What makes a buyer of personal auto insurance a ‘Good’ customer? If we define ‘good’ as ‘profitable’ over the lifetime of the relationship then there are really two behaviors that characterize them:
Loyalty – the willingness to stick with the same carrier and not churn to the cheapest alternative every year.
Honesty – telling the truth about their risk characteristics up front and filing honest claims thereafter.
- What is the value of Honesty?
- How much of the value of Loyalty is really Honesty? In other words, do dishonest customers jump in and then jump out while the honest persist?
- How can carriers legally reward honest customers? (More carrot, less stick)
- How good are carriers in finding the dishonest in the first place?
- If Honesty and Loyalty are highly correlated then should carriers find ways to reward them more?