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Post by manatee on Nov 16, 2016 13:04:46 GMT
I don't think motor insurers have much choice but to join in this game, but some choice as to how aggressively they play it.
An insurer that "played fair" would have to set premiums somewhere in between the competitive new business quote and the rip-off renewal. consequently they would find it difficult to pick up new business. Attrition might be lower, but they would likely end up with a declining base.
It doesn't feel fair to customers though - it's a penalty rather than a reward for loyalty. Of course that happens with everything, but it's more obvious with insurance.
LV don't seem too bad. They have been competitive on renewals for a couple of years now on the Roomster and the Outlander - the last Outlander quote was only £30 higher than their new business one but they reduced it anyway. They were well out on the MX5 but that was apples and pears really - they wanted >£200 and I put it on a classic limited miles policy for £88.
Admiral I found hard work to keep honest. I got a discount for a multi car arrangement, and on the first renewal found that they were expensive for all three even after the 'discount'.
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Post by commerdriver on Nov 16, 2016 14:52:35 GMT
It is as it should be. A company should seek to maximise its revenue and so only give a discount where it is necessary. A consumer should seek to obtain the best deal, and so make it necessary. Where's the problem? I can see where you are coming from but just a couple of comments 1 Customer loyalty has no value in this paradigm, correct? 2 What happened to the idea drummed into us a few years ago that it costs any company at least 2 or 3 times as much to acquire a new customer as it does to retain an existing one? |
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Post by manatee on Nov 16, 2016 15:07:54 GMT
In pure economic terms, a loyal customer is a mug. It was ever thus. You have to make money out of your loyal customers, you can't make it out of the promiscuous ones. Personal loyalty is different, but loyalty to a brand will nearly always cost you money.
Good point about acquisition cost. That's where the "tuning" of the renewal price comes in. The judgement is how nice can you afford to be to loyal customers.
Comparison sites and the internet have made it so easy to shop around that there is no possibility of this ending in the foreseeable future. The price at which you will get new business from the comparison sites is essentially uneconomic, so you have to charge more where the customer will bear it.
I have found the service from LV excellent, I and I suspect others will choose LV over an insurer who is £20 or £30 cheaper. Perhaps that gives them a lower churn rate and accounts for what seems to be a less rapacious approach. A problem of course with a customer service strategy is that most of your customers will never experience the service.
Some insurers such as Direct Line make a virtue of not using comparison sites, which saves them commission. It doesn't necessarily make them cheaper, they just spend their marketing budget differently. I have never found DL cheap.
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Post by Hofmeister on Nov 16, 2016 15:34:03 GMT
Inertia has its own inbuilt margin for the incumber provider. I doubt many (certainly not me) would be prepared to move for 20 or 30 quid (say 15 to 20% annual saving, so they have that as a margin PLUS minimal admin costs
However when you find out that customer loyalty incurs a 55% premium, then that, I would suggest, is cyncical exploitation guaranteed to loose that customer forever should they find out.
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Post by Deleted on Nov 16, 2016 16:38:02 GMT
Some insurers such as Direct Line make a virtue of not using comparison sites*, which saves them commission. It doesn't necessarily make them cheaper, they just spend their marketing budget differently. I have never found DL cheap. * In the UK. It was through a comparison site I found them and took out my policy. More marketing spin. You end up paying what you are prepared to pay for the product you think you want. When you claim you find out if you've bought what you think you have. |
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Post by Deleted on Nov 16, 2016 16:53:03 GMT
>>1 Customer loyalty has no value in this paradigm, correct?
Mostly correct. Not "none" perhaps, but little. Long gone are the days where a claim would be treated more sympathetically for a long time customer. Ever since the day when people began to choose their insurer at a £5.00 premium difference, then discretionary, preferential and loyal service went out the window.
>>2 What happened to the idea drummed into us a few years ago that it costs any company at least 2 or 3 times as much to acquire a new customer as it does to retain an existing one?
It depends, there is a level and its complex.
Don't forget, an insurer is constantly re-balancing and re-focusing its portfolio. It cannot do this without churn.
It may decide, for example, that it is overly exposed to middle-age crisis people. It will therefore make them more expensive. It may decide that it has insufficient young drivers, thus it will make them cheaper. etc. etc. Obviously they work at a much higher level of granularity, but the point is the same.
Much like unemployment to workforce flexibility, churn keeps their portfolio flexible.
An insurer is different in that it wants *certain* risks, not all risks. Unlike, say, Sky which wants *ALL* subscribers and thus each customer is no more than an cost of acquisition/cost of maintenance equation, an insurer is trying to target those he loses and those he gains. So for Sky churn is only bad. For an insurer it is necessary, at times essential and certainly a tool. Sky only wants to increase its base, an insurer must balance theirs.
Equally for the customer, there is very little sophistication or complexity in Sky product. Not so for the insurance product.
Also, you only speaker to an insurer when you have had an incident or they want money. There is no positive experience. With Sky every time you turn the television on you are involved in their product. This makes the customer acquisition/retention scenario quite different.
Every customer understands the Sky product. Few understand the insurance product. Again, impacting the selling/competition process.
People understand what makes the Sky product good or bad, they do not understand what makes an insurance product good or bad.
Gotta go, more later probably........................
NB: Sorry, I know this is garbled, I am sat outside some changing rooms frequently being required to find some variation on the words "that looks lovely, dear".
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Post by Hofmeister on Nov 16, 2016 17:31:04 GMT
NB: Sorry, I know this is garbled, I am sat outside some changing rooms frequently being required to find some variation on the words "that looks lovely, dear". Try "Wow your arse looks huge in that dear" I can assure you your shopping nightmare will end. |
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Post by Deleted on Nov 16, 2016 17:47:58 GMT
Along with most of the rest of my life, I'd guess.
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