With policyholders growing frustrated with rate hikes and insurance shopping surging, the question of how to ensure insurance customer retention is becoming increasingly urgent. Claims satisfaction plays a pivotal role.
Insurance Customers Are Loyal – Until They Aren’t
Most people don’t enjoy shopping for insurance. Once they purchase a policy, they often forget about it – until something happens to make them rethink their coverage.
Premium hikes are one trigger. When policyholders receive notice that their monthly costs are going up, they often decide to look for cheaper coverage. If they find it, they may decide to switch insurers, especially if the difference in cost is significant.
Negative claims experiences also prompt shopping. Policyholders pay premiums to receive compensation if they suffer a loss. If they feel unsatisfied with the claims process, they may decide to look elsewhere for insurance.
Insurers may need to raise premiums to account for rising claims costs. However, they never need to provide poor claims experiences.
When Insurance Customers Are Paying More, They Expect More
It’s no secret that insurance prices have surged in recent years. According to USA Facts, auto insurance prices have increased by 53.7% since 2020. Policyholders are also paying more for homeowners and commercial property insurance – and they aren’t happy with the increases. However, since rates are going up almost everywhere, policyholders may not have much choice in the matter. The J.D. Power 2024 U.S. Home Insurance Study found that more homeowners were shopping for new coverage due to rising rates, but most ended up staying put due to a lack of alternatives.
Whereas insurers may think this means they’re safe, this is no time for overconfidence. When you pay more for something, you expect more in return. Since policyholders are paying more for insurance, they want their money’s worth.
In the J.D. Power 2024 U.S. Auto Claims Satisfaction Study, 48% of study respondents had experienced a premium increase in the past 12 months. Claims satisfaction was particularly low among policyholders whose rates had increased before their claim.
Mark Garret, director of global insurance intelligence at J.D. Power, explains, “Premium increases have created a new challenge for insurers as trust is eroding and affecting the way customers view their claims. There are still many challenges the industry needs to navigate to maintain customer loyalty.” He also says that 80% of auto insurance customers who have had poor claims experiences have already left or are planning to leave their insurer.
Claim Speed Is One of the Easiest Things to Control
If an insurer charges next to nothing in premiums, approves every claim, and always offers large payouts regardless of coverage terms, policyholders will likely be over the moon. However, such an insurer would go insolvent. To stay profitable, insurers need to employ accurate underwriting and claims handling, even when policyholders are unhappy with the outcomes.
This means insurers don’t always have a lot of wiggle room to make policyholders happy. However, there are some areas where insurers can excel – namely claims speed, communication, and transparency. By implementing efficient claims processes that keep policyholders in the loop, insurers offer positive experiences and reduce churn.
This matters more than you might think. According to Value Penguin, claim handling delays were the top complaint against insurers in 2023, accounting for 7,751 closed insurance complaints or 22.8% of total closed insurance complaints. There were more complaints about claim delays than there were about claim denials and unsatisfactory settlements or offers combined.
What Should Insurers Do?
After years of rate hikes, policyholders already have one foot out the door. A poor claims experience may push them over the edge.
- Eliminate wasted time on claims cycles. In many claims processes, insurers lose time on things like waiting for assignments, manual data entry, and payment processing. An efficient claims process that eliminates these time drains shortens the time to close and leads to a better policyholder experience.
- Keep claimants informed. Keep claimants in the loop to ensure they know things are moving as quickly as possible. Claims handlers should also set reasonable expectations. Automated updates are a great way to keep claimants informed while freeing up claim handler time.
Will your claims system keep up with rising policyholder expectations? If not, it’s time to upgrade. VCA’s claims system offers with automations and timesavers to help your team deliver a superior customer experience. And, with our InsuredConnect app, you can empower your team to resolve claimant concerns with greater speed and transparency than ever before.
