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, Transformation, Innovation, Operations, UX, Planning & Performance and CEOs, MDs and other C-Level leaders serving in a range of retail banking and insurance firms. We learned about their priorities, opportunities and challenges, and where they see AI technology headed -- including those we specialize 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 Car, Home, Life, Health, Pet or Business Insurance in the US, you already know that 2023 is going to be hard (to say the least) on your renewal rates. With a recession looming and increasing inflation – there is no end in sight for consumers trying to make the most of their dollars.
It comes as no surprise, then, that cutting insurance coverage is a go-to response for consumers under economic pressure.
What’s the scale?
Drivers nationally are spending an average of 2.93% of their income on car insurance this year, based on an average annual premium of $2,014 for full coverage insurance and the national average annual income is $68,852, Bankrate said. That amount rose from 2.57% in 2022 when the average premium was $1,771. And the difference means car insurance rates increased by nearly 14% between 2022 and 2023, compared with an overall rise in yearly inflation of 6.5% in December.
What's worse, rates will keep rising this year as auto insurers continue to catch up with exploding costs of repair parts, labor and claims, experts say. Basically, that means most insurers are losing money on auto policies, said Martin Ellingsworth, P&C Insurance Executive Managing Director at JD Power.
Other insurance entities are having the same issues.
Key financial results for private U.S. property/casualty insurers significantly worsened in 2022 from a year earlier, according to preliminary results from Verisk (NASDAQ: VRSK), a leading global data analytics provider, and the American Property Casualty Insurance Association (APCIA).
The industry experienced a $26.9 billion net underwriting loss in 2022, more than six times the $3.8 billion underwriting loss in 2021. The underwriting loss was the largest the industry has seen since 2011. Net income fell to $41.2 billion in 2022, compared to $62.1 billion a year earlier – a 33.6% loss.
None of this is remotely a surprise to the leaders we spoke with. The majority of progressive insurance firms of all shapes and sizes come from firms that are dedicated to CX with people, process and technology. They can check off most of the usual to-do lists including:
- Ensuring relevant communication
- Streamlining processes with automation
- Updating, augmenting and leveraging data
- Building omnichannel capabilities to communicate with customers
All of this aside, the crux of the problem is 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 renew at all.
- Claims Inflation: supply chain disruption and increased costs from energy prices to consumer goods inflation means increases in the cost of coverage for customers for the foreseeable future.
- Rate hikes: Car insurance rates are expected to increase by 8.4% across the U.S. in 2023, the largest rate increase in six years, according to the report from research firm ValuePenguin.
- Soaring coverage costs: Employers in the U.S. expect medical plan costs per employee to rise 5.6 percent on average in 2023, HR consultancy Mercer reported. While significantly higher than the premium increase of 4.4 percent expected for 2022, the 2023 increase lags overall inflation, which is currently running at about 8.5 percent year over year.
Whatver 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 shockingly so from the customer’s point of view.
While excellent claims coverage is arguably the most important facet of any Insurance coverage, the renewal rate is a key indicator of how successful you’ve been in customer experience and loyalty. The renewal rate is a powerful indicator of trust and brand engagement. It’s an indicator of alignment between customer expectations and what your 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). 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:
- How to communicate with consumers? Agencies are 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 prices have increased?
- What impact will rising rates have on call centers? Many companies can precisely map how big an impact the rate changes will have on Customer Support and Call Centers. What pre-emptive – or proactive – options are there beyond preparing for the incoming calls?
Insurance journeys should encourage 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 coverage?
For the significant proportion of customers who don’t call (or simply just don’t renew), companies will need to engage ahead of time, to encourage consumers to make the most of a bad situation.
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, 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 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).
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, and keep that customer engaged in a personalized conversation until the objective of that conversation is fulfilled.
With its configurable design and ability to transact in-channel, ContactEngine keeps over 90% of proactive conversations fully automated without the need for human agent involvement. Every conversation is secure and fully auditable, making it simple for companies to enable proactive customer care and reap its benefits.
If you would like to get ahead with your renewals this year and convert your proactive customer care from simple notifications to proactive conversations, contact us [LINK] and let us show you how.