Aggregators and cashback websites in the financial vertical are not doing enough to drive customer retention for the brands that they serve.
Recently released data from market research consultancy, Finaccord, looked into the buying habits of consumers who purchased annual travel, breakdown recovery, home emergency, household, life, motor, pet or single-trip travel insurance.
From the 1,000 UK that were polled, aggregators were found to handle 27.5% of switchers and new buyers, which has now overtaken the 19.6% direct sales were responsible for. Cashback sites’ 8.8% share was considerably less.
The average proportion of customers renewing a policy was much less, with only 10% of renewals being attributed to aggregators and 2.8% to cashback websites. Direct sales fared much better, managing the largest share of renewals at 32.3%.
Rounding on financial publishers, David Parry, managing consultant at Finaccord, revealed that he was concerned these sites could be doing more to reward loyalty instead of fuelling the current culture of switching policies.
“Aggregators and, to a lesser extent, cashback websites have transformed the way that people buy insurance in the UK in the last decade, taking full advantage of the internet revolution – and this now applies to many products, not just motor and household insurance", Parry said.
"But they have attracted the most volatile customers, partly because their main appeal is that you can save money with them and partly because their online operations make it easy to keep switching provider year after year.”
Learning from financial partners
Financial publishers should look to the strategy employed by financial partners, such as banks and building societies, that boast the highest share of renewals of their customers and almost double the percentage managed by either cashback sites or aggregators.
Parry also questioned whether financial publishers could improve in other areas, not just customer retention, when going head-to-head with the more traditional insurance sales channels.
"The value of a customer depends on numerous factors, most obviously claims, but also the cost of acquisition, price sensitivity and the ability to cross-sell other policies (such as legal expenses cover with motor and household insurance),” Parry explained.
“By their nature, aggregator and cashback customers risk reducing profitability for insurers because of these factors – and will certainly be unprofitable if insurers win their business one year then hike up prices the next, sending them back to the internet for a better deal."