Unlock Higher Profits: 7 Proven Strategies to Enhance Retention in Your Insurance Renewal Portfolio

Insurance carriers face significant challenges in maximizing the value of their renewal portfolios due to inefficiencies in pricing and reliance on outdated systems. To address these issues, Quantee has identified seven strategies for enhancing customer retention and portfolio profitability.

Strategies to Improve Insurance Renewal Profitability

1. Establish Clear Business Goals and Strategies

Many insurers neglect to set distinct KPIs for renewals versus new business, leading to a lack of visibility regarding gross written premiums (GWP), retention, and overall profitability. To combat this:

• Track GWP, retention, and profitability metrics separately.
• Set realistic and measurable goals for renewal success.

2. Implement Renewal Capping to Manage Premium Volatility

Unexpected price increases can lead to customer churn. By introducing a basic cap of ±10% on renewal premiums, insurers can stabilize retention rates. Considerations include:

• Adjusting caps based on inflation and risk levels.
• Higher-risk clients may require rates beyond the standard cap.

3. Provide an Appropriate Number of Renewal Options

Offering too few or too many renewal choices can hinder conversions. A balanced approach is recommended:

• Offer 2-3 options: basic, same-as-last-year, and enhanced.
• Avoid downgrading packages compared to previous years.

4. Use Separate Risk Models for New Business and Renewals

Renewing customers typically provide more data, including claims history and behavioral patterns. Insurers should:

• Utilize distinct ratebooks for renewals and new business.
• Enhance risk prediction through better segmentation.

5. Tailor Price Tests for Different Customer Segments

While new business can benefit from symmetrical price testing, renewals require a different focus:

• Conduct tests on premium increases and bundled product behaviors.
• Test full configurations instead of individual items for improved accuracy.

6. Optimize Prices for Renewals Independently

Effective price optimization employs machine learning to balance margin and KPIs. For optimal results:

• Use different models for renewal and new business segments.
• Consider offline optimization through actuarial tools for batch renewals.

7. Be Bold in Refining Your Renewal Portfolio

Sometimes, it’s necessary to cut bad risks. If a renewal portfolio has a high cost of risk (CoR), consider:

• Implementing significant price increases, even if it leads to some retention loss.
• Securing leadership support for these critical decisions.

For a more in-depth exploration of these strategies, read the full blog from Quantee.