INSURANCE COMPANIES & BROKER PROCUREMENT
In an increasingly competitive market, client retention and new customer adoption is becoming ever more important. Historically, high customer retention rates consistently and positively correlate with high profits. In any industry, the top five companies have a 93%-95% customer retention rate, in contrast to the average customer retention rate within the insurance industry of 84%.
Over the years Insurance providers – Brokers or direct insurers have tried a multitude of ways to increase customer loyalty or make their product more attractive for new prospects – high street vouchers, no-claims discounts, free gifts and so on.
ProVantage Procurement can give you a USP by working not just with you but with your insurance clients to save them money.
If, as a minimum target we save them more than your insurance premium costs then they effectively have free insurance. If we replicate this annually for them, the chances of your losing them to a competitor at renewal time will be very low.
The same Value Add applies when you’re bidding for new business – if ProVantage can work on your behalf with the potential client we will be able to save them well in excess of the proposed premiums – again creating cost-neutral insurance.
BROKER PROCUREMENT FACTS
- As a general rule of thumb around a third of a company’s turnover, (your client) – is on areas we can help with – the rest being salaries, rent/rates etc, and of course, insurance which wouldn’t be reviewed.
- Of that third, we’d conservatively anticipate at least 15% cost reductions. If you take a ball-park view of some of your client’s turnover and the projected savings, it gives an idea of how quickly achievable that first target of exceeding the insurance premiums are.
- There’s no fees attached to the model, for you or your insurance client. All we take to cover our costs is the same as we would if we were reviewing your own spend – 25% of any direct, cashable savings that ensue, agreed and signed off by the customer as banked. In the (unlikely) event we can’t save anything, there’s no cost to anyone.
BROKER PROCUREMENT EXAMPLES
- We saved a manufacturing company in Northants around £350K a year ongoing – their comprehensive insurance premiums were £35K annually
- We saved a Care Home in Hertfordshire over £1.2M – against an insurance premium of £21K
- Saved a charity in Yorkshire over £0.5M – against their insurance premiums of £14K
With changes to IPT, legislation & rises in insurance fraud premiums are continuing to rise. And with customer perceived ‘benchmarking’ so easy now via the Internet it’s going to become harder to differentiate between providers. Rather than freebie giveaways, discounts for no-claims or discounts for locking yourself in to longer contracts, we can put the premium costs straight back into your customers’ pocket.
FREQUENTLY ASKED QUESTIONS
Some Basic Facts Around Customer Retention.....
Did you know….?
The insurance industry has the highest customer acquisition costs of any industry. Historically, high customer retention rates consistently and positively correlate with high profits. In any industry, the top five companies have a 93%-95% customer retention rate, in contrast to the average customer retention rate within the insurance industry of 84%.
It costs seven to nine times more for an insurance agency to attract a new customer than to retain one.
There’s a very strong correlation between high customer retention rates and sustainable high profits.
When customers tell you they’re satisfied with your agency, there’s no statistical correlation that says they will remain with your agency. Mere satisfaction is not enough.
Referred customers have on average a 25% higher retention rate within the first three years than customers who come from any other source.
Reducing customer defections by as little as 2% per year is equivalent to cutting costs by more than 10%.
A sustained 5% improvement in your agency’s customer retention rate can double profits in five years
Why Is This Different?
Given the costs of losing customers and having to invest in finding new ones, all insurers and Brokers commit time and resources to coming up with ideas and strategies on how to keep clients satisfied. For years Brokers or direct insurers have tried many ways to increase customer loyalty or make their product more attractive for new prospects – high street vouchers, no-claims discounts, free gifts and so on. These all carry a cost to the insurer.
ProVantage will aim to save your client more than their annual insurance premium is by taking costs out of their day-to-day operating costs. This doesn’t cost you anything, it doesn’t cost your client anything but by being an informal ‘Value Add’ to your insurance package, effectively gives them at worst a cost-neutral cover; in reality will likely make them a profit well in excess of the original premiums. This will make customers considerably less likely to move at renewal time, it will make cross selling different types of cover much easier and will be a significant hook for potential new customers
How Does It Work For Your Customers?
Historically, broad brush figures show that of a company’s turnover around 30% is on spend we can relatively easily influence. Of that 30% we’d expect to reduce costs by conservatively 10 – 15%. If you compare that end saving projection to your insurance premium fees it shows how quickly the insurance cover effectively becomes ‘free’.
Having been introduced by you we’d work with your customer on their spend profile – conduct a drains-up review on what’s being spent where and by whom, then go back to them with a report on where we think savings can be made. Then, with their buy-in, give them whatever level of support they wanted to negotiate, renegotiate, tender and so on to deliver those savings.
SEE HOW PROVANTAGE CAN SAVE YOU MONEY