Lack of the personal touch in auto insurance sales can hurt carriers in many ways, according to a new study out this week.

The Quality Planning Corporation, a subsidiary of the Jersey City, N.J.-based Insurance Services Office, released findings this week that concluded “from high turnover rates to adversarial relationships, there are hidden costs to ever-increasing depersonalization.”

Ted Harris, research manager and one of the report's authors, said the study clearly indicates that “those insurers committed to maintaining direct contact with their customers will likely see financial benefits.”

The researchers evaluated one year of renewal data of a major carrier that embarked on a “high-touch” approach to customer interaction, and compared its claims and costs data to equivalent data from other auto insurers.

Among the findings:

o The insurer that employs a high-touch approach with its customers saw a 12 percent reduction in claims per policy the year following a phone interview, compared with an increase in claims of between 4- and 8 percent for insurers that did not take the “high-touch” approach.

o Average claim costs over a one-year period fell from $1,200 to $1,055 with a total reduction in claims over a one-year period of $4 million.

The study asserted that the nonrenewal rates in the automobile insurance industry remain generally high and companies that make an effort to build relationships with customers can positively influence retention rates.

“But, unlike other industries, not all automobile insurance customers are created equal when it comes to acceptable levels of risk,” the report said. “Some relationships are worth severing.”

With the “high-touch” approach, carriers can determine which policyholders are less than forthcoming and therefore worth letting go. “The trick is to retain the right customer while letting go of the customer who continually misrepresents risk or claims,” the report stated.

Fostering a personal relationship with customers will be critical for companies in the increasingly competitive market of auto insurance. “By improving relationships with customers, a more trusting relationship will grow, cross-selling products will become easier and retention will rise,” the study concludes.

Special Reports /

Personal Touch Critical In Auto Sales

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