The mega risk of overpromise and underdelivery in insurance – A big issue in insurance selling

Under promise and over deliver

All business should be able to live up to the hype they create for themselves, however there are many businesses that over promise and under deliver. Some businesses work the other way around, i.e. under promise and over deliver, but what exactly does this mean? In a bid to win over customers, enter new markets and gain market share it seems that many businesses will make many promises to win the customer over, many of which seldom come to fruition.

Under promising and over delivering is the opposite of over promising and under delivering. For example, if a business states a policy will be dispatched in five working days and it is dispatched in three working days it has performed better than it promised to. Under promising and over delivering is doing that little bit more than stated and going that extra mile to satisfy customers. It is providing value for money, which is something all  insurance customers want.

In all transactions insurance customers will have an expectation, and this must be met and managed by the business. By stating the cost of products and services, the quality of the products or services, the delivery times, the after sales package and warranty etc. it is often the business that determines the customers’ expectations. Exceeding customers’ expectations i.e. under promising and over delivering, is beneficial for businesses as it often results in repeat sales and free advertising through word of mouth.

Under promising and over delivering is a good strategy, and based on the above it appears that all  insurance businesses should deliberately dumb down their products and services in order to create a lower customer expectation that can be exceeded every time. This is a great idea in theory, but in practice it wouldn’t work. Most market places are highly competitive and all are fighting for customers in order to increase market share.

In order to encourage customers to buy their products and services businesses must demonstrate their products and services are superior and offer better value for money than that of the competition. To deliberately dumb down the products and services would put a business at a disadvantage.

Over promising and under delivering is may increase market share in the short term, although it is likely to be detrimental in the long term. Business should not over exaggerate their products and services as this is likely to lead to high customer expectations, which may never be met. This would also be detrimental to the business. Businesses need to pitch their products and services at the right level, i.e. high enough for customers to perceive them being superior to the competition but low enough to enable the business to meet the expectations of all customers, and exceed the expectations of some of the customers.

Keep Business Commitments – Never Over Promise or Under Deliver

Customer service is crucial in the insurance industry, especially given the sheer amount of choice consumers have today. An customer who has a bad experience with a companies policy, has plenty of others option to choose from. A bad experience  on the sales floor can chase customers away customer. Is it ever a good idea to over promise to your insurance customer? What about those who under deliver? We have to ask if this ever works and question how we feel when we have been promised a  insurance product that was not what was delivered.

Through promotional campaigns, television commercials, and even conversations with their insurance customers, many businesses today either over promise or under deliver. Both are big mistakes in insurance business, whether you are a small player in insurance or big player.

They do this by:

  • False Advertising and Making Promises They Can’t Keep
  • Offering High Quality Insurance Policy and Providing Inferior  insurance Policy.
  • Over Committing While Knowing That a Deadline is Impossible
  • Not Meeting a Delivery Date

The effect that not keeping your business commitments is loss of credibility with your insurance customers and clients. The long-term effect? Loss of business and a bad reputation. It’s simply not worth the time that you felt you have gained and not worth the cost to your business reputation.

Do you over promise or under deliver? Now is a good time to exceed expectations instead. By doing this, you will give your customers reason to come back, to recommend your business, and to come to expect the quality  insurance products and services that you offer.

When you give more than expected, you find your clients quick to recommend you, you will have pride in the services and policy that your company offers, and life gets easier. The negative energy it takes to try to take advantage of your clients (and make no mistake when you over commit, you are taking advantage of your clients trust) is simply not worth it. Keep your word, don’t over commit or under promise.

With that in mind, here’s a look at five things that you or your employees should not do when dealing with your insurance customers.

