Many insurance providers are falling well short of the cross-selling opportunities available to them. This was shown by a survey conducted by Simon-Kucher: Although nine out of ten customers would prefer to purchase all their insurance policies from one provider, efforts to foster customer loyalty are lacking.
Attracting new customers costs a lot of time and money. It’s easier and 3 to 5 times cheaper to expand business with existing customers. This piece of advice is no less relevant to the insurance market, but many insurers still haven’t tapped into this potential yet.
There are regional differences though. In Germany, a Simon-Kucher survey showed just 26 percent of all customers have purchased their insurance in a bundle from a single provider. In other regions like the Nordics, the number is much higher, at around 60 to 70 percent.
Across markets, however, it’s true that large cross-selling potential exists. Insurance firms aren’t necessarily good at cross- and upselling to their existing base. They tend to forget customers once they are onboarded. Eight out of ten customers never buy another product after the initial sale.
Tapping into the enormous cross-selling opportunities
The potential here is immense. In the survey, 91 percent of insurance customers stated they would consider purchasing all their policies from one provider – as long as the offers meet their expectations. This means insurers could increase their cross-selling potential among almost all their customers. What’s more, age seems to make virtually no difference, since young people are no less willing to bundle all their insurance policies together with one provider than older people.
Retaining customers from a young age
Nonetheless, age is crucial to figuring out when in the customers’ life the insurers have the best chance of attracting and retaining them. The survey shows that customers have purchased most insurance products they need by the time they are 35. That’s why customer loyalty efforts should begin when the customer buys their very first policy. That policy is usually connected to the first car the customer owns. Statistically, motor vehicle insurance is the most common insurance product for customers to buy first. This shouldn’t be surprising since car insurance is mandatory for anyone who wants to drive their own car.
Paving the way for the customer
When the customer buys their first insurance policy, it’s important for the insurance provider to lay the foundation for another sale soon after. Ideally, more than one product is sold in the first meeting with the customer. Some customers are then prepared to consider insurance for other areas of their life beyond the product they were originally looking for. Even if most customers don’t want to invest too much time in the matter, it’s possible to find out a second specific need in that first meeting and give the customer an idea of the product. If the customer doesn’t want to sign for the insurance straight away – for example, because they want time to consider their decision – it’s a good idea to schedule a meeting to follow up shortly after, during which they can hear further advice and a sales pitch. This increases the chances of not one, but two insurance policies being booked in the first month of the customer relationship.
Because so many people want to bundle all their policies together with one provider, insurers have the opportunity to attract the customer for the long term across multiple insurance areas. To this end, they should push for customer loyalty once the first insurance policy has been sold. This requires the provider to take root in its customers’ day-to-day lives and more closely interconnect their individual sales channels. The problem is that insurance providers often have no idea when their customers’ circumstances change. That in turn means they don’t know if customers need a new type or different level of insurance. The result is that these insurers lose business, since these changing needs represent a huge opportunity. For example, if an insured couple has a baby, the family could benefit in their new situation from term life insurance. Or if a person with insurance buys a house, they may consider residential building insurance. What’s more, if they haven’t insured their belongings already, they could take out home contents insurance to cover them against damage or theft. These are unique opportunities to offer customers products tailored to their circumstances at an important moment in their lives.
It doesn’t work without customers’ consent to advertising
Cross-selling opportunities work particularly well if the customer has opted in for promotional messages. While many insurance providers don’t have noteworthy opt-in rates following the amendments to the General Data Protection Regulation’s terms, there are several companies that have since made great progress in this regard and now have good rates of consent from customers. There are several sensible ways of achieving this – for example linking relevant content to an opt-in. Insurance brokers should also remember whenever they speak to customers to ask for their consent to be contacted on the preferred channels in future. This allows insurers and brokers to conduct sales activities using traditional communication channels like telephone and email.
Keeping up to date with the customer
It’s generally good advice for insurance providers to become companions to their customers through every stage of life. This requires insurers to be agile and stay up to date with the customers. To do this, it’s worth making fixed sales and other sales activities more interconnected in a digital setting. Often, the sales division doesn’t hear anything about changes in a customer’s life because the first point of contact with prospective customers is usually digital. Customers who want term life insurance or home contents insurance look on the website first before they call an advisor. What’s more, they usually reach the company’s website through a link on a comparison site or search portal. That’s why any direct interaction with a prospective customer is a valuable opportunity for an insurance provider to identify customers’ needs and specifically address them. This also applies to insurance brokers that want to expand their business with existing customers. As the survey showed, the more insurance policies a customer has, the more likely they are to buy additional policies from the insurer they already have a relationship with.
Cross-selling – The holy grail of the insurance industry
It’s no secret that barely any insurance provider is satisfied with their rate of cross-selling. But looking at the market shows how important it is to develop the assets the company already has and not just push for more business with new customers. Nonetheless, acquisition costs per new customer have been rising for years. What this means is that relying on new customers to grow is becoming increasingly expensive. Even direct insurers that have always concentrated on acquiring new customers are increasingly turning their attention to cross-selling.
Successful cross-selling – At the center of all processes
The reasons why cross-selling isn’t working optimally are different for each insurer, and they must be analyzed and understood individually to find an appropriate solution. Common reasons include unclear allocation of responsibility for results, treatment of cross-selling as a minor issue in day-to-day sales, and a lack of structures for handling existing customers.
The clear success factors that show up in Simon-Kucher’s projects with top cross-sellers include unambiguous allocation of responsibilities for cross-selling within the insurer, data-driven success monitoring, and transparency regarding use cases, touchpoints, and triggers in the company itself. Accordingly, it’s crucial companies make cross-selling a focus across all divisions and don’t let it fall through the cracks.
The service is decisive, not the price
What’s interesting is that the price doesn’t necessarily matter most to the customers. Simon-Kucher’s survey showed that for 85 percent of customers who would bundle all their insurance policies together with one provider, the price is not the deciding factor for which provider they choose. Instead, the deciding factors are simplicity and the quality of service.
If insurers want to make the most of their potential for customer loyalty and cross-selling, they must reimagine how they advise customers, recognize their needs, and address them. It’s important for product characteristics to be communicated with a focus on their relevance to the customer. This gives them the chance to maintain customer loyalty, significantly expand business with existing customers, and make use of previously untapped growth potential.
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