Text reminders to policyholders for insurance policy renewals are a welcome service that improve communications. When insurance companies don't communicate well, it leads to confusion.

Also, another area text messaging is being used is in checking policy statuses.

On paper, it seems easy to explain what happens when an insurer doesn't continue a policy, but there are many factors. In a piece for The New York Times, American College of Financial Services assistant professor Kevin Lynch commented on a woman dropped by her insurance company after making a major claim for a lost engagement ring. Lynch said that the frequency of the insured's claims made a difference in this example.

"What happened in this lady's case is she had two substantial losses within a relative short period, which is the frequency issue," Lynch explained. "The insurance company said she represents a risk outside of the acceptable parameters, so they chose not to renew her."

"The difference between choosing not to renew and outright cancelling a policy may not be evident."

Even if the insurer is well within its right to discontinue, the difference between choosing not to renew and outright cancelling a policy may not be evident. The Insurance Information Institute said that the amount of notice an insurer gives before making this decision can vary depending on the state. This is also true in Canadian provinces.

Since non-renewal can happen for many different reasons, including some that don't concern the insured at all, being open about this with easy-to-understand messages can at least leave he or she feeling less shocked. It helps when it's made clear cancelation happens for very specific reasons, according to the source.

With accurate renewal updates via text messaging insurers can reach policyholders, and improve communications. It's easy with a good SMS API connected into a reputable SMS Gateway.