Retained business is a much larger portion of the overall premium of the insurance industry compared to new business.
Surprisingly, in the current pandemic scenario while there is wide spread reporting of drop in new business premiums, the drastic reduction in retained business has not been spoken about by industry stakeholders. There are multiple factors at play. The key ones are described as under.
With “stay at home” as a way of life, there are fewer vehicles on the road. Lack of vehicle use has translated to lack of premium payment. Retention rates for private vehicles have dropped by more than 50% of normal, as per portfolio tracked by Pentation Analytics.
The other large impact has been concessions provided either by government such as postponement of personal tax filing date or extended window provided by life insurers to pay annual premium without levy of penalties.
The current drop in retained business premium is however likely to have differing impact on segments of the insurance industry. While for the life insurance industry, the annual premiums can be collected even at a later date, for the general insurance industry, the loss of time is likely to cause loss of opportunity to insure hence premium.
Going forward the imperative for general insurance companies is to engage with existing customers and address the challenges towards realization of renewal premium. Particularly service led communication, can be a good way to engage customers. Vehicles have been lying unused hence the need to service the same is widely understood. Any policy renewal offer that incorporates vehicle servicing can be a good customer touch-point. Health insurance renewals is the need of the hour and there is likely to be an upsell opportunity along with renewals.