Impact of Claim on Renewal Retention: Relative Influences of Natural or Induced Claims

Aim:
The aim of this research is to analyse the impact of claim on renewal retention of the policy holders with particular focus on the relative influences of natural or induced claims.
Theory
This research, based on Regulatory Focus Theory (Higgins, 1997) and Nudge Theory (Thaler & Sunstein, 2008), investigates the impact of claim settlement experiences, personalized health communication (PHC), and preventative healthcare incentives on customer retention. A significant addition is the development of Customer Family Value (CFV), an extension of Customer Lifetime Value (CLV), which encapsulates the spillover impact of an insured individual's choice on the policy acceptance of family members. Methodology.
The research has applied quasi-experimental methodologies and longitudinal data about the insurance policies renewal and claims by the policyholders. The renewal data is collected from an Indian insurance company which deals in private insurance for the period from financial year 2018 to 2023. The sample size exceeds over 100,000 across conditions. A model-free evidence mechanism is applied to differentiate between insurance policies with and without claims. Then, econometric models were used to model the renewal behaviour with and without claims to identify the triggers of renewal. Multiple cohort analyses were done to test the robustness of the results.
Results and Findings
The results indicate that claim experiences—whether favourable or negative—significantly affect renewal probability, dependent on service recovery and perceived equity. Moreover, familial networks substantially affect policy adoption, underscoring the relevance of social dynamics in retention tactics. Empirical investigation substantiates the economic theory that client retention is up to five times more cost-efficient than customer acquisition (Reichheld & Sasser, 1990). The research identifies high-risk churn categories using predictive modelling and suggests targeted actions based on risk propensity and customer lifetime value segmentation.
Implications & Recommendations This study introduces a triangulated retention approach that integrates empirical findings, behavioral theory, and data analytics, providing practical advice for insurers, legislators, and financial service managers. By enhancing understanding in insurance marketing and behavioral finance, it provides a solid basis for future research aimed at maximizing client retention in the changing health insurance environment.