Buying or renewing car insurance is no longer a simple task for motorists. And for insurers understanding the increasingly complex purchase journey is critical to maximize sales and customer retention. We have carried out extensive research into the purchase journey of UK car insurance buyers and we’re sharing it in a series of articles - click here for Part 1: The Research Phase and Part 2: The Role of the Brand. Here in our third article we look at the conundrum of auto-renewers. Does automatically renewing your insurance make you loyal - or not? Our research shows that 69% of car insurance buyers stay with their existing provider. Insurance providers could be forgiven for seeing these people as loyal customers. However, this is a risky conclusion.
It starts with the renewal letter When a policy renewal letter is received with a premium increase, people are more likely to conduct online research and to search more extensively. Customers who receive renewal increases conduct 40% more online research sessions compared to those who don’t receive an increase, spend 36 minutes research time compared to 20 minutes, and visit 6.3 separate websites, compared to 3.9. However, a minority (11%) will renew with their current provider despite a premium increase, so clearly price isn’t everything for these people. Understanding price sensitivity can help providers fine-tune premium models to optimise customer retention and reduce churn.
Profile of an auto-renewer Our analysis of the purchase journey shows that more than half of renewers (60%) also conduct online research. While they spend less time carrying out research compared to switchers, they still spend more than 20 minutes in this activity, typically in more than four separate sessions. These four separate occasions are perfect opportunities for other providers and price comparison sites to divert customers from their intention to renew. So if insurance providers categorize these renewing customers as loyal, and fail to act to engage and reassure them, they run the risk of losing them.
What are the characteristics of the purchase journey of a renewer? They are most likely to have a search engine as their first point of call; they request far fewer quotes than others, and their journeys are likely to use different sources simultaneously. Our research suggests this is because they are busy checking that their renewal premium is fair and competitive, rather than actively seeking alternatives. Renewers are often suspicious that new customers are getting better deals. They use a variety of sources for ROPO (research online, purchase offline), a tactic frequently employed to give them the comparative rates they need to haggle over their renewal rate with their incumbent provider.
Watch the video to see the example purchase journey
Inertia, fear of change, and overwhelming choice don’t suggest loyalty Staying with a more expensive policy does not necessarily indicate brand loyalty, and nor is it irrational behaviour. Consumers are influenced by much more than simple economics. Other factors we’ve identified in our research include inertia (expected savings are not perceived as worth the effort), status quo bias (avoiding risk of the new), or they may simply be overwhelmed by the choice and difficulty of making comparisons between policies.
In summary In a highly competitive and price-sensitive marketplace, insurance providers can’t afford to be complacent. All car insurance purchase journeys have one thing in common: everyone is researching other offers looking for the best deal – whether they plan to stay with their current provider, or are prepared to move. In the case of renewers, ROPO is used to check that are not losing out by being loyal. Providers need to arm themselves with accurate information on consumer behaviour and attitudes about all aspect of the path to purchase if they are to succeed in this cut-throat, competitive environment.