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Customer Retention Strategies Every Insurance Agency Can Put into Practice

Insurance Agency Growth
Sep 7, 2021
minute read
Nectar Team
Customer Retention Strategies Every Insurance Agency Can Put into Practice

The insurance industry has many pillars of success. Effective sales strategies are, of course, one of those pillars. But, for an insurance company, customer retention is an equally important pillar — and a core component of not only growth and profitability but also survival. 

The way your business goes in the future will depend heavily on how you approach customer retention. The cost of acquiring new customers is much higher than retaining and renewing their policies from one insurance contract period to the next. That makes learning how to retain customers in insurance crucial for taking your insurance agency to the next level. 

Go Beyond the Sale: Why Customer Retention Is Paramount

Customer retention is critical because it reflects your ability to roll a customer from one insurance renewal to the next.

When you can retain customers, you can showcase their loyalty to your insurance agency and speak to how your customer service offering adds value to their insurance needs. Every time you increase your customer retention rate, even a bit, the growth to your long-term profitability is high.

Simply put, losing customers is bad for your bottom line.

Cost of the new customer

When you are trying to sell an insurance policy as an agency, you need someone to sell it to first. To find new potential customers, you need a sales strategy. It starts with identifying prospective customers, following with making contact, and ends with proposing a solution.

You may be even paying for leads, trying to find the right target customer for your policy offer. As essential as all of this is, it adds up in terms of cost. 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 out 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

What steps can you take to prioritize customer retention? There are several strategies you can implement as part of your sales cycle that will keep existing customers in the loop and happy with your service.

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. 

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.

Make Retention a Priority Starting Today

Customer retention is critical for the long-term health of your business, and it's never too early to make it a priority. Start thinking past what you'll do to win the customer and put these customer retention strategies in place for your insurance agency today.

Of course, you still need a steady stream of potential new customers to grow your business — and give you more clients to retain for the long haul. Nectar can help you bring in a steady stream of new leads so you can focus more on retention and less on searching for new sales opportunities. Let us help you find target leads in your niche so you can start growing and nurturing your client base for years to come.

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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.