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Customer Retention Strategies Every Insurance Agency Can Put into Practice

Insurance Agency Growth
Feb 10, 2022
minute read
Nectar Team
Customer Retention Strategies Every Insurance Agency Can Put into Practice

Insurance agents always put business growth top of mind. The biggest misconception, though, is that the only way to grow your business is to find new prospects via lead generation. The best insurance agents are those who strike a balance between finding new prospects and providing value to existing customers. Insurance renewals require the same commitment and attention as new customers, and insurance agents must recognize their value. 

Statistics on renewals do indeed show that they pack a lot of value for insurance agents. The average customer retention rate in the insurance industry is 84%. If you are above that threshold, it likely means higher profits. If you are below, it means you are missing out, spending a lot to gain new customers, while erasing easy premium dollars you could make on renewals. 

Defining Customer Retention

So, what exactly does it mean to focus on customer retention? The rate of customer retention is a measure of how many customers a particular insurance agent maintains from one renewal period to the next. You calculate your customer retention rate as follows:

  1. Take your total number of customers at the end of a period and subtract the new customers you acquired.
  1. Take the number from step one and divide it by your total customer base at the start of the period.
  1. Multiply the final number by 100.

Say you have 100 customers at the end of a policy year, and you acquired 10 along the way, giving you 90 pre-existing customers. Now, at the start of the period, you have 110. Take the 90 and divide it by 110, then multiply by 100. This equation would reveal you have an 81.8% customer retention ratio.  Now you need to ask yourself, how can you make this rate even better next year?

How Much Are Renewals Worth?

Customer acquisition costs in the insurance industry are high in comparison to other industries. According to Propeller, the average cost per customer acquisition for the insurance industry comes in at $303. This is in comparison to $10 for the retail industry. That means for every new customer you acquire you are spending $303 to bring that customer onboard. Once they are there, the cost to retain those customers drops significantly, but profit potential still exists.

Cost of acquiring the customer

To determine how much your renewals are worth, you need to think about opportunity or acquisition costs, as well as the commission your existing customers net you daily. The loss of one renewal does not just mean the loss of that commission. It also means you need to spend exponentially to replace that renewal with a new customer, driving up acquisition costs and eating into profit margins. It's important to acquire new customers, but you never want to put so much effort into it that it comes at the cost or loss of one of your existing customer relationships.

Sure, you may sell a new insurance policy, but what did it cost you to do that, and how does that cost impact your profitability?  A new insurance customer will cost you around nine times the amount it takes to retain an existing one. And, according to research, it may cost an independent agent up to $900 to acquire a new customer.  

When you compare the cost of a new customer to the cost of a renewal, it's a different picture entirely. When you practice positive customer retention methods, it's as simple as offering them the renewal policy quote when renewal time comes. And, typically with customers renewing from one policy to the next, you have an opportunity for small rate increases, which further improves profitability.

The ROI of retention

Retention does more, though — it can help you grow your business further if you make it a core part of your sales strategy. Every time you work to improve your retention rates, it means the potential for more new customers heading your way. Think of your customer base as your own personal advertising net. The wider the net, the more likely it catches new customers for you. 

Referrals can be powerful tools to help you bring in more customers to your insurance agency. When you have high customer retention, customers have engagement with your brand. They trust what you are offering to them with insurance policies, they enjoy their experience of your service, and they see value in your prices. 

All this commitment to your brand is going to help them speak positively about your company with friends and family.  According to research from McKinsey and Company, about 20% to 50% of all purchasing discussions are based on word of mouth.  As they speak positively, they'll likely refer folks to your insurance agency. That's free advertising, and it helps you grow your business without paying excessive amounts to bring in new customers.

What Are the Risks of Neglecting Customer Retention?

There is a great risk for your business if you neglect customer retention. When you fail to prioritize your existing policyholders, you open the door for competitors to offer them a change of scene.

You fail to value existing customers 

Many insurance agencies fail to put customer retention into their core sales strategy. When you neglect customer retention, you're not giving your existing customers the service they expect and need to stick around. And when your existing customers feel expendable, it's more likely they will seek alternatives in the insurance space. In contrast, when you show them you value their business, they’ll be more likely to listen to your renewal proposal and show engagement for the next policy period. 

You make it appealing to shop around 

It's one of the basic rules of insurance: You never want to give your existing customers a reason to shop around. There are many insurance agencies, and several of them will be there to offer your customer a new insurance policy for less than what they pay now. 

Competitors will often grant new customers excessive discounts as part of their initial sign-on period. It will not likely be competitive or profitable for you to match their insurance premium offering, and this opens the door for customer loss. To ward this off, your job is to keep engagement high and renewal talks ongoing so you can sell them on your customer service and other valuable benefits that make renewal more attractive than starting over.

Steps You Can Take to Make Customer Retention a Priority

The best thing you can do as an insurance agent is to make sure your clients renew their policies annually. There is a lot of competition in the insurance space. Customers have options when it comes to obtaining quotes on demand, so why will they stick with you?  

Here are some best practices you can implement and commit to each year to keep those renewals flowing and your retention rate high.

Build a relationship and communicate

Customers will stick with you as their insurance agent when they know you care. You need to work to build a relationship with your customers from the initial acquisition of their business through every year going forward.  

Once they sign on for that first policy, it's important to check in with them periodically. Do not wait until it is time to renew. Halfway through the policy term, send a note via email and see how things are going. Offer to speak with them on the phone at any time, and if a customer takes you up on it, make it a committed conversation.

