17 July 2019

Better Together: How Bundled Insurance Options Attract P&C Customers

Insurance bundles combine related forms of coverage for a single customer. For instance, many individual customers seek bundled home and auto coverage. Businesses may seek bundled general liability, property and loss of income coverage.

For insurers, bundled insurance policies represent additional business between insurers and customers. They can also improve client loyalty and provide a broader information base for understanding customers’ desires and underwriting risk, says Caroline Banton at Investopedia.

Customers also like the simplicity that comes with bundling insurance policies, says Stacy Johnson, host of the 2-Minute Money Manager podcast. The option to work with a single insurer for all their coverage needs represents a significant added value for many customers.

Insurance companies can leverage the benefits of bundling by focusing on the same factors that underlie strong customer relationships throughout the industry: strong communication and ease of use. When these two factors are in place, bundled policies are more likely to appeal to both individual and commercial customers even when savings are slight.

Basic Bundles: Combining Home and Auto Policies

Customers most often seek to bundle home and auto policies in order to save money. It also reduces the stress of obtaining coverage by working solely with one insurer. As a result, many insurance companies focus on selling the cost-saving aspect of bundling. This strategy ignores opportunities to add value by improving customer communication or by making bundles easier to purchase than separate policies.

Not all insurance companies, however, can guarantee that every customer who bundles will save money.

“The reality is that the insurer who can provide you the lowest-cost home insurance is most likely not the one who can offer you the lowest-cost auto insurance,” says Kyle Nakatsuji, CEO of Clearcover.

Insurers who offer bundles can still make them attractive to customers who aren’t actually saving money on one or more of the policies included in the bundle. Clearly communicating the value of bundling (saved time and improved customer-insurer relationships) can help customers embrace it.

To promote bundled insurance, many insurance companies have taken the upselling approach. For instance, a customer who has just purchased auto insurance coverage receives information about the insurer’s homeowners and renters policies, as well.

While the upselling approach can appeal to customers looking for simple coverage, it’s not always the best choice for either insurance companies or their customers, says Pat Howard at Policygenius. When bundling solely to save money, customers aren’t as focused on considering the policy itself. This makes them less likely to purchase the full range of coverage they actually need.

Instead, insurers may benefit from making bundles a primary coverage option. Instead of upselling additional insurance coverage during or after a transaction, allow customers to search for bundle options from the start. A mix-and-match purchase that allows customers to select their coverage in each policy can also add value and encourage customers to stick with one insurer.

Commercial Bundles: General Liability, Property and Loss of Income

Landlords and business owners also seek property and casualty insurance coverage. A commercial entity might seek out several policies, including general liability coverage, coverage for property damage and loss of income coverage. Insurance companies that cater to these customers can benefit from offering bundles as well.

One problem with bundled insurance, from the customer’s perspective, is that it’s difficult to tell whether the policy actually does what it needs to do until after a loss occurs, says Jeff Rose at Good Financial Cents.

“Since you aren’t using [your insurance every month], you won’t get immediate feedback about the quality of the coverage you’re buying and how it is fitting your changing needs. You won’t be prompted to buy supplemental coverage or get an entirely different policy,” says Rose.

The lack of adaptation over time can cause some commercial insurance customers to hesitate when bundling coverage. Insurance companies can address this qualm by monitoring commercial business needs and communicating at the right times.

Communicating and Bundling Across the Personal/Commercial Divide

New business owners and landlords often have a clear sense of their individual insurance needs, but don’t understand the needs of their income-generating activities. Good communication can also build a stronger relationship between insurance companies and new business owners or landlords.

For example, “novice landlords, renting out a residential property (house, vacation cottage, apartment) for the first time, may assume that their homeowners insurance will cover all the costs in the case of a natural disaster, accident or other damaging events. That’s a rookie mistake,” says Steven Richmond at Investopedia.

New landlords or new small business owners represent an opportunity to create bundles that offer the familiarity of home and auto insurance, combined with the trust and cooperation of a business relationship with the insurer.

For instance, landlords who rent out only one or two other properties may wish to bundle landlord insurance with home and auto policies, says Nathan Barber at Capterra. Insurers can attract business by emphasizing the ease of bundling landlord insurance with already-familiar policies.

When insurers leverage strong data analysis tools, it’s easier to spot customers who may be seeking to offer a rental property. By reaching out to these customers, insurance companies can demonstrate value by helping them understand their coverage needs — and strengthen the relationship by providing that coverage.

To Bundle Effectively, Focus on the Platform

Charlotte Burr, owner of the AZ Insurance Team, says that bundling boosts customer retention.

“Insurance companies, as a whole, find that customers who have more than one line of business with an insurance company tend to be more stable and tend to stick around longer.”

This long-term relationship is fostered by strong communication and ease of service. Overall, customer satisfaction is higher among customers who bundle policies with one insurer than customers who purchase policies from several insurers. Insurer communication about bundle options and benefits, however, has a strong impact on whether or not customers avail themselves of bundling options, says Valerie Monet, director of the insurance practice at J.D. Supra.

He adds that millennial customers “unbundle to receive better coverage and price more often than Boomers, underscoring the importance of straightforward communication about price, as well as the policy and what it covers.”

Customers who bundle for easier service may become frustrated and abandon the process if purchasing bundled insurance isn’t more efficient, as well. For example, Progressive struggled with its multi-product quote tool initially: Customers had to enter their information separately for home and auto insurance, even when trying to purchase both in the same transaction, says Tom Super of J.D. Power.

While insurance customer satisfaction has increased in recent years, “insurers should note that the preference for digital channel interaction has notably increased for several years,” says Robert Lajdziak, business consultant for J.D. Power. Insurance companies that lag behind on offering streamlined digital platforms for customer use may see their customers drift away to digital-native insurtech companies.

Effective bundles thus depend on the technology that supports them in order to reach customers. A streamlined omnichannel experience helps customers take advantage of bundling options, and it also helps insurance companies ensure they’re offering the right coverage to each customer, no matter how the customer’s home, auto or business situation is structured.

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