Over the years I’ve seen a number studies that show the expense of gaining a new customer to be anywhere from five to 25 times that of retaining an existing customer. I’ve also read a bit about a concept called the lifetime value of a customer, which also stresses the importance of building customer loyalty. So why, then, do some companies and their representatives make such little effort to retain you once they’ve got you?
A case in point: in May, we received a notice that our homeowner’s insurance was going up significantly. Enclosed with this notification was a form that we were to sign and send back to the insurer because the proposed new rate that would go into effect August 1 was $150 above the rate proposed for our type of property by North Carolina Rate Bureau. In other words, we were being asked to agree in writing to be bilked!
Naturally, we never returned that form, nor the duplicate of it that was mailed to us several weeks later. As a result, we received a notification that our insurance would not be renewed. At no time between receipt of the first notification of the big rate hike and receipt of the notification of cancellation did our agent reach out to us to explore options. As a customer and as someone who has operated a small business for over 25 years, I found this amazing. I would have thought he would have made some effort to keep the business on his books, especially since our home insurance was bundled with our car insurance and we thus represented two pieces of business for him.
We researched alternative carriers online and signed up with a new insurer for both the home and the auto. When I emailed our now former agent to tell him to cancel both policies, his response was, “I wish you had reached out to me….” He also said that he can now write insurance with several other carriers, including the new carrier we had chosen. This was information he had never bothered to share with us before.
Whose job is it to be proactive?
My reply was to ask whether it was my duty to be proactive about reaching out to him or his duty to be proactive and reach out to a customer of long-standing when that customer was being charged a rate hike so big that it would almost certainly put the business in jeopardy. His initial reasons for not being proactive was this: Rate changes happen all the time and that he couldn’t possibly respond to them because he doesn’t have an assistant and he also has to “sell new business.”
Yeah, buddy, you have to sell new business because you’re not taking care of your existing clients.
The agent also wrote that he is not notified when the carrier tells a customer their insurance will not be renewed. I said I found that incredible. Why wouldn’t a flaming red flag not have gone up that this piece of business was in serious danger of being lost? I’m not sure whether to believe that one of the country’s largest property insurers is so clueless as to not notify agents of such developments with their customers. Or was this particular agent notified and just dropped the ball? Either way, the carrier lost a customer they’d had for seven or eight years.
After this email exchange, the agent then called me to explain exactly why our homeowner’s insurance rate was being hiked so much. He also explained that there was something he could have done to eliminate the hike! Golly, maybe a call like that in May when we got the rate hike notice would have been productive!
The lesson to be learned from this service fiasco is that it is all too easy to lose a customer by not really trying.