  • Don’t give the hard sell: Customers have long been trained not to trust salesmen/agents in part because of fear concerning high-pressure sales tactics. Now, armed with better information thanks to the Internet, those same insurance consumers will be much less afraid to run the minute they feel pressured. Whether it’s upselling at the service advisor’s desk, the salesman’s cubicle, or in the finance office, dealers need to walk a fine line between advertising their products and upsetting the buyers. It’s fine to softly peddle the upsell, but when a customer says no thanks, note it and move on. Pressing hard can make you look like a bully, or even worse, desperate. Taking “no” for an answer could actually lead to increased trust from your customers.
  • Arguing with customers: Even if you’re right, somehow, you’ll end up being wrong. This doesn’t mean you should give the insurance customer carte blanche if they complain. What it does mean is that if you can’t easily rectify the complaint, or the customer’s demands are unreasonable, is that you should calmly and politely control the conversation. Letting your emotions take over–or allowing the situation to devolve into yelling or shouting–does you no good and can make you look unprofessional in front of other customers. Most problems can be headed off with the right words and the right tone of voice.
  • Don’t over promise and under deliver: Don’t make promises you can’t keep–all you’ll do is make insurance customers angry when you can’t deliver. Better to tell customers up front that a service might take a while or might be hard to arrange, and then look like a hero when the job takes less time than promised or when the service can be provided after all. A customer would rather be pleasantly surprised than hit with a negative surprise. Happy customers are repeat customers.
  • Don’t be afraid to say “no”: This fits in with the previous two items on the list. By being willing to say “no” on occasion, you’ll avoid overloading yourself. Service personnel who always say “yes” end up juggling too much, which often leads to customer service disaster. Much better to be honest with the customer than to try too hard to please.
  • Don’t stonewall: Keeping consumers in the loop on sales and service processes will help keep them happy. Remember, that car on the lift is theirs, not yours. They worry about it, and they want to be kept in the loop, should problems arise. Keeping them in the dark serves no purpose, save perhaps chasing your customer to your competitor.

There are many things you can do to keep your customer relations in insurance successful. Not doing any of the five things listed above can help as well.

Overpromising and under delivering is highly risk issue

Customer retention is indispensable

A  insurance company have to retain customer for their long term survival in the insurance business. Overpromising and under delivering will erode their business segment. Actually customer retention is  defined as the activity that a selling organization undertakes in order to reduce customer defections. Successful customer retention starts with the first contact an organization has with a customer and continues throughout the entire lifetime of a relationship. A company’s ability to attract and retain new customers, is not only related to its product or services, but strongly related to the way it services its existing customers and the reputation it creates within and across the marketplace. Customer retention has a direct impact on profitability.

The importance of customers has been highlighted by many researchers and academicians. Customers are the purpose of what we do and rather than them depending on us, we very much depend on them. The  customer is not the source of a problem, we shouldn’t perhaps make a wish that customers ‘should go  away’ because our future and our security will be put in jeopardy”. That is the main reason why organisations today are focusing on customer satisfaction, loyalty and retention.  Satisfaction is an overall customer attitude towards a service provider, or an emotional reaction to the difference between what customers anticipate and what they receive, regarding the fulfillment of some need, goal or desire”.

Customer loyalty, on the other hand, “is actually the result of an organisation creating a benefit for a customer so that they will maintain or increase their purchases from the organisation. Actually customer loyalty refers to “a deeply held commitment to re-buy or re-patronise a preferred product or service consistently in the future despite situational influences and marketing efforts having the potential to cause switching behaviour”.

True customer loyalty is created when the customer becomes an advocate for the organisation, without incentive. Customer retention is the practice of working to satisfy customers with the intention of developing long-term relationships with them. Retention can be defined as “a commitment to continue to do business or exchange with a particular company on an ongoing basis”.

Customer retention is more important than customer acquisition

Hence overpromising and underdelivering is to be avoided

Every insurance company needs customers to survive, and it undertakes every possible action to get them. It runs advertisement campaigns on television, in print, and even on web. It hires public relation firm to build trust and create positive corporate image. It hires search engine optimization expert to make their web presence prominent. It does everything that is needed to be done – from sponsorship to realizing corporate social responsibility to hiring best people to making product available within the customers’ reach to pricing it attractively.

