How to Retain Insurance Customers Successfully: Build Loyalty

03/12/2025 18 min read

In today’s competitive insurance market, carriers must often maintain a balance between attracting and retaining customers.

Unlike most other sectors and industries, insurance policies and processes can be complex, and the risk of fraud and identity theft makes customers more cautious when choosing a provider.

According to one report, 50% of customers look for alternatives after just one negative experience with an insurance company.

Since it costs more to attract new prospects than to retain or upsell current ones, your main focus should be to keep your current customers happy, engaged, and loyal.

After all, satisfied customers are 80% more likely to renew their policies compared to those who are dissatisfied.

This article will walk you through how to retain insurance customers for real and much more.

Key takeaways

Retaining insurance customers is more cost-effective than acquiring new ones. For instance, a 5% increase in retention can boost profits by 25% to 95%.
A flexible and engaging onboarding process tailored to customer preferences builds trust and sets a positive tone for long-term relationships.
Bundling insurance products, offering discounts, and personalizing recommendations help insurance agencies retain customers.
When you create customer experiences based on both direct and indirect feedback, it helps boost engagement and overall satisfaction.
Rewarding renewals with discounts, loyalty perks, or small gestures helps strengthen bonds with customers.

What is customer retention in the insurance industry?

This refers to the efforts insurance carriers make to keep policyholders engaged, satisfied, and loyal to their agency over time. It helps ensure customers stay connected to your brand, products, and services, reducing the likelihood of them switching to competitors.

This is often achieved through quality service, competitive pricing, and value-added offerings that meet or exceed customer expectations.

Focusing on retention allows an insurance agency (and agents) to build long-lasting relationships with customers, increase their lifetime value, and create a loyal customer base.

Some of the best customer retention strategies are often powered by digital experience intelligence, which helps carriers:

Prioritize customer satisfaction.
Promote consistent engagement.
Deliver personalized customer experiences.

Why is insurance customer retention important?

Customer retention plays a crucial role in the profitability of your insurance agency. This is because retaining current customers is much more cost-effective than acquiring new ones.

According to research from Harvard Business School, increasing customer retention by just 5% can boost a company’s profits by 25% to 95%.

For an insurance agency, in particular, it costs 7 to 9 times more to attract a new policyholder than to retain an existing one. In fact, the customer acquisition cost for insurance is among the highest in any industry.

This makes one thing clear: retention rates are what separate successful insurance carriers from those who are struggling.

Still unsure about insurance customer retention? Here are a few more cogent reasons why customer retention insurance is important:

Long-term profitability: Loyal customers usually stick with their insurance provider for a long time. This often leads to steady profits as customers continue to pay insurance premiums.
Cross-selling opportunities: Satisfied customers are more likely to buy additional insurance products from you, giving you more chances to sell other products.
Referral business: Happy customers often recommend your services to friends and family, which brings in new customers.
Reduced policy churn: Efforts to retain customers reduce churn, which is when customers leave for a competitor. Lower churn means less business lost.
Customer data & insights: Retained customers often provide valuable data that can help an insurance agency personalize its marketing, create new products, and assess risk. Data from long-term customers is more reliable than from new ones.
Captive audience: If your customers are happy with your services, they’re less likely to shop around for other insurance providers when new needs come up.
Robust claims experience: Loyal customers are more likely to have a positive experience when they file claims.
Regulatory and compliance benefits: A stable customer base can make it easier to meet regulatory requirements. Retained customers also tend to cancel less, improving your compliance records.

First Connect’s step-by-step guide on how to retain insurance customers

Encouraging customers to stay loyal during tough economic times can be increasingly challenging – especially when competitors provide market-beating offers to win new customers.

To help you succeed, here are five killer customer retention strategies you can use to keep policyholders coming back – whether it’s for policy renewals or new coverage needs.

Create a seamless experience throughout the sales cycle

According to one report, when a business offers a great customer experience, it becomes 60% more profitable than its peers. That said, the best place to improve your customer experience is right at the beginning—during the initial sales process.

An insurance company’s onboarding process can set the tone for its customer relationship. If it’s smooth and engaging, customers are more likely to have a positive impression of your insurance products, services, and overall business and stick around.

Make the sales process flexible

Every insurance customer is unique, so they will prefer different ways to explore their insurance options. Some customers may want one-to-one walkthroughs from agents, while other clients may like self-service options, written guides, or video tutorials.

