Inertia, and word of mouth

Interesting insights yesterday from a conversation with a lady who has just moved her home insurance policy after more than 25 years. Why now, I wondered?

Well, she has been thinking about it for a few years, because the price keeps going up, but each time she got round to looking at the policy, it had already passed its renewal date. This time, some friends told her how much money they had saved by changing.

She read the policy, decided that there were a lot of things that she didn’t need (for example £5,000 cover for home entertainment equipment), made some comparisons, and switched to another insurer for half the price. When she called to cancel her original policy, the company told her that they had a range of offers which could save her a lot of money. This simply confirmed her decision to move, since, as she pointed out, they had never bothered to tell her about these money-saving offers before.

What can I learn from this:

1. Inertia, and the comparative difficulty of making a change, continue to be strong influences on decision-making (has any insurance company tried a two-year policy, or 18 months, to take advantage of this?).
2. The influence of friends is so powerful, especially when it is spontaneous and where the friend is just being friendly, with no axe to grind or product to sell (and of course it’s pure coincidence that the company this lady now insures with, is the same one that her friends first mentioned)
3. Beware the product features that you turn into benefits – the cover for ‘home entertainment’ might be a benefit for some customers, but others can see it as something they are paying for that they don’t need
4. Amazingly, companies are still putting existing customers at a disadvantage compared to new ones. In a world where so much information is available so quickly (in the UK financial world, look at information exchanges like http://www.moneysavingexpert.com, or to the consumer champion Which? http://www.which.co.uk), it’s just bizarre that we still think this is sustainable.
5. Isn’t it interesting how much you can learn by listening to people?

Oh, and the company that used to insure this lady’s house? Northern Rock.