A  insurance company does everything to acquire new customers, but when it comes to retaining them, most of the businesses fail; may be because some of the decision makers do not see any point in spending time on retaining customers. I have heard business people saying that why should they worry about customer retention, if they can get a lot more by spending some dollars on promotion. I wish they knew why it is important for them to retain their  insurance customers for as long as it is humanly possible, and how  insurance customer retention becomes the only difference between a failure and success in business.

Cost implications of losing customers for insurance companies

  • A lost customer means lost feedback and the opportunity to improve.
  • A lost customer means lost sales and revenue that is lost forever!
  • A lost customer causes asking, “Why didn’t we recognize the problem before losing them?”
  • A lost customer means having lost a testimonial to use in selling to others.
  • A lost customer opens us up to potentially negative word-of-mouth that might affect our reputation with prospects, customers, suppliers and staff.
  • A lost customer means having lost all their possible future referrals.
  • A lost customer has a negative impact on the confidence of our entire staff.
  • A lost customer increases the urgency to prospect for new customers (and often at the worst time).
  • A lost customer and the resulting reduced revenue can slow or even halt plans to grow.
  • A lost customer means less money available for payroll, commissions and benefits for the work force.
  • A lost customer can demoralize the sales and marketing staff.
  • A lost customer may become an unexpected opportunity for the competition.
  • A lost customer means a distraction from other important issues.
  • A lost customer can be the beginning of a reputation for losing customers that hangs like a black cloud over the ability to find and hire the right personnel.
  • A lost customer can degrade an image and reputation in the marketplace.
  • A lost customer forces undertaking tasks and changes that weren’t wanted or planned.
  • A lost customer can have a damaging impact on our sales projections, cash flow, receivables, and payables.
  • A lost customer can cut volume and prohibit meeting buying commitments with suppliers and vendors.
  • A lost customer can trigger the need to spend un-budgeted funds on marketing, research, new customer acquisition, etc.
  • A lost customer can disrupt inventory levels, inventory investments, ordering procedures and reorder frequency.
  • A lost customer may cause the need to refocus priorities and go in a totally different direction.
  • A lost customer can cause the need to focus attention on poor performance rather than growth opportunities.
  • A lost customer can cause doubt about the validity of service fulfillment and pricing strategies.
  • A lost customer causes hard work in an attempt to regain the business.
  • A lost customer can cause overreacting and even panic when confronted with similar situations with existing customers in the future.
  • A lost customer can discourage a prospective salesperson from ever trying the job.
  • A lost customer can lead to an accounting, collection or legal nightmare.
  • A lost customer can devalue the worth and saleability of a business.
  • I did not create this list, I don’t know its origin, but I find the value in the message, and I hope you do to.

Overpromising and underdelivery to insurance customer may lead to attrition

Attrition is not a part of customer service but they are closely related terms. Customer attrition is the gradual loss of existing customers over time. One of the best ways to deter the loss of customers is to provide a high level of customer service and to focus on customer retention programs.

Customer attrition is a natural result of operating a business. No matter how well a insurance company operates and attempts to take care of insurance customers, you are always going to lose people for reasons within and beyond your control. Customers moving, dying, having a one-time need and finding another provider are common, usually uncontrollable causes of attrition. However, significant attrition results when companies do not have adequate customer retention programs or fail to meet customer service expectations of customers.

Causes of Attrition

Poor customer service interaction, along with disappointment in insurance products meeting customer expectations. This is actually a service issue when a insurance companies overpromise and underdeliver. When you offer a valuable product or service at a reasonable price point, the only controllable issue you could lose a customer over is that you failed to meet her service expectations.

Customer Service

Customer service includes a wide array of activities. It includes proactive planning and preparation to know your company and products so that you can inform customers accurately. It also means helping customers resolve issues and feel good about the purchase experience. After the sale, it means following-up and following through on sales. Following-up is checking in to see how a customer experience is going with your solution. Following through means delivering on commitments made to get a sale.


