How to help insurance consumers cut costs while maintaining coverage
The more you know about customers, the better equipped you are to get them the right policy at the right price.
Consumers in 2020 are trying to stretch their dollars more than usual. Insurance agents, brokers and carriers are responding by making car insurance policies even more affordable.
Here are some key insights to keep in mind during this unprecedented time:
- Knowing your customer and assessing suitability is more crucial than ever. But these skills are nothing if agents and brokers don’t translate suitability to customers.
- Discount programs make car insurance policies more affordable. They also increase customer retention.
- Historically underused discount programs, like telematics, are seeing new popularity.
- Economic volatility is changing the driving landscape, and it’s uncertain whether these trends will persist or suddenly rebound. Agents, brokers and carriers need to prepare for multiple outcomes.
Let’s take a closer look at these trends.
Know your customer
The more you uncover about your customer’s life, the better equipped you are to get them in the right policy at the right price. We think the essentials every agent needs to uncover about each client are:
- Client profile: Age, driving history, and credit score, when applicable.
- Vehicle choice: Is it a car they’d be willing to drop non-essential coverage/? Do they have savings to replace their vehicle if they drop collision coverage?
- Location: Are there ways to mitigate location-specific risks that would also lower their car insurance rate?
- Insurance history: Have they had lapses in coverage? Have they ever been dropped?
- Motivation: Why are they looking for a policy now?
- Driving habits: How do they use the car, and who do they drive around with?
Understanding their strengths and vulnerabilities means you can guide them to a product that rewards their strengths and ignores (or penalizes less) their weaknesses.
Address pain points
Customer satisfaction is still down, way down, in the car insurance industry. According to the J.D. Power Consumer Outlook and Trends report, customer satisfaction is 20% below pre-COVID levels. But, customer satisfaction is higher for people aware of premium relief.
Making customers aware of company generosity, while setting clear expectations for customers, offers them the kind of peace of mind that’s in short supply. People are asking questions for which no answer exists such as:
- When will I regain employment or full employment?
- When will I return to the office?
- Will I keep my job if there’s a fall/winter spike in cases?
Overall, customers are not feeling confident in the economy. Inform them that they have options should their financial situation change.
Let discounts guide you
Discounts make the difference between an “okay deal” and an amazing customer experience. They also produce higher customer retention. Matching your customer’s profile to the right discount programs is key — and so is staying up-to-date on carriers.
Many carriers have unveiled new discount opportunities to their customers. All in all, the field is changing rapidly. Not only are carriers offering new discounts to their customers, but customers are also showing new interest in traditionally less popular policy features, like telematics.
And that’s not all: Smaller carriers, which as Root Insurance and Metromile, are making headlines and winning more market share.
The future of discounts
Though telematic programs have been around for over a decade, they’re seeing a new rise in popularity. According to the J.D. Power Consumer Outlook and Trends report, 46% of respondents said they were “highly interested” in signing up for a telematics program. And this trend has persisted even as driving levels are returning to pre-COVID levels.
This accounts for why Metromile and Root are doing so well: Their main attraction is user-based insurance policies that reward favorable driving habits. We expect the user-based policy trend to persist and even expand.
Trust and telematics
Even so, questions around privacy concerns and data collection should be expected. Being transparent with customers about data collection is key to gaining customer trust and helps insurance pros avoid uncomfortable conversations later.
Walking a fine line
You must strike a balance between affordability and coverage levels suitable for your customers. Knowing your customer and products is essential. But if you’re not translating that suitability to your customer, you forfeit the opportunity to give them peace of mind.
Customers who understand why they’re paying what they’re paying will be happiest. Be prepared to explain:
- Their deductible and why it’s the right deductible for them;
- Their coverage limit and why it’s the right coverage limit for them; and
- The best carrier(s) and why they’re the best fit.
Don’t let them cancel
According to our recent study, the average cost of a 60-day lapse in car insurance coverage leads to a 23% increase in insurance premiums. And that comes with the added risk of having no coverage if their vehicle suffers damage while not in active use.
However, being clear about drawbacks is nothing without a viable alternative. Car storage insurance is a great option for people who want to suspend regular coverage. This option lets agents and brokers retain customers while protecting their interests — even cars in storage can be damaged or stolen.
The bottom line
We are experiencing a rapid shift across global, national and local markets. While forecasting is never perfect, it’s difficult to assess what the future holds. Many studies acknowledge that the shifting we are seeing could be a sign of an acute but lasting change — or a trend that rebounds sharply.
Here are some recent trends that we’re watching closely:
- The rural housing market is booming. As people migrate from the city to rural areas, perils are changing. Rural roads suffer in the U.S. and are posing different risks to drivers — and insurance companies.
- According to the August Conference Board survey, consumer confidence continues to decrease and is at a six-year low. Positioning insurance products to answer the unique pain points of these uncertain times will remain important for the foreseeable future.
- A boom in used car sales has caused used car prices to rise. We care less about the price of used cars (though what a strange trend!) and more about how more used cars on the roads will change consumer demand on collision and comprehensive coverage.
In an ever-changing market landscape, no one knows for sure where trends will land tomorrow. But we know that forward-thinking professionals save clients time and money.
Jackie Cohen (jackie@insurify.com) and J.J. Starr (jj@insurify.com) are writers and insurance researchers at Insurify, an online insurance comparison platform. Through market research, data analysis, and customer insights, Insurify stays ahead of the industry curve.
These opinions are the authors’ own.
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