Customer acquisition is the most costly activity that a Life Insurer engages in. The costs incurred at the acquisition stage can be set-off only if the customer persists with the relationship for a certain tenure with the Life Insurer. Sustaining the relationship tenure, which is termed as policy persistency, therefore is a key metric that Life Insurers aim to achieve.
Unfortunately owing to various factors such as changing channel mix, not well understood product benefits at policyholder end or offerings from competition, persistency levels vary and need continuous monitoring and control mechanisms. Insurance companies have made investments to set processes and systems to address policy persistency. Some of these investments are tactical such as schemes for revival of lapsed policies while some are strategic such as outsourcing persistency efforts to BPO’s to maintain focus on the premium collections process. However the purchase from these efforts vary and at best meet average expectations.
The hypothesis for superior benefits lies in not just addressing the collections process but in identifying the right pre-collections metrics and ensuring high marks on the same. Some of the key metrics that we have come across as part of our work and experience are as follows:
Customer contactability forms the denominator of all persistency efforts. Contactability varies with the manner of sourcing of the policy. Certain channels such as online have higher contactability than say, agency where disguising customer contacts seems to be market practice in certain parts of India. Again collecting multiple contact points whether it is alternate landline numbers, email ids, alternate email ids, social identity, would always help in the long run as these would be alternate ways of reaching the customer. Connecting with customers on appropriate social forums is something which Insurers are yet to actively take up. Periodic contactability checks done via well designed soft engagement processes certainly benefit Insurers that invest in them.
Post-purchase policyholder engagement
While Insurers have defined customer onboarding processes in detail, there are gaps which require closer monitoring and redress. Primary among them being the Policy Bond not delivered to the customer even after 30 days of issue. While there can be various reasons for this lapse, the insurer could proactively checking with the customer, whether policy bond has been received can be the first real engagement driver!
There are other significant customer engagement opportunities that a Life Insurer can capitalize on in the period between policy issuance and first renewal premium payment period. Our work brings out that quarterly engagement activities have a significant predictive impact on premium payment behavior. Updates from Insurers, which are closely linked to the product purchased by the customer such as Net Asset Value (NAV) figures for market linked products or milestones achieved by the Insurer help in keeping the relationship top of mind.
In most cases, the intermediary channel which sources the Insurance policy is the only touch point for the customer with the Insurer. While intermediaries have their own objectives to meet, it is important for the Insurer to engage with them and identify and align common goals. As part of our analytical work, we have seen that channels which sustain with an Insurer typically tend to service their policyholder needs and have higher persistency levels.
The count of complaints received by Insurers are minimal when compared to the policy base. At most, the ratio would be around 0.5%. Also most customers complain under extreme stress. Therefore addressing complaints with due speed and process considerations is one of the most effective ways of sustaining the policyholder-insurer relationship. We have found that the first response turnaround time in the complaints process, has a significant impact on ensuring a sustaining relationship.
Long term benefits of the Policy
An insurance policy can be used as a collateral or can be used to draw loans against. These benefits really need to be communicated to policyholders. Once the policyholder is aware of such benefits, the objective of ensuring persistency becomes a shared one.
In our engagement with insurers, we have realized that in addition to a great product catalog, continuous engagement and education of customers are areas which have a great impact on persistency. Insurers must focus on these systematically to ensure products sold to customers are in alignment with their overall goals.