It's not mad. It's about inertia- customer inertia.
Most customers are too lazy to check competitive prices at renewal time and get screwed.
You or I might think that retaining loyal and accident free customers might be a sensible way of doing business and would offer them better rates. Insurers think that existing customers are mugs and offer new customers better rates than existing ones.
I always believed that it costs a fortune to attract new custoemrs and retaining them is cheaper than losing and starting again. Insurers think otherwise..So obviously the administrative costs of marketing advertising and checking new customers are minimal compared to the costs of giving existing customers a good deal:-) And TV adverts at peak time are free andpigs fly:-)
But that's the way insurance works. A business model which encourages existing customers to go elsewhere or get screwed.. I would love to see a Business School study on it.
And then they wonder why no-one admires insurers and customer loyalty is low:-(
madf
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Worked in a brokers for 18 years.
Insurers have absolutely no loyalty to you.
Don't credit them with this character trait, just get the best deal. Then treat yourself with the money you have saved.
Sounds vaguely like a Direct Line advert.....
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There are such large variations in quotes between insurance companies that I conclude the numbers are pulled from a hat!!
--
\"Nothing less than 8 cylinders will do\"
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That all makes sense in today's competitive world, but from my (older generation) perspective, I can only express the hope that one day even companies like banks and insurance companies will see, and act on the advantages of striking a balance between rewarding loyalty and attracting new business.
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On receiving the renewal notice for the policy covering two of my cars, I ran my details through
www.confused.com
I presented the results to the insurance brokers. £400+ was sliced off the renewal price to match the lowest prices on the confused.com list.
I had done comparative checks among half a dozen companies on this policy on two previous renewals, but found it to be competitive. I'll be using confused.com in future.
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>>will see, and act on the advantages of striking a balance between rewarding loyalty and attracting new business.
You'd think there would be some, wouldn't you. But there mostly aren't any advantages.
Lets assume that a company would like to have 100 customers. They have 100 customers, but each year they lose 10. So they want to make sure that either they don't lose the 10 or that they get a new 10.
So firstly they will analyse their losses.
Bearing in mind that;
-they will wish to constantly tune their portfolio. e.g. Car X driven by drivers Age y is costing them a fortune so they deliberately will price themselves out of that specific market.
-some losses will be unavoidable - people die, leave the country, stop driving, sell their car, fall out with their insurance broker, marry an insurance broker, whatever.
-then there is a portion that they lost, which they would have preferred to keep, but went somewhere else cheaper. - what do you suppose out of the 10 ? 3 ? Lets suppose its three.
So in order to retain those three, they will have to drop their prices on the whole 100 including those that they don't wish to keep. So they will discount 90 policies to increase the count to 93, which is still short of what they want.
Or, they just accept that they will lose all 10. Then they offer a whacking great discount to new business. This discount is so good that they get 10 new policies. Now, not only are they at 100, not 93, they also retained the original 90 at the higher premiums.
Of course its is more complex than that what with the cost of acquisition, customer relations, reputation and perception, etc., but that's basically how it works - They don't want too much loyalty. They do want new customers. They do want to lose some. As was said above, you should treat them the same way.
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All this explains perfectly why the initial quote is higher than for a new customer but surely this is irrelevent once you have phoned up and asked them about this - they would not need to discount all policies, simply discount yours in order to retain you.
In cases where you are going to cancel and re-sign up again, surely its worth doing just to save the admin costs. Bizarre insurance companies.
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The amount of times I had to go through the faff of starting a new policy with the same insurer to get the best price for a client makes me weep.
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surely this is irrelevent once you have phoned up and asked them about this - they would not need to discount all policies, simply discount yours in order to retain you.
Then it gets into the newspapers that all that is required is a phone call. Then, rather than the 10 people you suddenly get all 100 calling you, even those who were previously quite happy.
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Have been with the same insurer Zurich since 1955,maybe I am paying more than some others but they have always come up trumps when needed and I find peace of mind on that score worth it.
ndbw
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I admire your loyalty.
The tragedy is it will never be repaid.
Service levels are set and everyone gets the same.
If you do reach the stage where you feel you are paying to much and say you may go elsewhere, they will let you walk. No discounts, no favours and no repayment of your loyalty.
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And they might complicate the issue by delaying or refusing to provide you with proof of your 'no claims', unless of course you a renewal notice to show.
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interesting stuff ...
ok, I accept I am out of date and idealistic, or should that be naive?
irony is, I work in PR, and clearly, image and reputation protection/perception is not an important issue for such organisations.
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Crazy isn't it.
You are the type of client they should be falling over to keep and bend the rules to give you a bit of discount as and when to keep you happy. Sadly, it does not work that way anymore.
Working in broking and dealing with insurers was such a demoralising experience. Like political parties, they had focus groups, seminars re keeping clients/customer service etc, etc but at the end of the day my experience showed me this was window dressing and they only ever cared about the bottom line and pink fluffy dice everyone else.
Two things spring to mind:
1) The firm that likes to quote you happy arranging a seminar re keeping clients as this is the cheapest client to maintain and the most profitable and then adopting policies that half the time made it more difficult for brokers to keep clients for example quoting different rates all over the place despit insisting that rates would not vary by more than 10% to keep a sensible and stable market.
2) A firm that will remain nameless insuring a person for three years and then pulling my agency for 12 months because they had a large claim and the insurer had lost money on our account that year. The fact that every year and if you stripped out this claim the relevent year also they made stacks from us was irrelevent. We had cost them money and we had to pay. You can liken this to any group of car owners costing them money...they will be punished. Oh and the claim? The neighbour of our client went through the roof space of the terraced house they lived in, dropped down through the loft hatch and stole the keys to her car. He then drove it and hit a motorcyclist. They reserved £100,000 for the claim, but three years later had still not paid a penny. How this bizarre sequence of events was our clients and my fault I will never know!
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in case anyone's interested in the result, I went on-line to MoreThan, intending to cancel poliocy and come in as "new customer", saving £60-ish. But had prob with site accepting my valuation, so rang 'em. Went thru whole rigmarole again, complained bitterly, was put thru to "Retention Team" (yes, I kid you not) and eventually agreed to half-way-house figure between what renewal by "dealing with human beings" cost and on-line-new business discount figure.
They got my business, but goodwill ... never.
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Thanks for the tip but I'm going for a lie down now. I remember now why I've stuck with Direct Line for zillions of years;
"when did you pass your driving test" - a very long time ago - oops that's not a drop down
"what is you car worth" - less than I think
"what is your occupation" - I typed in IT 'cos I work in IT and I got "Itinerant". Put me in my place. I fancy "hedge layer". "Knitter" sounds quiet and harmless. What does "personality" mean ? I obviously don't watch enough television.
Then there's "registration is invalid" - Oh ! you want it with no spaces do you ? Not to mention the slow server. Zzzz.
John
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