In an evolving landscape where customer loyalty is in short supply, the U.S. property and casualty (P&C) sector faces a pivotal challenge. Our survey researched customer perception of value from their insurance providers and how it can be improved. Our findings shed light on the potential impact of personalized loyalty programs, revealing untapped potential within the industry.
As we unveil the core challenges posed by low customer loyalty, we underscore the significance of satisfaction and retention. With the majority of U.S. customers engaging directly with insurers to purchase insurance, our research unveils the potential for developing stronger bonds beyond policies. Economic pressures, led by inflation, have triggered active insurance shopping, particularly in auto and home segments. These insights underline the urgency for targeted retention strategies.
This report outlines strategic recommendations, focusing on loyalty programs as the foundation for retaining customers, as well as increasing customer acquisition through referral programs.
Additionally, we examined the types of property and casualty insurance policies held by survey respondents, requiring them to have at least an auto, home, and/or renters’ policy for one or more years.
Q1. Which of the following types of property and casualty insurance do you currently have? N=600.
This report is focused on the U.S. consumer only. However, there were some notable differences found in U.S. consumers versus U.K. and Canadian consumers:
Given that U.S. consumers are typically more loyal and prefer to purchase bundled offerings, there’s a significant opportunity for insurers to capitalize on this trend and increase retention with a loyalty program. U.S. consumers are used to loyalty programs in other areas of financial services, including credit cards and banking products. Notably, 89 percent of respondents belong to at least one loyalty program in 2023.
In the insurance sector, the landscape of customer loyalty has changed significantly in recent years. The number of consumers switching providers has increased due to the challenging economic environment, as well as the ease of switching to a new carrier. Customer retention is more of a priority than ever before.
"Insurance customers have become super volatile as evolving customer expectations and a highly competitive environment have taken hold—and the huge losses from national disasters are prompting carriers to pull back in some states."
— Ash Joshi, Managing Director, Strategy
Today, customer satisfaction has become an economic priority for the insurance industry. Insurance companies are actively investing in customer acquisition rather than customer retention—but acquiring new customers can cost between seven to nine times more than retaining existing ones.
Conversely, customers often feel like they get a better deal by shopping for a new provider instead of opting to renew with their current insurer. Customers are accustomed to shopping for insurance based solely on price, and switching to a new carrier is relatively easy.
Changes in economic conditions, especially inflation, have a significant impact on auto and home insurance customers. Further, factors like the cost-of-living crisis are forcing consumers to evaluate whether they can afford insurance altogether, with more consumers either getting the minimum insurance required or opting out altogether even when it’s legally required (such as auto insurance). Many consumers have opted to raise their deductible (and increase their risk burden) to reduce premiums.
In times of economic strain, customers have begun examining and assessing risk differently, which affects their choice of provider. Customers are increasingly seeking tailored and individualized policies, and these changes will call on insurers to redefine their role in a way that absorbs the impact for both consumers and the wider economy.
In our survey, we found that changes in economic conditions, such as inflation, have had a higher impact on auto insurance providers versus other policy types.
Auto customers are 30 percent more likely to switch based on changes in economic conditions than holders of other policies. Insurers should consider focusing their efforts on retaining auto customers during this time of economic pressure, rather than on home or other insurance products.
Conversely, holders of other policies are more likely to switch based on offers. Compared to auto insurance customers, holders of “other” policies are 50 percent more likely to switch based on bundling offers and twice as likely to switch based on promotional sign-up offers.
“To retain customers, it is critical to provide them personalized policies that provide customers with a value proposition that’s more closely aligned to their needs, aligned to what customers have come to expect based on experiences in other industries.”
— Mike Chiaramonte, Senior Principal, Strategy
Unsurprisingly, the biggest motivator for switching P&C insurance providers was a more competitive price, with 75 percent of U.S. survey respondents agreeing.
Q8. Which of the following led you to switch or consider switching property and casualty insurance providers? Please rank the top 5 reasons for switching, with 1 being most desired. Top 3 Ranked N=531.
The second and third largest factors were changes in economic conditions (42 percent) and consolidating/bundling different types of insurance policies (34 percent), respectively. The former might have an impact in the latter, given a refocus on savings that generally accompanies challenging economic conditions.
Price will always remain a factor for customers when selecting an insurance provider; however, insurers can lessen the influence by offering more impactful value-added services and a personalized loyalty program with rewards.
With insurance being a “low touch” industry, insurers don’t often have the opportunity to interact directly with consumers. With many P&C insurers offering relatively the same service and product, satisfaction and loyalty are called into question. Insurers can use loyalty features to enhance the value they provide to consumers and reward their loyalty.
Approximately 37 percent of respondents have multiple policies with one provider while 16 percent have multiple policies with multiple providers. This implies that these consumers (the 16 percent) are not loyal, despite insurance providers pushing consumers to a bundle for greater convenience and discounts.
