Customer retention top priority for North American P&C insurers: Gartner

Stronger broker relationships, IT investment, also make the list.

While strategies such as operational efficiencies and cost reduction were top of mind among P&C insurers during the past few years, they are dropping in priority for 2012. A survey by Gartner, Inc. found that customer retention was the largest priority among P&C insurers. Approximately 81% of respondents felt that this strategy was extremely important to them, far overshadowing all other business strategies, including customer acquisition (rated number 5 out of 10) and expanding relationships with existing customers (rated number 6 out of 10).

“Insurers have increasingly been looking to customer retention as a means to preserve revenue and avoid customer churn,” said Kimberly Harris-Ferrante, vice president and analyst at Gartner. “Protecting the customer base through improved customer service is key for P&C insurers, as well as helping to avoid negative brand images as consumers continue to use social media channels to share complaints and opinions about insurance companies in a public forum. Improving the customer experience and its impact on customer retention are key initiatives for P&C insurers in 2012.”

The second-largest priority among respondents was promoting and building relationships with brokers. Focus on strengthening relationships and building loyalty among the distribution channel is essential. Approximately 67% of survey respondents thought that broker relationships were extremely important.

The focus on moving from legacy assets to more modern solutions has become a priority among many P&C insurers during the past two years. The survey found that approximately 69% of respondents indicated that modern claims and policy management systems were extremely important to them, being rated as the most powerful tools of those listed in the survey that can augment and/or improve P&C core business operations.

“Taking an approach to improve core business applications through adjacent technologies (such as underwriting workstations) and those that can supplement legacy systems to fill gaps is commonplace in the industry,” said Harris-Ferrante. “We have seen an increasing number of P&C commercial and specialty line insurers seeking underwriting solutions to support complex decisioning that is done manually today without proper underwriting support or documentation. Additionally, personal and commercial insurers alike are seeking new platforms to manage product design, assembly and management in an environment outside of the policy system.”

Fifty percent of P&C insurers indicated that they were investing in modern claims and policy management systems in 2011, with an additional 31% planning on starting to spend in 2012. This was rated as the top investment area among North American P&C insurers during the two-year period, with only 19% of respondents indicating that they were not investing in management packages during this time frame.

Other technologies growing in interest include case management, underwriting solutions, and fraud tools for underwriting and claims. All four of these technologies have had limited adoption in the past, but are gaining more momentum among midsize to large P&C insurers that are undergoing core systems renovation projects. However, it is important to note that more than 50% of North American P&C insurers surveyed have no planned investment in fraud detection solutions through year-end 2012. While attention is rising, many insurers still have not developed strategies aimed at controlling fraud.

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