Why do customers leave insurance companies? (2024)

Why do customers leave insurance companies?

The Biggest Reason Clients Leave

People are leaving the insurance industry

The hiring pool is limited for entry-level and experienced talent, with 65% of people leaving an insurance job also exiting the industry. The leading reason why employees quit is a need for more career development and advancement.

The industry says it has become too expensive to operate in California, blaming the high cost of rebuilding, growing risk from natural disasters and increasing expenses from buying “reinsurance,” or insurance for their losses, which state law prohibits them from passing onto customers.

One of the most common reasons customers leave your business is poor customer service. Customers expect to be treated with respect, empathy, and professionalism when they interact with your business. They want to feel valued, heard, and understood.

An attractive premium isn't the only grounds for switching insurance companies, so talking to others who have first-hand experience with insurance companies can provide great insight on customer service, as well as the ease of processing claims or making policy changes.

The rising cost of claims based on labor, materials, and other factors can make it challenging to offer attractive pricing to customers. But aside from that, the rise of price-based competition has only increased alongside the internet, which has given insurance organizations a wider reach.

GEICO eliminated 2,000 positions and Liberty Mutual cut 850 jobs. From big brands to insuretechs like Hippo that laid off roughly 20% of its employees, the cuts are undeniable. CEOs cite several drivers behind their decisions, from restructuring to improving efficiency to automation to re-evaluating product offerings.

Legitimate Denials

People have successfully fooled insurance companies into paying out for false injuries, so these insurers are often paranoid about paying out for a false claim.

Insurers are retreating from markets in hurricane-prone North Carolina and western states like Oregon, Colorado, and Arizona that have struggled with increasingly frequent and destructive wildfires in recent years.

The most common way life insurance agents make money is through commissions. Generally, agents receive front-loaded commissions of 40% to up to 115% of the policy's first-year premiums, although the figure for renewals falls steeply to about 1% or 2%.

What do you say when a customer is leaving the company?

Though you can count the reasons why your customers leave on the fingers of one hand, the major cause is but one — poor customer service.

NFU Mutual has been named the best insurer for customer experience in new market research by Insurance Data Lab (IDL).

There are very few situations when switching car insurance is bad, which is why many motorists change providers each year. Yet if you're satisfied with your current rates and the car insurance coverage and customer service you're receiving, you can stick with your current option.

Common reasons for canceling a policy include excessive claims, a DUI conviction or nonpayment of premiums. You're more likely to be dropped after a claim or face non-renewal if you're a high-risk driver.

Failure to work hard is one of the top reasons people in this industry want to call it quits. While it's true that this job isn't easy, it's also true that it can be very rewarding when you allow it to be. As an insurance agent, you have daily opportunities to change your clients' lives for the better.

Bankruptcy of Executive Life Insurance Company

Executive Life Insurance Company is regarded to be the biggest bankruptcy of an insurance company in the United States in the course of recent years. Based in California, the life company had to file for bankruptcy in 1991 following disastrous investments in junk bonds.

No Trust in the Insurance Agent or Insurance Company

Many people really feel that people in the insurance business are out to get them. Some are just paranoid, but others have had past experiences that justify their lack of trust.

Are people leaving the insurance industry?

The Current Turnover Rate

Historically, turnover rates in the insurance industry have increased from 8-9% to 12-15% recently, indicating that retaining employees is becoming more difficult​ (Deloitte United States)​.

Paying money for insurance claims is a large expense of an insurance company. The less that is paid out, the more money for their owners (the stockholders). Insurance companies will deny paying more in payouts when the investment market is expected to do a down turn versus when money is to be made.

State Farm said it is dropping policies across California for financial reasons and is ending coverage in areas with wildfire hazards, among other factors.

Life insurance is a very difficult product to sell. Simply getting your prospect to acknowledge and discuss the fact they are going to die is a hard first step. When and if you clear that hurdle, your next task is creating urgency so they buy right away.

State Farm will discontinue coverage for 72,000 houses and apartments in California starting this summer, the insurance giant said this week, nine months after announcing it would not issue new home policies in the state.