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Competitive Products have been a loyal customer of my automobile insurance company for ten years. However, my behavior is an exception rather than the rule. Thirty-one percent of non-life insurance customers have changed providers in the last five years (the 2007 world insurance report). This customer churn is often driven by consumers who aggressively shop for the best price. This switching will continue apace as more and more consumers surf the Internet to compare prices, assisted by the growing popularity of data aggregators that present insurance products from carriers as undifferentiated commodities sorted by price. In a matter of minutes, consumers can locate the cheapest provider and execute the purchase of a policy.
But, just because price matters the most doesn't mean that service matters little. While 62% of customer churn for non-life insurance products is primarily attributable to price, 9% of the churn is because of poor customer service/experience and another 7% is due to a poor claims service/experience (the 2007 world insurance report). In fact, the ability to provide an excellent customer experience may become the only way for competitors to differentiate themselves in this commoditized market and may ultimately determine the new winners and losers in the automobile insurance industry.
In my case, I have not sought out a cheaper insurance policy because of the outstanding service I have received from my provider. When I was in an accident, the company processed the claim in an efficient and timely manner and did not try to raise my rates even though the accident had been my fault. This is in sharp contract to my previous automobile insurance provider who cancelled my insurance policy after I had received two traffic tickets. This company has since tried to get me back as a customer by sending promotional material including low rate offers, but I have learned the value of sticking with a company who treats its customers well and won't easily be lured away by competitive pricing.
Bibliography
The 2007 world insurance report (2007). Capgemini and the European Financial Management & MarketingAssociation. Retrieved December 2, 2007 from Web site: http://www.us.capgemini.com/DownloadLibrary/requestfile.asp?ID=541
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