The importance of healthy policy retention rates cannot be understated. When policyholders churn, insurers lose premium revenue, incur new acquisition costs, and miss opportunities to deepen long-term customer relationships.
And, unfortunately, it’s never been easier for policyholders to make the switch to another carrier. Policyholders don’t need to mail anything in to cancel a policy: it’s a simple push of a button on an app for many carriers.
With these high stakes, insurers of all sizes are naturally eager to understand what causes turnover and how they can reduce policy churn. Let’s explore what research indicates are the common instigators of policy churn and how carriers can safeguard their retention rates for the long term.
What Causes Policy Churn?
While pricing and coverage can cause churn, research shows that negative payment experiences are often the deciding factor. Payment touchpoints along the policyholder journey tend to be the most frequent and critical interactions carriers can have with their customers.
For instance, research conducted by InvoiceCloud and PAN Communications shows that 83% of policyholders are likely or very likely to change carriers over a negative claims payment experience (i.e., if the payout took too long or wasn’t delivered via the policyholder’s preferred channel).
Another survey, conducted by the same organizations, showed that 80% of respondents do not trust a digital billing or payment experience that seems outdated in any way — and 55% of those people will immediately abandon the online payment as a result.
The distrust that these poor experiences breed can impact churn twofold:
- Customers can cancel their policy because a difficult experience sent them looking for another carrier (and there’s no short supply).
- Continuous payment abandonment leads to the policy being cancelled.
Increasingly, policyholders expect interactions with their carrier — especially where it concerns billing and payments — to be as seamless and transparent as the digital experiences they have with banks, retailers, and streaming services. That’s the only way carriers can foster the trust needed to keep policyholders loyal to their organization.
How Can Insurance Carriers Reduce Policy Churn?
When payments are considered untrustworthy, churn risk increases. When payments are easy and transparent, customers stay. It really boils down to trust.
Insurance carriers that invest in modern payment processing solutions often see meaningful improvements in retention because billing interactions become easy and predictable, effectively earning policyholder’s trust.
American Farmer’s and Ranchers Insurance is a great example of this. Since implementing InvoiceCloud’s billing and payment software, they’ve seen a 97% retention score — not to mention, they’re saving over $95k a year in print and mail costs.
If insurers can provider an experience that policyholders trust enough to use, self-service enrollment skyrockets. Instead of logging into a complex portal every month, policyholders can set up AutoPay once their policy remains active. However, this is easier said than done. What passes as a “trustworthy” digital experience today is somewhat of a moving target in this fast-paced landscape.
4 Keys to Earning Policyholder Trust
So, how can carriers deliver a billing and payment experience that policyholders trust? Modern payment processing platforms can support this trust-building in several ways:
1. Providing modern interfaces with convenient payment options
As the data shows, if policyholders go to your digital payment platform and feel in any way that it’s outdated, they are immediately feeling suspicious and are likely to abandon payment. And, again, the data demonstrates that claims disbursement process that aren’t aligned to policyholder expectations could directly lead to policy cancellation.
Whether it’s through offering the digital payments options people expect (credit card, ACH, or digital wallets) or ensuring your billing and payment platform is design to encourage self-service (AutoPay enrollment, paperless billing enrollment, guest checkout routes), flexible digital payment services make it easier for customers to pay on their terms. This has become table stakes for any payment experience today and paying premiums or receiving claims disbursements are no exception.
2. Ensuring payments are accessible
Research finds that 1-in-3 Americans have a disability that impacts their ability to use digital billing and payment options. If your entire policyholder base can’t access your online payment options (the way they increasingly prefer to pay) you’re missing an opportunity to increase digital adoption and improve retention as a result.
3. Presenting visible security standards
Visible fraud prevention can reassure customers that the system their using is secure. When users see familiar, trusted authentication standards like multi-factor authentication (MFA) and single sign-on (SSO), it signals that their information is being handled responsibly. These visible safeguards communicate that your organization takes security seriously, which builds confidence during every interaction.
4. Leveraging branded experiences to increase engagement
When experiences are branded, like payment reminders and portals, customers are more likely to engage.
Together, these elements strengthen confidence in a carrier’s digital payment offerings, an important foundation for long-term customer loyalty and consistent revenue flow.
Building Trust Through Every Billing Interaction
Policy churn rarely happens overnight. It typically builds through small moments of frustration or uncertainty — many of which occur during billing and payment interactions.
In a market where policyholders have more options than ever, trust matters. And increasingly, that trust is shaped by how easy insurers make it to manage and pay for coverage.
Want to explore the strategies insurers are using to strengthen customer trust and reduce churn? Download our practical guide for trust-building tactics that help improve retention, efficiency, and long-term growth.