To meet your customer’s needs, an insurance agency should offer a variety of formats, such as:

Co-browsing experience & support: Agents can guide new clients through their insurance dashboard with secure screen-sharing tools. This makes the process simple and builds trust.
Self-service tools: Provide clear guides, tutorials, or interactive resources for customers who like to learn on their own.

When an insurance carrier offers these options, it ensures that every customer gets the experience they prefer, making them feel valued and supported.

Tools to improve the sales process

With digital experience intelligence tools, an agency can make the sales process even better for their insurance customers.

Here are three strategies you can use to enhance your insurance customer retention:

User behavior analysis: Analyze how customers interact with your website or app during onboarding. This can help your insurance business spot areas where clients face challenges. For example, you may find common drop-off points or roadblocks. Fixing these issues creates a smooth, more enjoyable experience and improves your insurance retention rate.
A/B testing: Test different sales approaches to see what works best. Try various layouts, content styles, or interactive features. Use data from these tests to improve your website or app. Advanced tools such as digital experience intelligence (DXI) can provide deeper insights, helping you make smarter decisions.
Heatmaps: Heatmaps show where customers click or spend the most time on your website. This visual tool helps you see which parts of the sales process work well and which need improvement.

Focus on cross-selling and upselling products

Believe it or not, customers find it easier to switch from one insurance policy to a better deal than to shop around for separate replacements for home, life, and auto coverage.

One study shows that customers who bundle insurance policies, such as home and auto insurance, with one carrier have a 95% retention rate in insurance. However, many insurance customers nowadays consistently shop around for better deals due to soaring insurance rates.

One of the most effective things agents and insurance providers can do to improve their insurance retention rate is to focus on cross-selling and upselling. To sweeten your deal for clients, provide discounts and special offers for a premium or multiple products.

Agents should offer a mix of insurance products such as different types of coverage, carriers, or plans to keep customers engaged and loyal. Bundling multiple policies makes things easier for clients and can also save them money. Since high premiums are a common concern, discounts or savings from bundled plans can help seal the deal. Customers appreciate agents who take the time to understand their needs and offer the right coverage options. After all, customers will appreciate agents who take the time to understand their needs and offer personalized recommendations.

Want to know where to start? Calculate the average number of policies each customer has. This can help you identify opportunities to cross-sell and grow your business.

Elevate your customer experience with omnichannel business

Another strategy to increase your customer retention is to use an omnichannel approach.

Becoming an omnichannel insurance business means you connect all your customer touchpoints into one seamless system. This includes your website, email marketing, app, live chat, SMS, and social media messaging.

An omnichannel contact center ensures customers can switch platforms while continuing the same conversation. No matter the channel, your agents will have all the context they need to assist efficiently.

What does omnichannel insurance support look like for a customer?

Imagine a customer trying to view their online insurance policy. They call your support team and find out from an agent that the website is temporarily down due to technical issues.

Later, the same customer reaches out via X (formerly Twitter) to check if the website works. A different agent confirms the site is back up and advises them to try again.

The customer still has trouble opening the document, so the agent sends an SMS with a secure link to start a video chat. With the customer’s permission, the agent accesses their account and shares their screen to walk through the issue.

The agent discovers the customer is trying to open an expired policy and guides them to the correct document for the current year.

Problem solved! The customer is happy, the video chat ends, and the agent’s account access is automatically removed.

Why omnichannel matters

Omnichannel insurance support doesn’t just resolve problems – it creates a better customer experience.

When you make it easy for customers to jump between platforms while keeping conversations consistent, your agency can build trust, improve satisfaction, and strengthen loyalty.

Provide renewal rewards

Rewarding customers for renewing their policies can be an effective way to boost loyalty and customer retention in insurance. When you show customers you value their commitment, they’re less likely to explore other options.

Ideas to reward customer loyalty

If you’re an agency or agent that offers vehicle insurance, consider providing loyalty points customers can use for car maintenance services. Discounts on renewal premiums are another effective way to show appreciation.

You can also include perks such as additional coverage, bundled offers, or free financial planning sessions.

In some cases, you may even send small gifts to your top customers. For example, a gift basket they can share with family or coworkers is a thoughtful gesture. Plus, it introduces your business to new potential clients.

When you add value to the renewal process, you strengthen your bond with policyholders and make them feel appreciated.

