The level of customer engagement and customer interaction with a given product are currently two extremely important factors that contribute to success in almost any industry. This is why numerous companies are trying to implement models in which customer loyalty is rewarded and thus the relationship between the customer and the brand becomes effective. A large portion of these models are based on modern technologies, which create new communication channels between companies and customers, intensify existing ties and make it possible to customize the product portfolio.

With motor insurances, the insurance sector is among the industries that make good use of modern solutions in terms of customer engagement (i.e. the interactions between the product and the customer). This article will focus on how insurers achieve this exactly.

This is the right article for you if you want to find the answers to the following questions:

Why is customer engagement particularly important in the insurance industry?

How can we encourage customers to interact?

What are the business benefits that customer engagement can generate?

The customers of the insurance market face many problems, and the benefits of purchasing insurance products are usually postponed or not noticeable at all. It is, therefore, no wonder that most customers treat motor insurance as a kind of “tax” which they are simply obliged to pay. Clearly, this attitude makes it more difficult to deepen the relationship between the insurance company and the customer.

Some of the most frequent problems indicated by buyers of insurance products are: lack of an individually tailored offer, long waiting times for claim considerations, conservative circulation of documentation, lack of bonuses or incentives to invest in insurance products.

As a result, customers usually have little trust in insurance companies and their relationships are typically negative. This, in turn, translates into very low customer retention and serious financial losses. Analyses indicate that some companies may lose more than 10% of their customer base each year. At the same time, acquiring new customers is typically five times more expensive than maintaining existing ones. What is more, the insurance industry is characterised by very low margins. All of this means that customer retention should be of vital importance for insurers. This is just one of several reasons why insurance companies should — or even need to — systematically build better customer relationships.

What is the purpose of customer engagement?

1. Finding low-risk customers

By encouraging customers to interact with the company more and more, we obtain ample information about their behaviour and expectations. This obviously provides us with a powerful tool to assess if a given customer is worth retaining or if they pose a threat to the insurer’s financial results. Finding a group of low-risk customers is one of the main reasons for building customer engagement.

Insurance products based on telematics solutions (such as UBI — Usage Based Insurance) are often used in this context. On the one hand, they allow customers to prove they belong to the low-risk group. On the other, customers’ safe driving allows the insurer to lower motor insurance premiums. This brings benefits to both parties — the insured pays less for their insurance while the insurance company gets the loyalty of a low-risk customer. At the same time, a customer who already obtained various types of bonuses based on their safe driving is highly unlikely to be willing to prove their worth at another insurance company.

1. Extending the current customer base

Apart from attracting low-risk customers mentioned above, insurance companies can also attempt to acquire new customers from Generation Y, or the so-called Millennials.

Millennials are people aged between 13 and 34 who constitute one-third of the world’s population. It is a group that receives more disposable income every year, which means it is characterised by constant growth of purchasing power. That is why insurance companies are attempting to convince this group of consumers to their products.

One way to get Millennials’ attention is by using modern technologies, with particular focus on the gamification strategy. As this group of consumers has had constant access to computers and mobiles services throughout their lives, insurance companies must use state-of-the-art technology to communicate with them. Telematics is one obvious solution. We must keep in mind that engagement in the product and brand identification strengthen the position of a given company when competing for attention in this consumer group.

1. Cross selling and brand awareness

A customer intensively engaged in the interaction with a product opens up new communication and sales channels. Insurance companies can take advantage of this by collecting user data related to their location, behaviour on the road and vehicle usage frequency to offer many interrelated services in the cross-selling model. Apart from that, frequent reminders about the product with the use of mobile applications raises brand awareness and influences a customer’s purchasing decision.

This obviously increases the insurer’s financial results and provides the possibility to select appropriate products based on the customer’s needs. New, well-prepared marketing strategies can be developed to mitigate risk of loss and invest company resources effectively.

1.  Safety on the road

Increased customer engagement has a positive influence on the driving behaviour as well. It helps constantly improve driving performance and reduce the risk of accidents. In turn, this improves road safety, which is beneficial for both the insurer and entire society.

How can we make the customer engaged?

1. Daily updates and hints

One way to constantly remind the customer about a product is to come up with daily updates. In the case of UBI systems, this could mean sending statistics related to the number of kilometers driven or the time spent behind the wheel. We can also send notifications about discounts, marketing campaigns, or special actions in which the customer can get involved.

In addition to a standard newsletter, UBI systems can provide their users with precise, personalised tips about their driving style. Hints on driving skill improvement may be interesting for the customer and can contribute to building a positive relationship with the insurer.

2. Gamification

Another equally interesting way to engage a customer is gamification, i.e. mechanisms known from computer games used to change customer behaviour in non-gaming situations. One example of this is rankings and challenges between users based on their driving style. Users can compete for the highest place in the ranking by sharing their achievements and scores in social media. They can also win various kinds of prizes.

Knowledge and experience — creating telematics systems with a technology partner

At the initial stages of creating insurance products based on telematics, it is important to design solutions which maximise customer engagement and allow the insurer to measure and capitalise customer behaviour. To that end, insurance companies should choose a technology partner that has not only technical expertise but also commercial experience. Such a partner will be able to support the customer at every stage of the project.

Sparkbit helps companies around the world create advanced telematics systems tailored to the requirements of a specific partner. We are always focused on the needs and expectations of our customers, which is the best way to ensure that the companies we support succeed.

If you want to know more about how we help companies build engagement and gain new customers, please familiarise yourself with our portfolio.