Abstract
PurposeThe insurance industry has not been able to effectively retain its customers and struggles to establish and maintain long-lasting relationships with them. The purpose of this paper is thus to identify the main factors that explain the cancellation of motor insurance policies by individual customers, considering the influence of intermediaries on their decisions.Design/methodology/approachThe data used in this research is based on a sample of 3,500 insurance policies that lapsed during the period of analysis between January and July 2017, against another sample of 3,500 policies that did not lapse, from a major insurance company in Portugal. Binary logistic regression was used for data analysis, using IBM SPSS software.FindingsAggressive tactics by insurance companies for customer acquisition may induce the cancellation of insurance policies. More valuable customers, the policies with higher premiums and recent claims, as well as the ancillary intermediaries and agents, are determinants of insurance cancellation. Conversely, the payment of policies by direct debit and without instalments reduces the probability of cancellations.Research limitations/implicationsThe main limitation of this study is the restriction on data access. Insurance companies are significantly resistant to sharing their customer data – including with academic researchers – even in an anonymised form.Practical implicationsThe paper highlights internal and external practices of insurance companies that should be reformulated to significantly improve their performance regarding product cancellation, related to customer information management, mistrust behaviours related to stakeholders and new value propositions that deepen the relationships with intermediaries.Originality/valueThis research developed a framework with which to identify the factors that are mainly associated with motor insurance cancellation and to predict its likelihood.
Highlights
Insurance is an important business that allows other sectors of the economy to progress (e.g. Han et al, 2010; Weisbart, 2018)
More valuable customers and higher premium policies tend to be more commonly targeted by the acquisition tactics of competitors, as they are more subject to cancellation
The results demonstrate that the existence of claims is a predictor of insurance cancellation, which is in line with Frees et al (2018), who argued that customers with a claim have a higher tendency to lapse due to the fear that an unfavourable experience rating induces premium increases
Summary
Insurance is an important business that allows other sectors of the economy to progress (e.g. Han et al, 2010; Weisbart, 2018). In spite of the importance of this industry to individual people, companies and even nations, it has not been able to effectively retain its customers and to establish and maintain long-lasting relationships with them, as demonstrated in previous studies Guillen et al, 2003; Brockett et al, 2008; Cohen and Siegelman, 2010). Losing and gaining customers through brand switching is a major, well-founded concern for insurance firms, which generates very negative financial impacts as well as reputational impacts to the industry (Brockett et al, 2008). Customer loyalty is one of the main challenges (Guillen et al, 2009) and priorities (Bolance et al, 2016) for most insurance companies
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