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How Customer Frustration Impacts Customer Churn

By Angela Abbott

Losing business to customer churn is a notorious challenge in the insurance space. Part of what makes this loss so difficult is trying to determine why your former policyholders are leaving – an investigation almost as frustrating as the churn itself.

There are a few common reasons for customer turnover, some of which are out of your control as an insurance provider. But, fortunately, one of the primary drivers of churn is something that your organization can actively address and impact: customer frustration.Just as it sounds, customer frustration means the policyholder is unsatisfied with the experience their insurance company has provided. While it might be easy to blame policy offerings or rates on this negative experience, most often the policyholder is frustrated with the customer service they have received. That can mean a negative person-to-person service, or a negative experience with any technology or tool a policyholder might use to interact with a carrier.

Some new data shows that 59 percent of consumers in the US will walk away from a brand or product after several bad experiences. 17 percent of consumers will walk after just one bad experience. That means you only have a few opportunities (at most) to provide a satisfactory customer experience (CX) and retain your policyholders. Not to mention that in the insurance space, there are even fewer contact points with policyholders, and each one of those CX touchpoints can impact critical premium payments.

How do you define a “bad” customer experience?

There’s no universal definition of a “bad” customer experience – there are countless unique factors that make up each policyholder experience. However, when it comes to electronic bill payment and presentment (EBPP), we’ve identified a few red flags that tend to indicate a bad user experience:

  1. If the payment platform has a clunky interface, it could deter policyholders from making online payments. Insureds are more likely to choose self-service options if the payment interface is simple, intuitive, and user-friendly. 
  2. Poor customer communication, which makes it difficult to properly engage your customers. Without clear, engaging communication, it's markedly more difficult to drive e-payment adoption rates.
  3. Limited payment options -- and, you guessed it, fewer options means lower adoption rates and higher customer frustation.
  4. Finally, if the technology is outdated (or difficult to update), you're not just providing a difficult experience for your policyholder, but you're creating more strenuous work for your own team. 

These red flags are shortcomings you can identify and control – but don’t forget about the aspects of a customer’s experience that are just out of frame. It’s impossible to know, for instance, what external stressors are contributing to your customer’s frustration. You may also be missing some critical feedback without even realizing it. Not all customers complain, so it’s possible that customer frustration levels are much higher than they appear.

Why is improving the customer experience important?

The importance of retaining policyholders cannot be understated. Customers are the lifeblood of your organization, and it’s business-savvy to treat them as such. That goes double for existing clients.

Acquiring a new customer is five to 25 times more expensive than retaining an existing one. Research has even shown that increasing customer retention rates by just five percent can increase profits by 25 to 95 percent.

Bottom line: there’s value in retaining your policyholders.

Luckily, there are proven steps you can take to improve retention across the board – and you probably won’t be surprised to hear that improving your customer experience is one of the most impactful drivers of retention. Research from NTT Ltd. (formerly Dimension Data) shows that 84 percent of companies that work to improve customer experience report an increase in revenue.

The connection is clear. A positive customer experience means higher client retention, which saves your organization money and, ultimately, increases revenue.

How to reduce customer churn (and retain more customers)

So, creating a positive payment experience is critical for reducing churn, retaining policyholders, and increasing profit. Great – but how do you assure that your customer experience is working in your favor?

For starters, consider conducting a customer experience audit. Put yourself in the insureds shoes and experience the process from their point of view. Ask yourself (and your team): what’s it like to pay a bill with your organization?

Write down the steps you come up with then identify the major roadblocks along the way. Ask: at what points in the process were you frustrated? Where do you think payers are likely to abandon the process?

Finally, work to simplify those problem areas. This is best done by finding a partner that will help you simplify the payment process to improve self-service, reduce frustration, and decrease churn.

Beyond a CX audit, there is so much more you and your team can be doing to create an engaging customer experience, much of which is covered in our free ebook, The Ultimate Guide to Customer Engagement.

Download the guide now and start developing your organization’s game plan against customer churn.

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Tags: customer churn, customer frustration

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