Increasing customer loyalty in short-term insurance sector

The survey provides critical information and analysis in the four areas: short-term insurance, long-term insurance, banking and healthcare Insurance. Over 400 respondents were interviewed telephonically in each sector, with a total of 1692 respondents interviewed.

Suzanne Broadley, stakeholder relationship manager at Markinor, remarks that loyalty in the short-term insurance sector lagged significantly behind the other sectors in 2004, but this year's loyalty levels have caught up to the other sectors: "After all the new entrants penetrating this market over the last few years, it appears that customers have found their supplier of choice and have settled to some degree".

She continues, "Further underpinning this theory is the fact that a significant number of high-risk clients in the short-term insurance sector has been converted into essentially satisfied customers. Now the trick is to further enhance these relationships and shift consumers into the Truly Loyal space".

Direct versus broker

Last year, 87% of customers who dealt through a broker said they would continue doing business this way, whereas this year only 79% echoed the same sentiment.

Due to the "direct" nature of the relationship, those customers who choose to go direct are more likely to do the things that are good for the short-term insurer's business, such as recommendation and not looking around for better offers. In 2006, customers doing business through a broker were less likely to exhibit these business-enhancing behaviours.

It would seem, according to the research, that consumers who are dealing direct are relying more heavily on other contact points such as call centres and websites. Also, unlike other sectors, these customers perceive their insurer's call centre very positively.

For the customers who manage their short-term insurance through a broker, it appears that touch-points beyond the broker and the policy have become important. "Are customers demanding more information from the short-term insurer itself?" Broadley asks.

Retail banking

"The retail banking sector in the survey has lived up to its mature industry status with rather static measures," she says. "As an example, truly loyal customers are at 59% for 2006 versus 57% for 2005.

"However, this year, the question of reputation is rearing its head within the retail banking environment. It could be the lack of real answers to questions about fee structures contributing to reputation becoming more crucial to customers."

In contrast to 2005, where only the consultants had an impact on loyalty in retail banking branches, the return to in-branch human servicing has ensured that two other key staff touch-points have become drivers of loyalty. Capable leaders also emerge as a driver for the first time in this sector, confirming much evidence globally to support the role of the CEO as the chief brand officer.

Long-term insurance

Loyalty in the long-term insurance sector spiked last year at 62%, over 49% in 2004. This was no doubt due to the furore created by the Pension Fund Adjudicator and the subsequent activity that occurred in the sector last year. This year, the loyalty percentage has stabilised at 56%.

"Experience has taught us that loyalty increases when customers have had a recent experience, and for some long-term insurance customers, last year may have been the first time in years that the relationship customers have with their life insurance provider has been re-evaluated. Timely communication from life insurers and confidence that the relevant adjudicators are doing their job has taken the focus away from the life insurers' ethics. Similar to retail banking and medical aids, human touch-points are increasing in importance in this category," Broadley explains.

Medical aids

This sector suffers from the lowest perceptions of overall quality of products and services, together with the highest perceptions of comparatively high prices. "In medical aids, quality does not seem to be driven by price or value for money. Product customisation may be the key to building quality perceptions in this sector," she points out.

Truly loyal customers exhibit behaviours which are value-enhancing. They not only remain customers, but also tend to increase their levels of business. They are also more likely to recommend their vendors to other potential customers. Those customers who are not truly loyal, including trapped customers, generally do not exhibit these behaviours enough to grow shareholder value.

In the medical aid sector, the behaviours exhibited by loyal customers and those that are 'not loyal' is more pronounced than in any of the other sectors, underpinning the necessity for medical aid providers to understand the levers that will ensure movement of customers into the truly loyal space.

"Moreover," she adds, "the medical aid sector is the only financial services sector where length of tenure has a significant effect; thus, the longer the relationship a customer has with a medical aid, the more loyal the customer becomes."

She says that one in five (21%) customers that have been members for less than five years are high-risk, compared with less that one in 10 (8%) that are long-standing customers (over 10 years).

Other interesting facets emanating from the survey are:

• More than one in three (35%) long-term insurance customers use more than one service provider. This is the case with one in five (18%) in retail banking and only 4% in short-term insurance.

• The survey examined complaints about all four sectors over the previous three months. "Due to the high human interaction element in the sectors, medical aids and retail banks have the highest level of complaints", Broadley points out.

  In the medical aid segment, 12% of respondents had a complaint about their service provider. Top reasons were non-payment; poor service; incorrect information given to customers and statements not received or incorrectly made out.

  In retail banking, 7% of respondents had a complaint. Top reasons for complaining were negative attitude of customer-facing staff, customers receiving no feedback and problems with credit cards and garage cards.

  In short-term insurance, 4% of respondents had a complaint. Top reasons for complaining were poor service, non-payment, incorrect information given to customers, customers receiving no feedback and staff not taking responsibility for customer interaction.

  In long-term insurance, 5% of respondents had a complaint. Top reasons for complaining were non-payment, customers receiving no feedback, availability of staff members and negative attitudes of client-facing staff.

"Ultimately, financial institutions must find a way to retain profitable customers, turn marginally unprofitable customers into profitable ones and reduce the marketing budget spent on the most costly customers.

"However, before these issues could be addressed and action can be taken, financial service providers must closely monitor customer behaviour to develop insights that allow them to target the right customer segment with a relevant, compelling offer at a time when the customer is most open to receiving the message", Broadley emphasises in conclusion.