Responding to the announcement that the FCA is to carry out a detailed investigation into the cost of home insurance when it comes up for annual renewal, Tony Tarquini, Director of Insurance EMEA, Pegasystems, explains that insurers are stuck in a vicious cycle, with new customers-only pricing being the sole way for insurers to secure customers via comparison websites who drive demand for lowest possible price.
This means insurers lose money in the first year of the deal and try to recover the loss in later years, so loyal customers pay more. So, what is the solution?
“Consumers find the quest for new deals at renewal frustrating and a waste of time. They want their time back, the work of crafting a better deal done for them, and to be confident that they are getting a reasonable deal. For insurers fighting to retain customers it is significant how consumers are willing to make a commitment back to the insurer who will give them that comfort through innovative offers and better, personalised service at renewal. In fact, in a recent Pega survey, 60% of respondents said making the renewal process simpler and personalised would be likely to make them renew with their existing insurer. Furthermore, 69% said being offered a reasonable, fixed, three-year deal on insurance premiums with no increase in cost would also encourage them to stay.
“Re-imagining renewals to benefit everyone requires new digital and agile operating models, based on technology which can personalise the balance between making money and giving real long term value to the customer. At the heart of this technology must be AI and real time decisioning, pre-emptively helping customers to make good, informed decisions about where to place their business. By doing this, insurers can break the vicious cycle forced on them of “new customers only” pricing, reward loyalty and kill off the loyalty tax stigma.”