Colorado Life Producer License Practice Test

If a policy owner plans to change insurance coverage from one insurer to another, what does the current insurer do to discourage this?

1. Launches a new marketing campaign

2. Offers discounts on premiums

3. Starts a conservation effort

4. Increases benefits of the current policy

The correct answer is: Starts a conservation effort

When a policy owner considers switching insurance coverage to a different insurer, the current insurer may initiate a conservation effort to retain the policy holder. This strategy involves various actions aimed at emphasizing the value of the existing policy and addressing the reasons the policy owner might be contemplating a change. A conservation effort could include personalized communication from agents, reviews of the policy’s benefits, and offering to adjust terms or coverages in order to better align with the policy owner's needs. By doing so, the insurer tries to highlight the advantages of staying with their coverage as opposed to moving to another company, thereby fostering customer loyalty and reducing policy lapses. In contrast, launching a new marketing campaign or offering discounts on premiums might not directly address the policyholder’s specific concerns about why they want to switch, and simply increasing benefits of the current policy could also be less effective without a broader conservation strategy. Thus, a conservation effort specifically targets the retention of the policyholder by engaging in dialogue and showcasing the current policy’s strengths.