Proactively increase retention by predicting which policies will churn in the coming policy term.

Overview

The Property and Casualty Insurance industry has historically faced significant challenges in retaining existing customers. The market’s competitive nature means that policyholders often switch to competitors for better pricing, showcasing the critical need for improved customer retention strategies. With minimal new customer acquisition rates, retaining the existing user base becomes paramount for maintaining business profitability and market share.

Problem Statement

Despite significant efforts in precise risk assessment and competitive pricing, many insurers face a high churn rate, with policyholders frequently switching to competitors for an average 20% price reduction. Current retention strategies are mainly reactive, relying heavily on historical KPIs without actionable insights into which policies are prone to churn in the future.

Solution Overview

Generative AI solutions can transform customer retention strategies by enabling insurers to predict which policies are at risk of churning in upcoming renewals. These AI models analyze historical data, identifying complex patterns and reasons behind past churns. By applying these insights, the models provide underwriters with a proactive approach to intervene and retain at-risk policyholders. The AI-driven predictions offer detailed reasons for potential churn at an individual policy level, allowing underwriters to tailor their retention strategies effectively. This personalized approach not only helps in addressing specific concerns of at-risk policies but also enhances customer satisfaction and loyalty.

Moreover, senior managers can utilize aggregated churn predictions for more accurate data-driven forecasting on renewals, ensuring better strategic planning. Pricing actuaries can leverage these insights to refine and enhance pricing plans, making them more competitive and appealing across various segments of the insurer’s portfolio. From a business perspective, improving the retention rate by just 1% can significantly boost renewal income. For instance, a 1% retention improvement in a $1 billion written premium book can lead to a $10 million increase in gross income. Additionally, guided actions based on model predictions can improve the overall loss ratio, optimizing the profit margins. Implementing this AI-driven churn prediction solution entails integrating the AI models with the insurer’s policy management systems, enabling seamless analysis and action on the predictions for better retention outcomes.