Mind the Gap
Underwriters today are constantly challenged with making the right risk selection while confronting the pressures of pricing, retention, competition, and expense management to improve profitability. Amongst the key growth drivers, the customer retention rate correlates positively with high profits. Acquiring a new customer is anywhere from five to 25 times more expensive than retaining an existing one. While the top-performing insurers have a 93% - 95% retention rate, the average for the industry is just 84%. Guidewire estimates that just a one-percent improvement in the retention rate for a $500 million auto book of business results in $4 million in annual savings.
On a recent visit to London, while traveling on the underground, I was fondly reminded to mind the gap between the train and the platform. Similarly, insurers are aware of the above statistics and want to mind the gap to improve their customer retention rate.
Yet many insurers fail to improve retention rates for various reasons — they engage with customers too infrequently, sometimes just once a year at the time of renewal, or they struggle to access the appropriate data, empower frontline personnel to make smart retention decisions, or fail to measure the effectiveness of retention actions.
Guidewire Predict offers a solution to improve customer retention and accelerate growth through a four-step systematic and scientific process.
1. Leverage insights from internal and external data. Insurers already use the data from the core and adjacent systems (premium, claims, billing, CRM, customer interaction, surveys, etc.) for advanced modeling. Augmenting this data with external third-party data results (purchase, spending habits, prior violations, demographic, and firmographic) in improved model lift and accuracy.
2. Build a predictive model or bring your own. The next step is to build a model using the variety of machine learning techniques and algorithms supported by Predict. Predict can also import and use models built in popular third-party languages and applications such as R, Python, and SAS. The model is then operationalized and the predictive insights are embedded into Guidewire PolicyCenter with configuration.
3. Take customer-specific retention actions. Once the modeling solution is put into production, frontline personnel can take customer-specific retention actions that balance retention likelihood and customer profitability. These actions also help improve customer satisfaction as the insurer is engaged with the customer throughout the policy lifecycle and not just at renewal.
4. Measure business impact and adjust, as necessary. Predict performs continuous model health checks and assesses performance with real-time audits. In addition, new visualizations can be developed to monitor key metrics in real-time. Predict can also test and compare model performance before rollout with A/B testing.
Guidewire will deploy the insurer-specific retention solution in eight to 10 weeks. Contact us to schedule a meeting today to learn how the Predict: Retention Solution can help mind the gap (i.e., keep the best customers and boost the bottom line).