The best way to avoid customer attrition in insurance is to have proactive customer retention programs. Even more evolved are customer relationship management programs, which combine database software and marketing, to develop strong relationships with top customers. Insurance Companies need to know who their valuable customers are and proactively target them for value-added opportunities.

Building customer loyalty: A checklist – tips on increasing insurance customer loyalty for best business performance

Customer loyalty is critical. People focus too much on new business when it’s more profitable to focus on existing customers. Research shows that a 5% improvement in customer retention rates yield between 25%-100% increase in profits across a wide range of industries. Loyal customers buy more, more regularly and they frequently recommend your business to others. Here are a few pointers for increasing loyalty in insurance business.

Start with knowing who your  insurance customers really are. Research the needs of your customers. Then develop ongoing solutions or support that are highly valued by customers. This is the start of becoming “customer-centric”.

  • Build lasting relationships with your insurance customers through effective two-way communication. Can your customers contact you easily? Make it easy for customers to complain and provide feedback. Also research why it is you’re losing customers. Use this information to improve your insurance business.
  • Set high standards. Don’t over promise and under deliver. Have you gone the extra mile recently for your insurance  customers? That is, surprised them? Delight your customer.
  • Are you investing in training staff and keeping them motivated? Happy employees generate happy customers. Let customers know you value them and offer them rewards for their loyalty.
  • Consistently delight your customer. There is no use being strong in one area and weak in another. Every customer contact point should contribute to an overall satisfying experience to create loyalty. Make sure you have quality control measures in place to ensure consistency.

Few tips how to retain insurance customer

How to retain customer

Customer satisfaction  key to retention

Philip Kotler defined satisfaction as: “a person’s feelings of pleasure or disappointment resulting from comparing a product’s perceived performance (or outcome) in relation to his or her expectations”. Hoyer and MacInnis another researcher said that satisfaction can be associated with feelings of acceptance, happiness, relief, excitement, and delight.

There are many factors that affect customer satisfaction. These factors include friendly employees, courteous employees, knowledgeable employees, helpful employees, accuracy of billing, billing timeliness, competitive pricing, service quality, good value, billing clarity and   quick service. In order to achieve customer satisfaction, organisations must be able to satisfy their customers needs and wants  Customers’ needs state the felt deprivation of a customer .Whereas customers’ wants, according to Kotler (2000) refer to “the form taken by human needs as they are shaped by culture and individual personality”. The success drivers for the customer satisfaction and retention (CSR) can be a long list, as anything which we do contributes to the CSR in one way or the other. Here is the list of some key ones:

Product and services meeting customer expectations and product promise

This is the core- There are two parts in there:

  • Insurance Product Promise-This includes not only what you said in your brochures, and advertisements, but also what your sales person told the customer. It is evident that sales people can over play the good qualities of the product or may mis-sell the product. Therefore, companies not only have to focus on creating authentic published sales pitch, but also ensure that their products are sold but not mis-sold.
  • Customer Expectations in Insurance: One needs to manage customer expectations, as misplaced customer expectations lead to dissatisfaction even if you are meeting your product promise. As a customer behavior, in this sales driven world, consumer, do give a little tolerance to your performance short-falls, but its minor. The methods to manage customer expectations can be:

Try to address the key expectation gap areas (as you learn by your experience), and clarify it to the customer.

You can be factual about the key areas which can lead to customer expectations mis-match. For example, for a life insurance company, one can clarify to the customer the sales illustrations (which provides the estimate of the asset value of your policy till maturity), are a guess and not a promise.

You don’t have to go around telling everything what your product cannot do. Focus on key areas, where customers may have wrong expectations. As long as you are positioning it in a factual and positive language, it should do the trick. One other way is to submit detailed technical and functional specifications in a user friendly manner. The product comparison charts with your other products also helps.

