Technology Can Be One Key To Increasing Customer Loyalty
Spurred by deregulation and globalization, the United States life insurance industry is facing rising competition from new entrants like banks and brokerages, European insurance companies, and online financial services providers.
These competitors are deploying new and innovative life products through lower cost channels, resulting in more competitive prices and convenience to customers. Additionally, in this slow economy, life insurance premiums are competing with other household necessities for wallet share.
However, the key threat to retention that confronts most life insurance carriers is the empowered customer. Easy access to information has given birth to a different breed of customer. This empowerment is “commoditizing” most insurance products, lowering margins exactly when the subsidy from investment returns is evaporating.
Most life insurance products are not profitable for carriers unless the customer continues to pay premiums for seven years. Is gaining customers loyalty the answer to all these challenges and the end state for the life carriers? Will those carriers that gain significant loyalty command competitive positions and be able to fortify these advantageous positions in the value chain for decades to come? And exactly how do the life carriers go about gaining loyalty of this new breed of customer? Can technology play a role in this quest for achieving customer loyalty?
We know it is more profitable to retain an existing customer than it is to acquire a new one. Agents and brokers have known all along that a referral from a loyal customer is the most effective tool to gain new business.
What is even more important today is the fact that customers want to do business with companies they trust. However, the stark reality is that cross-selling and up-selling additional products and services to existing customers remains a pipe dream for most insurance companies.
Good agents get referrals from customers not because of their companys reputation or brand name, but because of personal relationships with customers. Loyal customers stay longer, buy more and refer other customers.
Most unsuccessful customer loyalty and customer relationship management (CRM) projects have failed because the information technology (IT) departments led the initiatives, based on technology decision making rather than a customer loyalty-driven framework.
However, keeping IT out of the initial phases of a business strategy process is not a good option either. IT executives can validate the strategy and must be involved from the get-go, because IT will bear a major burden of the execution of the chosen business strategy.