CASE STUDY: How to Lose Trust With Customers
Here's a Classic Example of How Companies Lose Trust
It’s a simple equation:
Lose customer trust = Lose customer
There is a mountain of research that places trust at the core of customer loyalty and customer experience. It appears, however, that some in the insurance industry may not have gotten the memo.
In March, 2024, Consumer Reports published an article on how to save money on car insurance. Among other things, it suggested that consumers can often see significant benefits by getting competitive quotes the next time their insurance is up for renewal. Some auto insurers, apparently, are notorious for taking advantage of their loyal customers.
To be honest, I wasn’t entirely convinced. My wife and I had been loyal customers of the same car insurance company for over twenty years. Surely, we thought, there were some benefits to this.
Well, it turned out there were – but only for the insurance company, not us.
Loyalty to the insurance company worked against us
This past June, we traded in our trusty 13-year-old Lexus for a spiffy 2024 Kia EV6, and decided to take Consumer Reports’ advice. We were absolutely floored by the results.
All of the quotes we received were over a thousand dollars lower than our existing provider. To illustrate how ridiculous the difference was, our existing insurer had been charging us 66% more for our old car, than other companies were going to charge for a new car valued at almost 10x its value.
The numbers that lost our trust and loyalty:
The book value our old Lexus was around $6,500 – exactly one-tenth the cost of our new car. Needless to say, we had been expecting a significant increase in our insurance rate. Boy, were we wrong. By switching to a new provider, our insurance actually went down – a LOT. We had also asked the company to which we had been so loyal to quote on our spiffy new car. The rate they quoted was double that of the company we eventually switched to.
They lost more than just a policy
As you might suspect, we no longer have the policy with our former insurance company. It’s also a safe bet that not one person who works for that company has lost a scintilla of sleep over this. We are, after all, two teensy-weensy fish in an ocean of customers.
This is, however, the customer experience mindset that can cripple a company. If you’ve ever looked at our Cost of a Lost Customer calculator, you know where I’m going with this.
You see, not only has this company’s demonstration of how to lose trust with customers cost them one insurance policy with us – it has cost them all future policies with us. We also told a whole lot of people about our experience and, as of this writing, five friends and family went through the same exercise – and changed their policies as well. None of them have any intention of going back to the company that broke their trust.
What part of trust did they break?
The research tells us that customer trust, and customer loyalty, are created by three components: Caring, Competency and Integrity. In the simplest terms, it means that we trust companies and people when we think they genuinely care about us, are very good at what they do, and will act with our best interests in mind.
The company I dealt with followed a practice that is common auto insurance industry – one which compromises any semblance of integrity.