Establish a feedback loop with your insurance customers

Without customer feedback, it’s difficult for an insurance agency (and agents) to identify what their business does well and where there’s room for improvement.

To retain customers and enhance their experience, you need a clear, well-rounded strategy to muster their input.

A feedback loop is a great way to collect, analyze, and act on customer input. This process allows you to gather and use feedback to improve your business and boost customer retention in insurance.

How to collect insurance customer feedback

There are numerous ways to gather customer feedback, such as:

Run surveys to ask about their insurance policy experience.
Invite customers to participate in focus groups.
Encourage customers to rate your services and share detailed reviews about what they liked and didn’t like.

Once you have collected the feedback, look for patterns in customer behavior and comments. Use these insights to make improvements that enhance the customer experience.

Tips on implementing the best insurance customer retention strategies to cultivate lasting relationships

Are you an insurance agency or agent who wants to increase their sales and overall bottom line? If so, you need to retain your current clients.

Here are some actionable tips on how to apply the best insurance customer retention strategies to cultivate long-term relationships:

Personalize every interaction

One of the most efficient ways to retain insurance customers is to personalize their experience. Customers feel valued when their individual needs and preferences are acknowledged.

Make sure to leverage customer data such as age, location, policy type, and claim history to tailor interactions. For instance:

Send policy renewal reminders customized to their coverage type.
Offer personalized recommendations for additional coverage based on their life events (e.g., a growing family or a new home).
Acknowledge milestones such as birthdays or anniversaries with thoughtful messages or small discounts.

When you show genuine care, you demonstrate that your company is invested in their well-being, which leads to loyalty and trust.

Maintain open & transparent communication

Clear and consistent communication is the cornerstone of customer retention. Insurance policies can be complex, and customers often appreciate companies that take the time to explain terms and processes in simple language.

Ensure your communication strategy includes the following:

Proactive updates: Notify prospects about policy changes, new products, or discounts.
Easy-to-reach support channels: Provide multiple options for contact, including email, phone, live chat, and in-app messaging.
Transparency during claims: Walk customers through the claims process step by step, ensuring clarity about timelines, documentation, and outcomes.

When customers feel informed and confident in their decisions, they are more likely to remain loyal.

Leverage digital tools

Technology plays a significant role in modern customer retention. Digital tools can help streamline processes, enhance convenience, and provide new ways to engage with clients.

Some examples include:

Mobile apps: Create user-friendly apps where customers can manage policies, file claims, and track requests.
CRM systems: Use customer relationship management software to analyze customer interactions, identify patterns, and optimize communication.
Chatbots: Implement AI-powered chatbots to provide 24/7 assistance for common queries.

Train your staff in customer care

Exceptional customer service requires a well-trained and empathetic team. You must empower your agents with the tools and knowledge they need to provide top-notch service.

Here’s how you can do it:

Conduct regular training sessions on effective communication and problem-solving skills.
Teach staff how to manage difficult customer situations with professionalism and patience.
Encourage a customer-first mindset where the goal is to exceed expectations at every touchpoint.

Focus on value creation beyond policies

Insurance customers often stay loyal to companies that go beyond the basics.

As an insurance agency, you should provide your customers with educational content that enables them to make informed decisions, such as:

Webinars on financial planning.
Articles or videos explaining policy options and their benefits.
Personalized risk assessments to help them choose the right coverage.

FAQ

What is the formula for retention in insurance?

The retention formula in insurance is typically calculated as follows:

Retention Rate = (Number of Customers at End of Period − New Customers Acquired) / Number of Customers at Start of Period × 100

This formula measures the percentage of customers retained during a specific time frame.

What are the latest insurance customer retention statistics?

According to recent studies, the average retention rate in the insurance industry is 84% (with the top-performing carriers in the 93%-95% range). Factors such as policy type, customer service quality, and pricing competitiveness play significant roles in these retention rates.

What is an example of a retention in insurance?

A common example of retention in insurance is when a policyholder renews their annual health insurance policy with the same provider due to consistent communication, competitive pricing, and added benefits such as health checkups.

What is a realistic customer retention rate?

A realistic customer retention rate for the insurance industry falls between 80% and 95%, depending on the line of insurance. Compared to auto or property insurance, higher retention rates are generally seen in life insurance.

What is the insurance retention limit?

The retention limit in insurance refers to the maximum amount an insurer retains as a liability before transferring risk to a reinsurer. It ensures the insurer’s financial stability by capping potential losses.