Q1. Which of the following most accurately describes your property and casualty insurance policies? N=600.
Satisfaction and loyalty in the insurance industry are hindered by the absence of robust loyalty programs and value-added services beyond the policy. Most insurers do not offer a loyalty or rewards program—nearly half of all survey respondents were unaware if their insurer had a loyalty and rewards program (45 percent), and 20 percent of respondents were certain that their insurer does not have a loyalty program.
Q10. How aware are you of the loyalty and rewards program offered by your primary property & casualty insurer? N=600.
Of the remaining 35 percent who are aware of their P&C insurer’s loyalty program, only a third (31 percent) of respondents were “extremely satisfied” with the offering. Those who are engaging with a loyalty program and are clear on their loyalty status are the most satisfied customers—75 percent of respondents were extremely or very satisfied by the loyalty program.
Given a lack of maturity for loyalty programs in insurance today, this indicates the bar is low for loyalty and rewards programs—customers are happy to receive any loyalty and rewards offering.
Q11. Overall, how satisfied are you with the loyalty and rewards program provided by your primary property and casualty insurer? N=210.
Overall, 41 percent of all respondents are likely to recommend their current provider to friends/family with an NPS score of 12. The NPS score was dramatically higher (31) for respondents who reported their provider having a loyalty program versus those who did not (7) or those who were unaware (-1). Clearly, customers sincerely appreciate the loyalty program, given its impact on their satisfaction ratings of their insurer.
Given the low awareness about loyalty programs, it’s clear that an important success criterion for insurers is educating their customers on what loyalty features are available and what rewards are offered. Building this awareness and appreciation with customers is what will build loyalty and lead to increased retention rates for carriers.
Increasing awareness will not be an easy task and requires thoughtful marketing campaigns for prospects, as well as outreach to existing consumers with relevant messaging about the value of the loyalty features and rewards.
Another challenge with activating loyalty and rewards programs relates to the regulatory landscape in the U.S., where rules vary from state to state. For example, carriers will need to ensure that the loyalty features and rewards comply with regulations in a handful of states, such as Massachusetts, where the managed competition system requires approval of rates offered to customers by the regulatory authority.
Personalized loyalty programs are key to improving loyalty. Customers who engage with loyalty programs are highly satisfied, and loyalty programs can reduce the customers’ incentive to shop around for another provider by assuring them that their loyalty is earning value for them.
Incentive options can be diverse and tailored to individual insurer’s needs, capabilities, and goals. An example of this is “forgiveness” benefits for small claims—and not raising rates—or rewarding customers for their tenure.
But awareness of such programs is low, which suggests a relatively low bar for loyalty and reward offerings. Insurers can boost retention by offering rewards at milestone events, policy discounts, and other enhancements. Through a focus on personalized experiences and innovative solutions, insurers can fortify customer loyalty and keep pace with a competitive market.
Auto insurance consumers want their insurers to reward them at milestone events (40 percent), offer discounts on policies (43 percent), and provide other policy enhancements (45 percent) as these factors drive consumers’ perceived loyalty to a brand.
Q12. When thinking of AUTO insurance, what can insurance providers do to earn your loyalty for your auto insurance needs? Ranked 1, 2 or 3. N=562.
Home insurance consumers also want their insurers to reward them at milestone events (48 percent), but they seek additional experience-related services that can help boost emotional loyalty. After recognition at milestone events, consumers seek offers that reduce their risk (45 percent), provide value-added services like service plans (41 percent), inform them of new policy features and services (41 percent), and proactively identify better opportunities (35 percent).
Q13. When thinking of HOMEOWNERS insurance, what can insurance providers do to earn your loyalty for your auto insurance needs? Ranked 1, 2 or 3. N=528.
Approximately 64 percent of millennials expect that the loyalty programs they belong to are tailored to their preferences. Specifically:
Attitudes and expectations around loyalty programs are changing. Consumers are no longer expecting a transactional program (e.g., getting points based on spend); they want tailored offers and personalized experiences as part of their loyalty programs. (Forrester’s Consumer Benchmark Survey, 2023)
Building emotional loyalty through ecosystems and personalized experiences is impactful. While some features driving emotional loyalty rank low in preference, recognizing consumers based on tenure and safe driving habits is essential. Emotional loyalty can complement transactional rewards.
With auto insurance, U.S. consumers are looking for policy enhancements (45 percent), discounts (43 percent), and recognition (40 percent), reaching various milestones as ways to earn their loyalty.
Emotional loyalty plays a large part in consumer behavior. Approximately 78 percent of U.S. respondents would like to be recognized for their loyalty by tenure, with 65 percent of respondents wanting to be recognized for both the number of years without a claim and driving history.
Q14. How would you like your primary insurer to recognize your loyalty? Ranked 1, 2 or 3. N=600.
This preference varies by the tenure of a consumer’s stay with a provider. The vast majority (86 percent) of auto insurance consumers who have spent five or more years with an insurer want their provider to recognize their tenure versus 74 percent and 63 percent, respectively, for those with tenures of two to five years and one to two years.
