Navigating Customer Retention and Pricing in Volatile Times: A Guide for Health Insurers
Growing customer uncertainty is a trend causing concern for sales executives across the insurance sector. Even as inflation rates moderate, the emerging wage-price spiral suggests it will remain a persistent issue, continuing to unsettle policyholders. The central question for insurers since the onset of inflation has been: How are our customers reacting? A recent study by Simon-Kucher reveals a significant shift: over 50% of respondents show a higher willingness to switch their supplemental health insurance providers compared to pre-inflation times. This intent is markedly higher among men than women. Regarding age groups, insurers should pay closest attention to the 25-44 demographic. Millennials and Gen Z are the most likely to consider moving their supplemental health coverage to a competitor.
The Paradox: Increased Willingness to Pay Amid Uncertainty
Paradoxically, alongside this uncertainty, the study also identifies an increased willingness to pay for supplemental health insurance. Nearly two-thirds of respondents are prepared to pay more for their current coverage, even without additional benefits. However, this isn't a cue for insurers to celebrate. A one-size-fits-all approach won't work. Segmentation is crucial: women are significantly more price-sensitive than men. Age and income also play vital roles. Older customers pay closer attention to price, while those with incomes between €3,000 and €4,000 react most strongly to price changes.
Strategic Levers: Value-Adds, Product Optimization, and Communication
To minimize cancellation risk and capitalize on existing customers' willingness to pay, insurers must deeply understand their target segments for supplemental health plans. The strategic use of value-added services is key. Two-thirds of respondents are willing to pay a higher premium if offered additional services tailored to their life circumstances. Crucially, these add-ons must contribute positively to the margin to alleviate cost pressure.
This strategy also applies to new customer acquisition. While overall willingness to pay is lower due to inflation, it can be significantly boosted. The study shows about 48% of participants accept higher prices for new health insurance policies if accompanied by additional services—a 21% increase compared to a scenario with a price hike alone.
Active Price and Product Management
Insurers must also ensure their products remain competitively attractive despite price increases, as over three-quarters of potential new customers frequently compare offers. Another effective tool is product "de-golding"—streamlining portfolios by removing underutilized benefits while keeping core offerings strong. Over 60% of respondents felt their supplemental plans included benefits they neither valued nor needed, a sentiment particularly strong among men and the 25-34 age group.
Actionable Recommendations for Health Insurers
To successfully navigate this landscape of price sensitivity and high switching intent, insurers should adopt a multi-faceted strategy:
| Strategic Area | Key Actions | Expected Outcome |
|---|---|---|
| Customer Segmentation & Pricing | Continuously monitor willingness-to-pay by segment and market. Optimize product packaging and pricing to match specific customer groups. | Improved price acceptance, reduced churn risk. |
| Value & Communication | Develop compelling value communication focused on customer benefits, not just cost. Implement targeted, margin-positive value-added services. | Enhanced customer perceived value, justification for premium adjustments. |
| Product Portfolio Management | Conduct regular portfolio reviews. "De-gold" products by removing unvalued features to optimize costs and value proposition. | Leaner, more focused products, better cost management. |
| Implementation & Control | Establish clear premium KPIs and enforcement guidelines. Utilize sales steering software for monitoring and control. | Measurable outcomes, consistent strategy execution. |
By integrating these insurance pricing strategies and customer retention tactics, health insurers can not only retain their existing customer base but also unlock new growth potential. The goal is to transform inflationary pressure and customer uncertainty into an opportunity for demonstrating value, strengthening relationships, and building a more resilient and profitable portfolio. Keeping a close eye on these factors allows insurers to steer confidently through even the roughest market waters.
Insurers and brokers struggle in claims management with high backlogs, increasing claim frequencies, skilled labor shortages, and growing customer expectations. Manual processes are expensive and slow.