Building relationships with your customer base helps to establish a sense of loyalty. Some customers will want their renewal notice annually, while others will want the one-on-one phone call to talk about options or simply update you on their life and what’s transpired since you last spoke. Take advantage of these opportunities, keep the lines of communication open, and increase your renewal rates as a result of the effort.

Keep communication lines open

One of the best things you can do with current customers is to maintain steady communication. You never want to nag your existing customers, but you do want to let them know you're thinking of them.  

If you have a policy with a 12-month term, set up checkpoints to touch base with existing clients a few times each year. These touchpoints will let you gauge their happiness with the insurance policy or policies as well as their openness to talking renewal when the time is right.

You can use a variety of communication methods to do this. Emails are especially effective these days — 40 times more effective than social media, even. But good old-fashioned phone calls and postcards are still powerful, too. 

Even random acts of kindness can go a long way. During the holidays, send a greeting card in the mail. If you know it's your customer's birthday, send a note along to wish them a happy birthday. These little things add up and go a long way toward building engagement, loyalty, and — ultimately — retention.

Speak proactively and honestly about impending changes

It's critical to be up front and honest with your customers when it comes time for renewal. The premium on their insurance policy this year is going to be different than last year, but why? Do not let them read a renewal notice and see the premium change with no explanation. You must be proactive and honest about any impending changes in that upcoming renewal policy. 

This ultimately goes back to communication. But, even more than just communicating, you need to exhibit transparency with each customer in your book. If their premium goes up to $100 this year, what is driving that change? Are there coverage alterations you could make to bring the premium back down? Are there industry forces causing the rate to increase dramatically year over year? These types of proactive explanations and moments of honesty can enhance trust, loyalty, and renewal rates.

Perform coverage and discount reviews

You owe it to your customers to offer them the best price possible. As an insurance agency, you want to make it a goal to get the best price for each of your clients, even those up for renewal. Not every one of your customers will want to talk with you regarding their coverage, but it's still a good idea to make an offer. Try to sit with your client to see if they will review their current coverage and evolving needs with you.

Discounts are always changing year to year as well. You don't want to lose a customer because they found a chance to save 10% off their insurance premium somewhere else. Take the time to review their policy, claim history, and available discounts so that you can offer them the best rates. If you can go to your client at renewal time and let them know you found a discount for them, it makes it that much easier for them to stay.

Never raise premiums without a phone call

Your renewal offers will often include at least a slight premium increase. No customer wants to see their insurance premium go up each year, but it's often a reality thanks to inflation. When your client's renewal includes a premium increase, don't send it out without giving them a phone call first. Be as open and honest as possible and let them know of any opportunities to adjust the premium. Coverage changes and discount opportunities could help to counter the impact of the overall rate increase.

Sell the benefits of staying with one insurance agency

There are many advantages to staying with one insurance company. You know this — but does your client? 

Sell this value to your customers. For instance, when a claim comes in and a claims adjuster looks at the length of time a client has been with an insurance company, longevity matters. If there is a gray area when it comes to coverage, the customer that’s been with the insurer longer is more likely to get coverage approval and claims payment. Loyalty matters, and there is no harm in making this clear to your clients.

Be Present on social media

In this day and age, social media is a powerful tool for all insurance agents. The majority of consumers today are on social media, so you need to ensure you have active social media profiles with at least one picture, your contact information, traditional office hours, and more. Platforms such as Facebook, LinkedIn, and others provide an opportunity for you to connect with clients in new and unique ways.

Follow your clients and see what they have going on. If they do something interesting, comment on their post to show your level of engagement. This also provides you with an opportunity to showcase your knowledge of the insurance industry. You can share news stories of interest to your clients and help educate them ahead of their next renewal.

Always sell on value, not price point

You want to acquire customers that understand the value you provide. You can acquire new customers by offering a very low premium, but what happens at renewal when that premium increases? It needs to be about more than the cost — you must emphasize value first and foremost. To help increase your renewals, you want to attract customers who see value in the coverages you offer and the advice you provide. If you always pull in the bottom feeders hunting for the lowest premium, your chances of renewal are much lower.

Build a reputation in a niche

There are several niche products in the insurance industry, from antique automobiles to boat insurance to final expense life insurance. You can develop and leverage your knowledge and reputation in a niche industry and help your renewals as a result. Clients who understand and recognize the knowledge you provide will be more loyal and likely to continue with you year after year.

Grow the products you offer

You can have a niche, but it's also essential to grow your coverage offerings over time. Risks are always emerging in the world, and the insurance industry is there to help provide customers with peace of mind and protection. Keep an eye out for new products and new coverage needs in the insurance industry. As the desires of your customer base change, so should the products you are offering to them. Enhance your options so you can sell insurance outside of the niche you originally began with.

Make Retention a Priority Starting Today

For insurance agents, renewals should always be top of mind. You can spend a lot on acquisition costs trying to bring in new business, all while leaving your existing customers waiting for their renewal notice. But you risk losing a profitable customer. 

Instead, focus on your renewals by keeping up with your customer relationships, communicating often, and being open and transparent along the way. Employ tools such as social media, grow the products you offer, and be an expert in your niche(s). 

As you focus on retention, Nectar can help you with maintaining a consistent flow of new leads. We provide real-time, high-quality leads that are looking to buy what you offer, generating plenty of new business potential for you so you can keep those existing relationships strong.

This article reflects the features of Nectar as of the date of publication. Features are subject to change at any time. This article is meant for informational purposes only, it is not a guarantee that using Nectar will help you achieve specific business or financial results and is not intended to serve as the sole recommendation for any business financial decisions.


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