Information Transparency and Customer Churn: Evidence from the Insurance Industry

Customer churn (not renewing their contracts) is a major issue in the services industry. In this study, we examine the role of a price/service comparison website for car insurance services in customer churn. Two competing theories on information transparency inform this relationship, price elasticity (which induces churn) and high product informedness (which reduces churn). To address this tension, we used a unique dataset from a major European car insurance company to show that customers who are acquired by a price/service comparison website are 3% less likely to churn than customers from traditional channels, implying that transparency on price and service information helps to reduce customer churn. We also propose a randomized field experiment with actual customers of the car insurance company to corroborate our preliminary results. These findings contribute to the IS and Marketing literature by linking acquisition channels, information transparency, and customer churn, offering implications to managers to allocate resources to high information transparent channels to reduce customer churn.