The homeowners’ market has also been hit by an overall reduction in the homeownership rate over the past six years or so. Younger Americans – millennials and Generation Y – have been putting off homeownership and marriage until a much later age than prior generations – which also serves to suppress the ability of acquisition-based, low-cost carriers to grow their businesses: The traditionally younger clientele that would be most likely to respond to the low-cost provider/GEICO model of advertising-based acquisition are underrepresented in the homeownership market (but not so much in the car market – which means GEICO and Progressive and other lower-cost, big advertisers have done well. The youngsters still want to drive!)
Non-Price Drivers of Defection
Of course, price isn’t the only reason customers bolt. They’ll take off for greener pastures over issues of convenience, as well, or poor customer service, a bad experience trying to get a legitimate claim processed, or because the carrier denied a friend’s or family member’s claim.
Home insurers experienced lower levels of defection, however, than other lines of insurance. Younger customers and those at lower income levels were the most likely to defect across all lines – again underscoring the difficulties those focusing on price-centered marketing have been having in expanding their books of business.
As expected, Bain found that the higher a carrier’s NPS, the better their retention rates, and the lower their rates of defection.
Recommendations
Bain’s analysts recommend that both carriers and agencies invest in the “Wow” factor. There are a few critical times that make a big difference in the perception of the brand – and these moments trump pricing for “passives.”
The Wow factor means exceeding customer expectations in a meaningful way:
- Responding to a price quote the same day.
- The ability to support proof of insurance via a smartphone app.
- Same day visits from adjustors.
- Prompt payment of legitimate claims
Not only can these moments help inoculate ‘acquiring’ insurers from mass migrations the next time a competitor slashes its premiums, but they can also convert a “passive” customer to a “promoter,” and unlock a lot of future value in the relationship with a newly-minted brand evangelist.
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