-to response for consumers under economic pressure.
What’s the scale of this? According to recent research by NerdWallet, 29% of UK customers have stopped or reduced their insurance cover over the past 12 months, with 11% of them planning to do so at renewal[1]. Top of the list to cut or reduce is Life Insurance (41%), closely followed by Home and Motor (both 38%). Other research reported in Nov 2022 that 9% of pet owners had already cancelled their Pet Insurance by the end of September that year[2]. Neither Home nor Life Insurance are mandatory, but Motor is. And for many owners, their pet is part of the family. All this hammers home the severity of the ongoing customer experience and the limited options they feel they have.
None of this is remotely a surprise to the leaders we spoke with. In common with many progressive insurance firms of all shapes and sizes, the majority of them come from firms ‘tooled-up’ with people, process and technology dedicated to CX. They can check off most of the usual to-do lists including:
- stripping out jargon and unhelpful technical language
- focusing on relevant communications
- streamlining processes with automation
- updating, augmenting and (really) using data
- building or building on omnichannel capabilities to communicate with customers on policy questions and Claims, and this includes deploying (for some) or actively evaluating (for most) SMS and WhatsApp
The scale of the problem, precise timings and impacts is all-too clear: many, many customers will be asked to pay much more than they are expecting (and believe they can afford) in order to continue their policy with their insurance provider. A significant number of those customers will not feel able to be covered at all, and will simply ‘disappear’ to all intents and purposes – a silent ‘goodbye’.
Room to manoeuvre on renewal pricing is tightening
Leaders told us that room to manoeuvre on the renewal offer to customers is getting tighter and tighter. There are many factors in this but two stuck out in our conversations:
- Claims Inflation: supply chain disruption and increased costs (from energy price rises, for example) and the 40-year record highs in inflation is part of a heady brew that means inexorable increases in the cost of cover for customers for the foreseeable future.
- Anniversary of January 2022’s General Insurance Pricing Practices directive (GIPP): the Home and Motor customers who had a renewal price cut in 2022 (as they had been overpaying, according to GIPP) will almost certainly see their cover increase in cost in 2023.
And whatever type of Insurance you’re in, if your primary focus in 2022 was market share, today’s operational realities mean that your renewal prices are going to be higher, and probably shockingly so from the customer’s point of view.
And then there’s Consumer Duty
The Consumer Duty sets new, higher expectations for the standard of care the FCA expects firms to provide for consumers to ensure the delivery of good outcomes. Newly, firms will be required to consider the needs, characteristics and objectives of customers, including those who are vulnerable, at every stage of the customer journey, including the bit where the customer says ‘goodbye’.
The recent Dear CEO Letter makes it clear that the regulator further expects firms to give customers in financial difficulty ‘appropriate support’, including ‘working with customers to avoid the need to cancel necessary cover’.
“I don’t want to have to just watch my renewals drop through the floor!”
Whilst the Claims experience is the ‘moment of truth’ for the buyer of Insurance, arguably the renewal is the acid test for the Insurance firm of how successful you’ve been in Customer Loyalty. The renewal rate is viewed as a powerful indicator of Trust and brand engagement. It’s an indicator of alignment between customer expectations and what the firm actually delivers. Some firms put a high renewal rate as a cornerstone of their proposition and marketing campaigns.
And of course, renewals are critical for the bottom-line.
Insurance is consistently in the Top 3 of most expensive sectors for customer acquisition, with a Customer Acquisition Cost (CAC) of seven to nine times that of selling to an existing customer. For US firms, this cost has been estimated at an investment per new customers of between $487 (for direct insurers) and $900 (for intermediated business)[3]. Retaining customers is a core competency for any business, but renewals are fundamental for insurance firms targeting profitable growth.
Some of the specific issues leaders spoke with us about on renewals in 2023 included:
- They’re awash with data and insights and can surgically predict which customers are going to have renewal quotes that will be much higher than they are expecting. The problem remains: when do firms best communicate this message, and how/why it is a fair price for the cover offered?
- Similarly, CX and others can precisely map how big the impact on Customer Support and call centre colleagues will be on receipt of higher renewal quotes, and when. What pre-emptive – or proactive – options are there beyond preparing for the incoming calls?
- For the significant proportion of customers who don’t call (they simply just don’t renew), CX colleagues are desperate to engage ahead of time, to stimulate them to get in touch with those expert humans in the business who can help – to say ‘hello’ before they decide it’s ‘goodbye’.
- One of the ‘proofs’ of Consumer Duty is that Insurance journeys are not designed to frustrate customers’ ability to shop and switch. If it should be as easy to cancel as it is to buy, how is this properly balanced with other requirements like working with customers to avoid the need to cancel necessary cover – and at a point where that is of maximum usefulness for that customer?
So, what?
2022 was challenging, 2023 is going to be a lot harder. The problem isn’t knowing that or modelling it. The question is, does the firm have more options – more choices for tools, technologies and services – that can put CX expertise, data and insight to work, proactively, and impactfully with customer? We think the answer is ‘yes’.
What Next?
Being proactive with customers is critical to successful renewals, but this doesn’t just mean an email or text message to the customer to remind them to renew.
The companies that get proactive customer care right, particularly for renewals, view it as more than sending a one-way notification (SMS, app notification, email, letter, etc.) asking the customer to do something. Instead, they see it as an opportunity to engage the customer in a conversation that guides and supports them to the right outcome (for both the customer and the business – in this case a successful renewal). Achieving this requires specialist proactive customer care technology, which is why they choose ContactEngine.
ContactEngine enables companies to engage entire customer bases in digital text- and voice-based proactive conversations. However, unlike notifications, these conversations actively seek an in-channel response, then keep that customer engaged in a personalised conversation until the objective of that conversation is fulfilled. With its configurable conversational journey design and ability to transact in-channel, ContactEngine keeps over 90% of proactive conversations fully automated without the need for a human agent to get involved. Every conversation is secure and fully auditable, making it simple for companies to evidence proactive customer care and reap its benefits.
If you would like to get on the front foot with your renewals this year and convert your proactive customer care from simple notifications to proactive conversations, then get in touch…
