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Your Mini-Guide To Auto Insurance Retention Rates

Your Mini-Guide To Auto Insurance Retention Rates

In an ideal world, every new customer your insurance agency signs on would stay with you forever. However, insurance professionals know this isn’t realistic. Some customers stay with you from vehicle to vehicle, while others switch providers every time they purchase or lease a new car—or just find a cheaper policy. As a result, auto insurance retention rates vary.

Everyone wants to know: What’s a good vs. bad insurance retention rate? We’ll attempt to answer that question here, along with some explanation of the factors that influence retention.

Auto Insurance Retention Rates: A Breakdown

What’s a good retention rate?

A traditional agency that’s focused on customer retention and is retaining over 90% of its customers is considered excellent. Customers are always experiencing life events that prevent even the best insurers from reaching 100% retention—they move out of state, divorce a spouse, become empty nesters, and (sadly) pass away. Beyond these legitimate reasons for ending coverage, insurers of course want to mitigate customers leaving or switching providers as much as possible.

In an agency that is hyper-focused on lead acquisition, a solid retention rate may look more like 75% or better. These agencies are buying a ton of leads, quoting a lot of business, and overall handling significantly more transactions than a traditional agency. They’re also likely selling on price, not overall value, which means these agencies are more likely to attract price-sensitive customers. Naturally, these customers are also more likely to switch when there’s a better price available.

Of course, these auto insurance retention rates are generalizations—they provide a broad look at the industry given two contexts. Every company in every state will establish its own retention norms.

For your agency, do the marketing math when considering your overall spend, lead purchasing practices, and retention rates in your geography. Also, realize that norms may shift based on market pressures and internal changes. For example, if your company takes a significant price increase, you can’t realistically expect to maintain, say, the 92% retention rate you’ve prided yourself on for the last two years.

It really comes down to keeping up with your company’s rate activity locally. If you’re a captive writer, you can ask your field leadership or sales manager for up-to-date details regarding your company’s rates.

What’s a poor retention rate?

In a normal market under normal conditions, anything less than 75% retention requires investigation. What are the potential causes of this low rate? Are there strategies you can implement to improve that number?

However, if your company has just taken on a large rate increase, hovering around 75% or slightly lower may be acceptable. Again, it’s important to keep up with your company’s retention rate norms in your state.

Using Insurance Retention Rates Strategically

Keep your retention rate in mind as part of your overall business outlook. You also need to understand what percentage of your business is consumed by customer policy lapses or early terminations—which not only results in lost revenue but also chargebacks for your agents.

Knowing these aspects can help you decide on key sales and marketing decisions, such as which marketing channels to pursue and which lead aggregators to engage. For example, say you keep close track of customer retention based on lead source. In comparing direct mail to online lead aggregators, you note the digital approach to lead generation regularly produces more loyal leads. This may influence you to adjust your spend accordingly.

A similar scenario: After some time, you might see that one lead aggregator is consistently producing leads with a 5–7% higher retention rate than the others. You can then do a value analysis to determine how to allocate your spend among aggregators—or whether to end your relationship with the underperformers.

Want higher retention rates? Consider leads from EverQuote.

High customer retention in insurance starts with high-quality leads, which you can readily get through EverQuote. No matter your growth goals or monthly quotas, with EverQuote’s suite of products, you can get all types of leads at budget levels to fit any agency. To learn more about what types of leads could help you reach your goals, click here to set up a time to talk with our experts.

EverQuote Consumer Study: Understanding Insurance Buyers

Topics: Insurance Lead Generation, Featured, Insurance Strategies

About the Author Dave Christy

Picture of Dave Christy

Dave Christy is an insurance agency owner, currently with 2 x locations in Washington State. Dave started with his current carrier in 1994 after a 3 year career with Dain Bosworth as a stockbroker in Spokane WA. Dave is the founder of Dave Christy Speaking, and speaks to audiences across the country, sharing his insurance expertise and training.

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