Rate increases; the most debilitating piece of the personal insurance puzzle

Incomplete draft from March 15, 2015.  I could write this post, with very little variation, this week as well. That is a massive failure.  Adding any more to it would be a waste of time.


The setting; a longtime customer is hit with double-digit rate increases two years in a row.  First year can be absorbed but by the second they have had enough.  The end result; YOU keep the customer.  That is the goal right?  Find a group of people who trust you and keep their business with you as long as possible.  What happens?  His $5500 premium drops to $4200.  Yes, scary.  In that he decides to save some money and drops an umbrella.  We also move a child onto their own.  So where is the fail?

Well, he now is not a fan of the former company because he feels mistreated.   The former company loses him and also loses his sons household.  They lost the other son two years ago.  So now you are down three households.  Call it six policies but it is really nine.  Fortunately, you only cost me one household I managed to keep the other two.

But Billy, you lowered the premium they are paying didn’t you lose money?  You can make a case I did in the short term but did I really  I didn’t have to go find a new customer which is good.  I stood tall on the promise of taking care of the people who trust me which is good as well. With some technology that is not quite here yet the perceived loss will be even less.  But where does it start?

Thought 1; It starts with complete actuarial assessments.  Someone in their big home office made some mistakes.  Like the rest of the industry, they think most customers are dumb and lazy and treat them as such.  They are most certainly not and buying patterns have changed.  They think that customer needs them because their product is good.  It’s not, you are very close to being a commodity.  Most things you market are never used by a customer anyhow.  Remember, if they use that new add-on they don’t need they’ll likely be penalized. Maybe it is because they are so focused on the short-term and operate in a “silo”   I think this may be it.  See the underwriters and actuaries apparently are not in communication with the marketers.  They also are likely not likely listening to the actual people bringing them the business.