Trust relationship with the customer in Insurance

This is a soft factor, which provides long-term sustainability to your customer base and loyalty. It provides strong foundation to your brand perception and value. This factor mainly emerges from the corporate culture and value systems. The trust-factor with the customer is built in following representations:

  • Veracity of the statements in the sales material.
  • Authenticity of the sales statements and scripts
  • The product recalls, in case of product issue
  • Product promise match with the actual product features
  • No fine-prints

NOTE- Our feeling is that, if you build an organization culture and value systems which promotes trust factor with the customer, you will build a trust-based environment within the organization itself. This will not only retain your customers, but also your employees and business partners.

Customer service and support

The quality, promptness and friendliness (in that order of priority) of your customer service and support will determine the level of your CSR. Customer service and support is a big subject in it-self. Here are some key areas of Customer Service, which drives the customer satisfaction:

  • Knowledge of the product and domain- A customer loose confidence, if the person who picks up the phone does not understand the products or processes of the organization. The following training and support of the front-line staff can help:
  • Product features and organization process
  • Top 500 questions, a customer can ask about the product and the organization, and their answer.
  • Create an online FAQ data bank and also the searchable product and process data-base
  • Create train the trainers, which are on the shop-floor to handle any complex query.

Identity of the insurance customer and customer interaction history

This is a norm in large organization. All interactions with the customer should be noted in detail. This should include:

  • The customer issue.
  • What did we respond on?
  • What did we promise to do?
  • Was that issue linked to a previous issue?

A single view of the customer in terms of all his relationships and transactions is key to creating the customer identity. A good operational business intelligence platform or an operational data store can help.

Customer relationship and constant touch

A customer likes to be contacted without the context of any issue. The customer touch can be achieved on the following counts:

  • Checking with the customer on if the product is working well?
  • Checking with the customer on his level of satisfaction after a repair or service call.
  • Sending a mail or a gift token on important customer dates like birthdays and anniversary.
  • Contacting customer with new offerings
  • Sending regular newsletter, industry developments, and tips on ‘how to make the best out of our product’ etc.

Level of customer satisfaction index

One can say that customer satisfaction index is inversely proportional to the customer attrition. This is not 100% true, due to following reasons:

  • An unsatisfied customer may not attrite, because the exit costs are too high.
  • A satisfied customer may attrite, due to aggressive competition campaigns or you may not have the product, which the customer wants.

Customer sales experience

Customer sales experience can leave a kind of good or bad taste. This after taste does contribute to customer retention or attrition. For example a great sales experience may retain a customer, even after some post sales issues. However, if a customer had an inadequate sales experience, it catalyzes attrition.

Customer post-sale experience

The post-sales experience can help reinforce the long term retention. The post-sale experience includes:

  • Order Delivery
  • Product- demo
  • Product manuals Introductory call with the relationship manager or account manager etc…

Exit Barriers for the customer

There are healthy and unhealthy aspects of these exit barriers. We have a dedicated topic for this purpose. One can create exit barriers without being unethical, so that a customer has a good stake in staying with you. Some of the ethical exit barriers you can have:

  • Exit clause in your contracts.
  • Provide value added but complementary services, which your customer gets used to.
  • Understand customers business and domain etc…


In a bid to win over customers, enter new markets and gain market share it seems that many businesses will make many promises to win the customer over, many of which seldom come to fruition. How many times have you been ‘duped’ in to buying a service or product, which the seller claims “has a good after sales warranty package”, and when you have tried to claim on the warranty you have found that it isn’t worth the paper it is written on?

This is a prime example of a business over promising and under delivering. There are several other examples of businesses over promising and under delivering that happen to many people on a daily basis, such as a business stating a product will be delivered in three working days when in fact it is delivered in five working days. Over promising and under delivering is a risky strategy for businesses as it is likely to disgruntle the customers, and virtually eliminate the possibility of repeat sales.

By: Dr. Ashish Barua, Former Associate Professor, Indian Institute of Rural Management, Published in The Insurance Times, May, 2012

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