Are your insureds loyal?

How loyal are insureds to the carriers who hold their risk, and the agencies who service them?  Certainly,  many are, but some erosion may be occurring as new tools and behaviors take hold. In this post, we’ll explore whether the concept of customer loyalty is still relevant, or whether a new model should be embraced.

The opportunity that exists today is that it is easier than ever to create customer experiences that encourage customer loyalty. But that opportunity comes with potential pitfalls too.

There are always options and other choices, and a marketer around every corner telling your clients that there is something better, or more likely, less expensive.

Unfortunately, just because your retention figures are high doesn’t mean that you have loyal customers.  They might be renewing their policies for any number of reasons beyond loyalty:

  • The time and effort to switch is seen as excessive.
  • The relationship is with an employee, not the business.
  • Habits are hard to break.
  • They are too busy; the renewal comes and they pay.
  • They’re already gone and you don’t know it.

And those customers who are just hanging around because it is easy might switch at a moment’s notice.

When their lives change, when a problem arises, when a creative ad plays during the game, or when a hungry young producer shows up on their doorstep.

Loyalty Defined

Webster’s defines “loyal” in a number of ways, but the one that applies in this case is: Unswerving in allegiance, faithful to a cause, ideal, custom, institution or product.

So what is customer loyalty? Per the above description, it would be a customer who is faithful to their institution (your agency/company) or their product (the insurance policy). You and I are enthusiastic about a well-crafted policy, but here’s a news flash:  Most insureds don’t read their policy, and only will care if a claim doesn’t get paid.

Compare that with Apple, or Volvo, or Ketel One. These companies, and their products are almost universally loved; be prepared to set aside some time should you ask a fan why they use the product.

However, the consumer relationship with these brands and their products is defined by another key characteristic: Emotion. Customer loyalty is bred from consistently positive interactions with a company and the perception of value derived from a product or service.

That positive experience that I have had, the delight I receive from the product or service, creates an emotional bond with the company and or product. And that builds my loyalty.

Moments of Truth

Jan Carlzon, the former CEO of Scandinavian Airlines, coined a term for those points in the customer experience where the customer can be delighted or disgusted. Carlzon calls those ‘Moments of Truth.’

If the preponderance of experiences that you have with a company are delightful, then your expectation of future experiences are that those will be great as well. How much will you enjoy your next meal at your favorite restaurant?

And if the majority of the experiences with the company are dreadful, then your expectation of your next interaction is that it will be just as terrible as the last. Think about your last trip to the Department of Motor Vehicles.  What is your next trip going to be like?

The key here is that for a company with a multitude of positive moments of truth in the past, it gives the customer the expectation of future good service. This expectation enables your business to ‘weather’ an instance where your service or product isn’t quite up to par, because that experience is outside the norm.

In other words, as you build up the bank account of positive experiences for your customers, you are creating the emotional ties that create loyalty.

Loyal Customers Are the Lifeblood of Any Business

Particularly a service-based business like insurance.

Why is customer loyalty so important to your agency?

A loyal customer is:

  • More likely to continue purchasing
  • More likely to purchase additional products and services
  • More likely to recommend your products and services to others
  • Not actively looking to replace you

But perhaps the most important reason you want loyal customers is they offer you an opportunity to correct an issue that wasn’t handled correctly. 

A New Definition of Loyalty

Today’s technology and the new sharing paradigm have removed many of the barriers and expense in checking options. Gone are the days when I had to walk my policies over to your agency, or wait for your producer to knock on my door.

customer loyalty is earnedThe new normal is a healthy skepticism towards government, authority and big business. Insurance is seen as nothing if not big business.

No bigger evidence of this trend in change in loyalty is in the sea-change in employer – employee loyalty. The days of a single employer for your entire working life are long gone. Now the employee expects loyalty from the employer, and if they don’t get it, they are gone with the wind.

The concept of customer loyalty is outdated in today’s world. The old customer loyalty was a one-way street. The customer was expected to owe fealty to the brand.

The new customer loyalty is earned. Customers expect you to be loyal to them before they’ll be loyal to you. This is reciprocal loyalty.

The great news is that reciprocal loyalty is right in the wheel house of the good insurance business.  We have the potential to work with each individual client, and craft a customer specific plan to address their risks in a way that meets their needs.

Forward-thinking insurance professionals can use their sales, marketing and automation technology to show loyalty to their customers by:

  • Using social media to inform and entertain their customers and prospects
  • Notifying customers of real time events with mobile apps
  • Informing prospects on the specific reasons why certain policies are different and better
  • Communicating with customers at times other than upon renewal
  • Servicing customers with care and compassion

Long Story Short

Consumer attitudes have changed, caused both by larger demographic and psycho-graphic trends. As technology has improved, customers’ expectation of loyalty have morphed from “I’m with your for life” to “What have you done for me lately?” And if that isn’t enough, there isn’t enough superglue in North America to get that customer to stick.

Insurance businesses that embrace reciprocal loyalty will prosper in this new world. Delight them or disgust them, it is your choice. Those who think that their customers owe them loyalty will wither and die.

Good Selling,

Marty Agather

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