Viewpoint: Loyalty rides on every claim

Insurance is a classic loyalty business: policyholders who stay longer, purchase additional products and refer other prospective clients are the cornerstone of profitability. Yet few insurers and brokers act on this fundamental fact.

Our research shows that 'promoters' - loyal policyholders who, when surveyed, are willing to recommend their broker or insurer to friends or colleagues - remain customers for up to 50% longer than 'detractors'; they are also nearly three times more likely to buy more than one policy from their providers. With the additional business generated through referrals, we estimate that a promoter is six times more valuable than a detractor.

We have studied each point of interaction between the customer, the broker and insurer - from issuing policies to premium payment and call-centre support to policy renewal - to find out how likely each factor is to delight customers if performed well or anger them if done badly. Overwhelmingly, the touchpoint with the greatest impact on loyalty is the claims experience.

While it is common industry perception that claims is a backwater where costs should be managed and controlled, our work found that giving customers exceptional claims service can produce dramatic results. For example, by transforming its claims management based on direct customer feedback gathered following thousands of transactions, one major insurer increased sales by over 10%.

The lesson for brokers is simple: make sure that you look after customers well when they claim. This could mean being more directly involved in helping customers navigate the claims they submit, tracking data on how long insurers take to settle claims and how many they deny, or just making sure your customers know you are there if they need it. All this costs money and takes effort but investing to win customer loyalty has a far higher return than having to win new customers to replace those you lose.

Jonathan Hughes, partner, Bain and Company