The effect of perceived costs and benefits on
churn intention and actual churn
The Dutch health insurance market
Introduction (1)
Accountability of marketing department decreases
Improving customer relationships or gaining competitive advantage
Importance of churn management
Gain insights in churn probabilities
New legislation Health Insurance Act (HIA) in 2006
Increase in competition
Churn in the Dutch health insurance industry
Churn rate last year is 6.4%
Limited research effect of churn intention
Introduction (2)
Research question:
To what extent do perceived costs and benefits influence churn intention and churn
behavior for different groups of people in the Dutch Health insurance market?
Sub questions:
• What are the perceived switching benefits and perceived costs?
• How do the perceived costs and benefits influence churn intention?
• To what extent does churn intention lead to actual churn?
• To what extent does churn intention acts as a mediator between the perceived costs and benefits
and actual churn?
• What are important segmentation dimensions?
• How do the relevant segments look like?
• To what extent do the different segments influence (moderate) the relationship between the
perceived cost and benefits and churn intention?
Methodology
Datasets with health insurance data in 2013
Merged five datasets into one dataset with 6445 households
Factor analysis
Principal component analysis (PCA)
Logistic regression analysis
Binary variables for churn intention and actual churn
Mediation analysis Baron and Kenny (1986)
Four steps to indicate partial, perfect or no mediation
Latent Class Analysis (LCA)
Results (1)
Five segments from LCA
- Retirees
- Middle class
- Upcoming starters
- Wealthy elderies
- High educated youngsters
PCA two components
Results (2)
Hypothesis Hypothesis
H1a: Churn is expected to be heavily influenced by the intention to churn. Accepted
H1b: Churn intention acts as a mediator on the relationship between the perceived benefits/costs and actual churn Accepted (Mediation) H2a: The premium of other insurance companies is the most important perceived price benefit that drives churn intention. Accepted
H2b: The premium of other insurance companies is overall the most important perceived benefit that drives churn intention. Rejected H3: The perceived benefit service quality positively affects churn intention. Accepted H4a: The perceived benefit (better) coverage at other insurance companies positively influences churn intention. Accepted H4b: The positive effect of supplementary insurance on churn intention is stronger than the effect of coverage. **
H5: The higher the overall perceived switch costs, the lower customers’ intention to switch ** H6: Procedural losses negatively affects churn intention. The higher the lossescustomers’ experience, to lower the intention to churn. ** H7: Financial losses are the most important costs that negatively drive churn intention. ** H8: Relational losses are the least important perceived costs that negatively affect churn intention. **
H9a: Age is the most important segmentation dimension that influences churn intention Accepted H9b: Income is the most important segmentation dimensions that influences actual churn Rejected H9c: Segments including young high educated customers are more likely to churn. Accepted H9d: Segments including young high educated customers have a higher churn intention. Accepted H10a: The level of churn intention is higher in urban areas than rural areas. Accepted H10b: Segments including customers living in an urban area are more likely to churn. Accepted H10c: The region (nat. vs. reg.) a customer lives in determines the type of insurer Accepted H10d: Customers living in the western part of the Netherlands are more likely to churn Rejected H11a: Customers that search online are better informed and experience a high churn intention. **
H11b: Customers that use online channels to gather information are less likely to churn. **
