5/1/2007
NU Online News Service
Lack of the personal touch in auto insurance sales can hurt
carriers in many ways, according to a new study out this
week.
The Quality Planning Corporation, a subsidiary of the Jersey City,
N.J.-based Insurance Services Office, released findings this week
that concluded "from high turnover rates to adversarial
relationships, there are hidden costs to ever-increasing
depersonalization."
Ted Harris, research manager and one of the report's authors, said
the study clearly indicates that "those insurers committed to
maintaining direct contact with their customers will likely see
financial benefits."
The researchers evaluated one year of renewal data of a major
carrier that embarked on a "high-touch" approach to customer
interaction, and compared its claims and costs data to equivalent
data from other auto insurers.
Among the findings:
• The insurer that employs a high-touch approach with its
customers saw a 12 percent reduction in claims per policy the year
following a phone interview, compared with an increase in claims of
between 4- and 8 percent for insurers that did not take the
"high-touch" approach.
• Average claim costs over a one-year period fell from $1,200 to
$1,055 with a total reduction in claims over a one-year period of
$4 million.
The study asserted that the nonrenewal rates in the automobile
insurance industry remain generally high and companies that make an
effort to build relationships with customers can positively
influence retention rates.
"But, unlike other industries, not all automobile insurance
customers are created equal when it comes to acceptable levels of
risk," the report said. "Some relationships are worth
severing."
With the "high-touch" approach, carriers can determine which
policyholders are less than forthcoming and therefore worth letting
go. "The trick is to retain the right customer while letting go of
the customer who continually misrepresents risk or claims," the
report stated.
Fostering a personal relationship with customers will be critical
for companies in the increasingly competitive market of auto
insurance. "By improving relationships with customers, a more
trusting relationship will grow, cross-selling products will become
easier and retention will rise," the study concludes.
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