In insurance, customers are only likely to hear from their insurance agent when filing a claim or when it is time to renew their policy. This turns the renewal period into a high-stakes game to learn about changes to an insureds’ needs, and upsell or cross-sell (i.e., account rounding) appropriately. What may come as a surprise though is that out of the entire year, account rounding within 30-days of the policy expiration has the lowest likelihood of success.
It is clear that the insurance industry has a billion-dollar communication and account rounding problem
We uncovered this insight after anonymizing and aggregating hundreds of thousands of policies and reviewing the data for changes to an insureds’ existing coverage. The 30-day window around the renewals period held true regardless of the type of insurance being sold or the size of the premium. While there may be specific agencies or brokerages which are the exception that proves the rule, it is clear that the insurance industry has a billion-dollar communication and account rounding problem.
According to a new survey by Collinson, less than 50% of insureds hear from their agent, broker, or carrier more than once a year. Perhaps underestimating their appetite for communication, or misunderstanding their motivation for opting out, insurers have begun to shy away even further from reaching out to customers. Respondents said their exchanges were mostly limited to transactional matters like renewals notices (79%); policy updates (67%); and terms and conditions amendments (37%), leading to disinterest and disengagement from consumers.
Irregular communication with their insurance professional makes most insureds apathetic about spending more money or purchasing another policy. While we are still analyzing the data to confirm the root cause, early results support that the less an insured interacts with their insurance professional or company, the exponentially less likely account rounding successfully during renewals will be.
Account rounding during renewals is an uphill battle. Especially if there is an exposure change that increases the final price of the policy renewal, insureds are likely to defer new purchases. This makes it difficult to multi-line existing accounts, while at the same time increasing the likelihood that the insured will churn.
How to Better Account Round
Insurance professionals need to address purchasing apathy by focusing on digitization efforts on tools that allow proactive and on-demand communication. While insurance agents tend to have high satisfaction scores for insured communication, many lack tools to digitally engage policyholders. In 2020, 44% of US insurance agents flagged digital tools as the most significant resource to invest in, along with digital portals to proactively engage policyholders and convey important news.
During the renewals period itself, insurance professionals should double-down on reducing churn, rather than viewing this periodic interaction as a sales opportunity. Increasing customer retention rates by 5% increases profits by 25% to 95%, according to research done by Frederick Reichheld of Bain & Company. Renewals are challenging enough, especially in the current climate of rising premiums and carriers changing their risk appetite. Based on preliminary results, account rounding is on average most effective 120 days before or after the renewal period. As such, insurance professionals should schedule a follow-up during this window and have any additional policy conversations during this time.
When a prospect or insured has an immediate insurance need, such as adding a new vehicle, new family member, etc., the optimal time to approach them about covering the risk is as soon as possible. Based on the data we reviewed, following up sooner for new risk equates to a high likelihood of making the sale. Interestingly, this window may also present a foothold for competitors to take business, but more research is required to confirm this.
For insurance sales, a constant challenge has been, and remains, how do we know what we do not know? This challenge equally applies to timing account rounding as it does learning about new needs, and estimating churn risk approaching renewals. Please note that the preliminary results above are averages, with significant deviation when broken down into age, geographic area, and exposure sub-groups. So while for an average insured, following up within 120 before or after the renewal period is optimal for account rounding, for some, it may be 7 or 140 days.
Digitization, and more specifically digital transformation, provides a way to pinpoint when account rounding activities should occur, and the exact policy or service that the client will be interested in. Acquiring the capabilities to understand what every prospect or insured wants allows companies to become competitive against larger players, and increase market share accordingly.
Creating Meaningful Change
Don’t just take our word for it. We recommend running a report from your agency management system that breaks down the proportion of new sales 30-days before and after the renewal period versus the rest of the year. We would also love to hear from you if your results align or are drastically different from what our findings are. Feel free to reach out to us at firstname.lastname@example.org. When you are ready to start supercharging your renewals, make sure to check out the 'The Ultimate Guide of Building a Tech-enabled Sales Team.'