These percentages were similar for home insurance consumers, with 86 percent who have spent five or more years with an insurer wanting to be recognized by tenure versus 75 percent and 57 percent, respectively, for those with tenures of two to five years and one to two years.
Impact of loyalty program increasing emotional and behavioral loyalty quantified: of consumers who feel appreciated…
(Forrester’s Consumer Benchmark Survey, 2023)
The most loyal consumers become advocates and play a meaningful role in increasing consumer acquisition through referrals. Around 61 percent of U.S. consumers surveyed are willing to recommend their auto provider to a family or friend, with 45 percent willing to recommend their homeowners’ policy provider.
Q15. Which types of insurance products would you be open to referring to a friend or family member? N=600.
Most people have not experienced loyalty programs and referrals in insurance, so they don’t have a frame of reference. As a result, the number of people who would be willing to refer could be higher for these consumers.
Consumers who are satisfied are more likely to refer others, especially if they receive meaningful rewards for themselves and those they refer. Therefore, it’s not surprising that consumers identify a monetary incentive as the most motivating factor for making referrals, preferably in the form of cash (73 percent), policy discounts (53 percent), and then gift cards (47 percent).
Q16. If you were rewarded by your property & casualty insurer for referrals, what would motivate you to refer a friend or family member for an insurance product? Ranked 1, 2 or 3. N=600.
Similarly, if consumers were referred to a P&C insurer, a monetary incentive is also the most motivating for being referred, preferably in the form of cash (66 percent), followed by free products and services (40 percent) and gift cards (38 percent).
Q17. If a friend or family member was to refer you to a property & casualty insurance company, what referral rewards would entice you to use the property & casualty product besides price and policy? Ranked 1, 2 or 3.
Loyalty and referral programs within the insurance industry are often uncharted territory for many consumers. Unlike sectors like retail or hospitality—where consumer loyalty programs are commonplace—insurance loyalty programs are less familiar to the average policyholder.
This unfamiliarity presents a unique challenge, as most consumers lack a frame of reference to better understand these programs and how they can benefit from them. Insurance companies have the opportunity to draw insights and inspiration from established loyalty programs in other industries, including credit cards, hotels, and casinos.
Adaptation and tailoring are critical here. What works in one industry might need modifications to align with the specific dynamics of the insurance sector.
But by looking beyond the boundaries of their own industry, insurers can gain valuable perspective on evolving loyalty strategies.
Loyalty is not something gained overnight—it requires a continual effort to build trust and support with your customer base every day. Customer loyalty is a continuous journey, requiring dedication and a modern approach to remain competitive. To thrive in challenging economic times, insurers must prioritize loyalty and referral programs.
Whether you already have loyalty and referral programs in place or are considering launching one, Publicis Sapient is here to help you. We have experience helping clients launch new loyalty programs in as little as six weeks, with a test-and-learn approach that maximizes speed to value. Our expertise can help assess and enhance your existing initiatives for maximum impact.
This is especially important in navigating certain challenges, such as building awareness for your loyalty and referral programs, which should be added to marketing campaigns to prospects as well as outreach to existing consumers, all with personalized messaging and offers. In addition, the different regulations in each state mean that certain variances will need to be incorporated into the program design and implementation.
For those without existing loyalty and referral programs, now is the time to consider their implementation to strengthen customer relationships.
Remember, improving customer satisfaction and loyalty is attainable by recognizing tenure and providing value-based incentives. Don’t hesitate to reach out to Publicis Sapient to explore the possibilities and secure your place in a competitive insurance market.
YouGov administered the survey among 600 American consumers who currently have Auto and/or Home Property and Casualty Insurance policies. Conducted in November 2023, the purpose of the research was to enable a better understanding of what consumers value in digital commerce experiences. This data is intended to help businesses evolve their digital commerce experiences to keep customers, attract new business, build revenue, drive loyalty, and foster customer lifetime value.
To learn more about how to incorporate a seamless loyalty program strategy, please contact:
Mike Chiaramonte
Senior Principal, Strategy
mike.chiaramonte@publicissapient.com
Brian Landau
Associate Managing Director, Strategy
brian.landau@publicissapient.com
Publicis Sapient is a digital transformation partner helping established organizations get digitally enabled, both in the way they work and the way they serve their customers. We help unlock value through a startup mindset and modern methods, fusing strategy, consulting, and customer experience with agile engineering and problem-solving creativity. As digital pioneers with 20,000 people and 53 offices around the globe, our experience spanning technology, data sciences, consulting, and customer obsession—combined with our culture of curiosity and relentlessness—enables us to accelerate our clients’ businesses through designing the products and services their customers truly value. Publicis Sapient is the digital business transformation hub of Publicis Groupe.
For more information, visit publicissapient.com
© 2024 Publicis Sapient Corporation