Insurance carriers often struggle to extract the full value from their renewal portfolios, largely due to inefficiencies in pricing and outdated systems. According to Quantee, more than 20 factors outside of pure pricing can erode performance. In response to this, the firm has delved into seven actionable strategies that insurers can use to enhance both customer retention and portfolio profitability.
1. start with clear business goals and strategy
Too many insurers overlook the importance of setting distinct key performance indicators (KPIs) for new business versus renewals. This oversight leads to a lack of visibility into gross written premium (GWP), policyholder numbers, and profitability for existing customers.
Some companies even lack the basic ability to distinguish new policies from renewed ones. By separating KPIs and setting realistic goals for retention, insurers can establish a stronger operational focus and gain better insights into underperformance in their renewal book.
2. Use renewal capping to control premium volatility
Significant premium increases from one year to the next, without any claims activity, can result in customer churn.
Likewise, underpricing renewals wastes margin. Renewal capping—setting upper and lower bounds on premium changes—can help address both problems. A simple rule like capping the renewal premium to ±10% of the previous year’s premium can dramatically improve customer retention.
However, this cap must be tailored to local inflation and market conditions. Carriers must also consider the risk profile; if a customer has worsened, it may be appropriate to lift the cap. Many firms still struggle to implement this due to legacy systems.
3. Offer the right number of renewal options
Sending inappropriate or confusing renewal offers is a common mistake. Customers who had comprehensive cover last year may receive only the most basic plan at renewal—leading to dissatisfaction and lost revenue.
Alternatively, overwhelming policyholders with ten variants is equally counterproductive. Research shows that offering two or three options—such as the current package, a minimal legal requirement, and an upgraded version—strikes the right balance. It leverages behavioural economics by encouraging mid-tier selection and ultimately boosting retention.
4. Separate risk models for new business and renewals
New and renewing customers are fundamentally different, and their risk should be modelled accordingly. Current customers provide richer data—claims history, cross-product usage, and behavioural patterns—that can significantly refine risk assessment.
However, many insurers still use a single ratebook due to system constraints. Separating risk models enables better prediction and segmentation, especially when leveraging information such as renewal channels or correlated risk behaviours. While the data requirements are high, the impact on combined operating ratio (CoR) and retention can be substantial.
5. Tailor price tests for each customer segment
Running uniform price elasticity tests across both new and existing customers is ineffective. New business often benefits from symmetrical testing (equal discounts and surcharges), while renewal testing should focus more on increases due to customers’ tendency to stay with the same product.
Additionally, renewal tests should consider entire product bundles rather than individual items, as customers tend to stick with previously selected configurations. A tailored approach helps fine-tune premium levels with higher accuracy.
6. Optimise prices separately for renewals and new business
Price optimisation, which adjusts premiums within strategic constraints using machine learning, must be split between customer types. This requires separate demand models, price elasticity inputs, and operational goals.
While implementing this through a dedicated pricing engine is ideal, insurers can begin with offline optimisation via actuarial tools. Optimised premiums can then be manually imported into existing systems for batch renewals. Renewal portfolios, thanks to richer data, are also more suitable for bundle-level optimisation.
7. Be bold in refining your renewal portfolio
If your renewal portfolio suffers from poor past underwriting and delivers a CoR above 100%, incremental improvements won’t fix the problem. Sometimes, the best course is to decisively price out unprofitable segments. This may cause pushback from sales teams and brokers, but retaining high-risk customers is not a sustainable strategy. Leaders must have the courage—and board support—to apply strong price hikes where needed, allowing those risks to migrate to competitors.
Read the full blog from Quantee here.
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