fear of finance

If you have always suspected that your bank - or your building society, credit card provider or insurance company - does not value your custom, your suspicions may soon be confirmed. Financial service providers, faced with an increasingly disloyal customer base, are struggling to identify their best customers as a first step to positive action to try and retain them.

Research shows that it costs at least four times as much to win a new customer as it does to retain on old one, so financial services providers are aware as never before that customers they used to take for granted must be assessed. If they fit the profile of a valuable customer, they must be cossetted and cajoled with improved services and, where appropriate, with financial incentives to stop them looking elsewhere.

Banks already get indirect evidence of customers preparing to defect. Warning signs include people who stop paying in their monthly salaries and reduce the number of cheques they write and the standing orders they authorise.

In some cases, of course, the banks may not care about these early warnings. Current accounts are not necessarily all that profitable unless customers continually overdraw by small amounts and trigger the full range of penalty charges the banks can levy against them.

But if you send the coded warnings through your account, and you are considered wealthy or active enough to represent real selling opportunities, these days the bank is likely to write to you or phone, to inquire whether you are unhappy and if so why, and whether you might like a premier banking service. Barclays recently introduced one, called Additions, and Natwest is expected to launch one shortly.

Good customers are also potential buyers of financial products, if they can be correctly identified and targeted. The banks have always had access to a great deal of information about their customers simply by interpreting bank statements, but they did not seem to be able to co-ordinate information on current account usage with the number of financial products, from mortgages and insurance policies to PEPS and pension plans, which individual customers owned.

New systems now offered to banks by specialist firms like the London- based Customer Value Company will enable banks to co-ordinate information and draw up profiles of customers most likely to buy more products.

Credit card companies are also suffering a sharp increase in customer disloyalty, as cardholders are attracted to new cards offering cheaper rates, higher borrowing limits, lower annual fees and rewards for using cards more frequently. Established card companies increasingly write to customers whose cards show signs of going dormant reminding them of the card's advantages and offering them higher spending limits.

Insurance companies are increasingly affected by the loss of renewal business which they used to take for granted. Renewal premiums in most cases have been reduced substantially during the past two or three years in a conscious effort to retain loyal customers with good claims records.

Premiums are now showing distinct signs of turning up again, but insurers may well have to offer discounts for early renewals in the hope of retaining good business. No-claims bonuses, traditional in the motor insurance business, are becoming increasingly common on household buildings and contents insurance in an attempt to retain good customers.

If you feel you have been a loyal customer of many years standing however, and have not claimed back more than you have paid in premiums, you must consider the possibility that you are being taken for granted, and the time has now come for you to shop around.

Clifford German