The hidden key to reducing customer churn in Insurance? Reduce your customers’ effort


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How setting up a Customer Effort Index can radically increase Top-Line Revenue

We’ve all experienced one of the greatest paradoxes in the insurance industry – encouraging customers to be disloyal. Whether it’s offering an existing customer much higher renewal levels while dramatically reducing offers to others to encourage them to leave their existing supplier, or simply not having the appropriate channels by which to enable a customer to communicate with customer service.

Companies must radically re-think the rationale for customer service spend – it’s not about reducing your customer service costs, it’s about stopping and not encouraging customer churn, and having a positive impact on your top-line revenue.

Watching the churn

Companies are certainly adept at chasing new customers while watching the churn – why else would they spend around $500B on advertising and acquiring new customers, $50B on CRM spend, and just $9B on the call center (Ovum)? Companies offer new customers price incentives, free service, unlimited this and that, while often leaving existing customers on the receiving end of poor customer service – and so the churn continues.

But no consumer really wants to change supplier – be it bank, insurance company or mobile phone network. Rather, customers feel forced to change. Why? Because they are dissatisfied with their service. And a common misconception is that customer dissatisfaction is not recognized as having a real impact on a company’s top-line revenue. But retaining satisfied customers can have a huge impact on top-line revenue.

Building loyalty is easier than you thought

The Insurance industry in particular spends a lot of money and effort on advertising services, offering lower costs, honoring existing no-claims bonuses – all of which results in increased incentives to consumers to change supplier.

Often, the contact center is seen simply as a way of reducing the cost of customer service and not one of reducing customer effort which can directly impact revenue. But the insurance industry is a prime example of where good customer service can transform a cost into a revenue generator and in fact help insurance companies keep clients and even sell more services.

So how can your contact center help you keep clients? Loyalty has more to do with delivering on basic promises than it does with top-end service excellence. It is all about making it easier for customers to do business with you; in other words, reducing the customer’s effort. Increasing customer effort not only decreases customer satisfaction, but more importantly, decreases both customer loyalty and potential increased spend. And it’s easy for dissatisfied customers to look elsewhere for the same product.

Build your individual Customer Effort Index

In examining your customers’ effort, it’s not just the number of events that are significant in scoring, but that some events can have a multiplier effect on the impact to the customer. So it’s important to not only count the events, but to also weight their impact based on how it affects the customer.

This will generate a Customer Effort Index that can be used to assess the magnitude of the effort needed to complete the business transaction. Understanding this enables you to start to eliminate frustrations from their contact centers and use them as a positive force for revenue retention – and revenue generation.

With customer frustrations eliminated and expectations met, the impact on top-line revenue could be significant. Companies can build a happier, more loyal customer base that will stay longer, refer more and buy more.

The bottom line? Grow your top-line

Companies need to recognize that there is a distinct need to re-balance spend on acquiring new customers versus retaining the loyal customers they have already. This will mean exploiting customer service technology in order to reduce customer effort, so that customers will stay. As a result, insurance companies will no longer be chasing new customers and simply watching the churn – instead, it offers an opportunity to actually grow top-line revenue by retaining a loyal customer base.

It’s worth asking yourself, whether you are managing to stop the churn by promoting customer loyalty and retention. As a result, have you seen any improvements in top-line revenue from cultivating your existing customer base?


  1. How many times have you, as a consumer, avoided going through the frustrating process of getting a new cell phone service provider, insurance agency or something like that simply because the hassle and frustration of poor customer service was less hassle than the actual switching. That is no way to keep customers! You don’t want customers that stay with you because they have to; you want to make them want to stick around!


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