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Why Insurers Should Be Helping Their Customers Complain More, Part II

Let’s jump right back into the thick of this topic.  In the first part of this blog series, we discussed why insurers should be empowering their customers to complain in fairly general terms.  Check out the link to our Decision Maker’s Guide to Complaint Enablement for more background on this topic.

This post dives deeper into a few key metrics: retention rates, customer lifetime value, and quantity of feedback gathered.  To do so, we’ll take a look at the financial impact of non-complainers.  While you read, it may also be helpful to consider whether you are currently measuring or utilizing any data to achieve similar goals.

Before getting to specifics, here’s a quick recap of what was covered last time:

  • J.D. Power’s 2018 research tells us that the industry average score for providing a satisfying purchase experience is 839 out of 1,000.1
  • For an average-performing insurance company that holds 1,000,000 policies, we can assume that 839,000 customers will be satisfied, leaving 161,000 dissatisfied.
  • At most, 50% of these unsatisfied customers will complain. In this example, that means 80,500 complainers and non-complainers alike.
  • Among these non-complainers, 91% will just leave our average-performing insurance company, coming to 73,255 customers who take their business elsewhere.

Let’s assume here that Regional Car Insurance Company (RCIC) holds 1,000,000 policies.  According to Business Insider, the average annual rate Americans pay for car insurance is $1,503, meaning RCIC holds $1,503,000,000 in car insurance policies.2  Based on the above statistics, 73,255 of RCIC’s customers will take their business elsewhere when their current policies end.  These policyholders account for just over 7.3% of RCIC’s total business, or $110,102,265.

In a perfectly balanced world, RCIC would bring in 73,255 new customers the following year, keeping their portfolio at the same balance.  An ideal scenario would see an increase in business.  But what happens if less than 50% of RCIC’s 161,000 dissatisfied customers actively complain?  Take a look at the impact:

Graph 1

With every 5% decrease in the percentage of dissatisfied customers who complain, RCIC loses nearly 1% of their total annual business (more than $12,000,000).

Up until now, RCIC was perfectly balanced and regularly saw 50% of their dissatisfied customers complain.  These complainers saw their issues addressed, and were retained year-over-year.  But this year, only 40% of RCIC’s dissatisfied customers voiced their complaints.

This means that instead of the typical 8.1% of RCIC’s total policies leaving, 9.7% departed, leaving the company’s sales staff on the hook for generating an additional $24,198,300 in new revenue beyond their typical turnover.  That’s an increase of 20% more new business needed in order to just hit last year’s numbers.

But what if the trend was reversed?  What would that mean for RCIC’s business?

Graph 2

We see the exact opposite effect: every 5% increase in the percentage of dissatisfied customers who complain means RCIC retains roughly 1% more of their total annual business.

After this year’s non-complainer fiasco, RCIC decided to invest in their consumers – specifically, in empowering them with the ability to complain.  Every year moving forward, RCIC expects to generate 3% more complainers than the previous year (thereby reducing the number of non-complainers by the same amount).  Assuming RCIC’s sales staff brings in a constant amount of new business, here are the results:

Graph 3

One year after empowering their customers to complain, RCIC can expect to see year-over-year growth of over $3,500,000.  Ten years in, this growth will have accelerated to 2.4%.  And keep in mind: these figures assume zero growth of new business revenues.

By generating 3% more complainers every year for 20 years, RCIC should witness more than 5% increase in year-over-year total policy value.  All this by giving their existing customers a more satisfying consumer experience.  There is incredible potential for referrals, cross-sells, and up-sells from these consumers that are not considered in these statistics – it is safe to assume that each of these new revenue streams will supplement RCIC’s continued growth.

If you’d like to see your business take a jump like RCIC’s did, let us know.  Just take a look at our Decision Maker’s Guide to Complaint Enablement to get an idea of how we plan to do it.

1. http://www.jdpower.com/business/press-releases/jd-power-2018-us-insurance-shopping-study

2. https://www.businessinsider.com/average-cost-car-insurance-in-every-state-ranked-2018-3

If you would like to get help with complain enablement today, contact us directly or you can also see us in person at one of many Events!

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