Preventing customer churn with better data analytics

The UK insurance industry suffers the highest rate of customer churn verses other service industry segments. This is according to a report issued by Pitney Bowes and the Chartered Institute of Loss Adjusters last year. Furthermore, a recent customer retention survey commissioned by Accenture estimated that insurers lose around 20 per cent of their customers each year that results in £3.3 billion of churn across home and motor insurance alone. That equates to approximately £500,000 to £1 million in lost premiums for every 1,000 policies.

Customer retention is clearly an important issue facing the industry. So how can insurers build customer loyalty and survive in the face of such high rates of customer churn? Three key capabilities can help insurance companies here.

Firstly, they need to properly understand their customers and their needs. This means determining overall market segmentation to understanding cross sell and up sell opportunities at individual policyholder level. To do this firms need the capability to be able to access and fully analyse the wealth of historical customer data – both structured and unstructured – that is captured in transactional systems. Mining data to a depth where customer intelligence becomes useful requires powerful, real time analytical capabilities and to date many insurance companies have struggled to exploit the potential in this data.

Secondly, insurance firms need be able to give their policyholders the personalised insurance products and services that they want whilst demonstrating unique selling points verses their competition. This requires the ability to support as a matter of a course highly customised products and services in their operational systems.

Finally, they need to recognise that there has been a shift in the relationship between insurers and their customers. Today’s customers will increasingly determine how they want to interact with insurers rather than the tone being set by insurers themselves. Insurers need to have a full omni-channel capability to support and respond appropriately to increasingly diverse customer journeys.

Customer loyalty and the informed cross sell will be discussed at the SAP Financial Services Forum next week along with other thought-provoking topics.