Keeping Clients Within the Fold

Insurers have reported exceptionally strong results in the last three years, with many companies experiencing high retention levels. Experience tells us that when prices are stable, as they are now, consumers don’t shop around for a better deal, which is what we’re seeing at this point in the cycle. As an industry, we invest time and money coming up with initiatives, products and services to win new business, but we don’t spend enough time retaining our existing customer base. In fact, I recently read a quote from an industry analyst that summarized it perfectly: “industry is running hard to stand still.”

WHY RETENTION?

WHY NOW?

Why worry about retention now? The quick answer is that it’s a lot easier and less expensive to retain your current client base than it is to attract new business. And yet, when you listen to industry leaders, you will hear us talk about growth strategies and not as much about retention. Retention played a key role in an increase in premiums in our commercial insurance business in the first half of this year, clearly indicating that a strong retention strategy can dramatically improve the bottom line.

I do believe we need to consider other market forces when looking at retention. We are seeing aggressive marketing campaigns from the direct writers, for example, and we are seeing some channel switching between intermediated and direct. But over time, I believe we will see a subtle shift in consumer buying trends; will see less channel switching and more movement within the channels. Consumers with complex insurance needs, or those who simply prefer the advice of a broker, will shop for a broker who most closely meets their needs. I do see the tide changing. I see brokers competing with each other for business, indicating that we will see further specialization. Brokers and insurers will have to work closely together to make sure that we truly know our customer and are introducing products that meet their needs.

A Successful Retention Strategy

Three main components contribute to solid retention: (1) stable pricing, (2) educating your brokers and consumers on your products and (3) providing exceptional service, both on claims and underwriting.

STABLE PRICING

This is where managing the cycle and providing consumers with stability is key. At this point in the cycle, I am seeing responsible and healthy competition, indicating to me that we have indeed learned lessons from the last cycle. It is critical that we maintain stable pricing for consumers and avoid the “boom and bust” pricing that we experienced in the past. At Royal & SunAlliance, our mandate is not just to better manage the cycle, but to beat it. We’ll achieve that through a segmented strategy, investments in underwriting and claims core competencies, developing multiple pipelines for growth and a culture of underwriting discipline.

MARKETING

As an industry, we are not great at marketing ourselves. We’re beginning to see that change – particularly when you look at the ad campaigns in which direct writers are engaged – but we need to do more. At Royal & SunAlliance, we are putting a lot of time and energy into understanding our customers and making sure that we work with our brokers. We want to build the features and benefits of our products to meet brokers’ needs, and to make it easy for them to share that information with their customers. Brokers are a key partner in a winning retention strategy: customers rely on their broker to provide expert advice and insurance solutions that meet their own unique needs. It’s clear customers continue to turn to their broker for advice; it’s important, therefore, that we support our brokers by making it easier for them to sell our products. We have gone as far as funding direct mail campaigns with our brokers.

SERVICE

At Royal & SunAlliance, our corporate value proposition is based on relationships, focus and services. As such, we place a high value on the service we provide to our policyholders and brokers. We solicit feedback on service from brokers and policyholders regularly and measure our improvement. In the last year, we have begun to measure how we are performing against our claims service commitments and customer promise. We found that 85% of our customers would renew their policy with us based solely on the quality of their claims experience. That’s a powerful indicator: it proves to me that claims is where the rubber meets the road; it is a clear point of differentiation in achieving customer loyalty and high retention rates.

Providing the right proposition to the right customer is also a key component to a successful retention strategy. For example, our small business team continues to develop a number of solutions that make it easier for small business owners to manage their insurance needs, including offering different payment options, multi-year policies and a rolling wave of initiatives to improve our offering. Each year at renewal, insurers essentially invite our customers to shop for a policy elsewhere: what other industry gives its customers a chance to shop for a better rate once a year? At Royal & SunAlliance, we will be introducing a perpetual policy for small business owners, which is in force until it is cancelled. Periodic reviews between the customer and broker will focus on ensuring correct values and policy coverage. On the personal lines side, we’re seeing companies offer innovative retention hooks like claims forgiveness. Most companies offer some variation on multi-line discounts and underwriting triggers that encourage the customer to stay, but achieving high retention rates requires more creativity. At Royal & SunAlliance, we have introduced products that are designed to meet our customers’ needs throughout their life cycle. For example, we offer discounts around driver training for young drivers, a wide variety of homeowners’ products, coverage for boats, motorcycles, and snowmobiles, as well as condo products aimed at mature condo owners.

Underwriting is Key

Underwriting is the backbone to any successful retention strategy, or growth strategy for that matter. If you don’t get this piece right, you simply won’t succeed. We maintain a multi-pronged approach to successful underwriting. First, there’s the education component, or having the right people in the right position. Earlier this year, we opened the National Learning Centre in Nova Scotia, which serves as a national training and recruitment centre for our commercial lines underwriters. This dovetails quite nicely with the Royal & SunAlliance Group’s launch of the Technical Academy, which draws on expertise from around the Group. We strive to provide our underwriters with the tools they need to make the job easier. This means, for example, working to increase the

number of automated renewals in less complex risks like small business. We also have the necessary governance and controls in place that gives me the confidence we are writing the right business at the right terms.

It’s clear that as an industry we spend a great deal of time and effort managing our revenue line and working on new business targets and initiatives. We don’t spend enough time on retaining the customers we do have. All the same, achieving successful retention rates means a more stable cycle for the industry and, more importantly, for customers.

Keys to a successful retention strategy:

* Stable pricing

* Know your customer

* Market your products

* Provide exceptional service

* Touch your customers at more than just renewal time

* Make it easier for brokers to sell your products