If you are like most insurance companies, you are feeling the steady pinch on margins. And when you look at your costs, other than the actual risk cost, the most expensive item is the cost of agents. What’s worse is that the upcoming generation of insurance purchasers refuse to speak with agents and are digital natives, accustomed to doing their purchase research and often buying online.
Throughout the last 25 years, savvy insurers have used direct marketing to generate a large percentage of their book of business. Typically they will pick a product to sell such as Critical Illness, Life & Health or Accidental Death & Dismemberment – insurance products that are easy for a consumer to understand. These products are valuable even to consumers who have insurance thru their employer and with monthly premiums typically under $30/month are affordable to most. Insurers obtain prospects by partnering with a list owner such as a loyalty card program or drive direct leads into the insurance company via TV ads or via out bound telemarketing.
If you are one of these savvy insurers, you use multivariate regression analytics to refine your targeting – this commonly used statistical technique identifies the likelihood of each customer purchasing your product. Marketers, of course, select the best prospects only, thus obtaining the best response rate and eliminating the cost of marketing to prospects with a low likelihood to buy. However, this puts you in conflict with your partner/client list who wants you to market to as many people as possible, since they are compensated on a percentage of premium, regardless of its profitability to you.
The challenge for you both is that this refining process inevitably erodes the list and it is reduced to an unsustainable size. At that point the business is shut down, leaving you AND your client without a formerly healthy source of income.
At this point, what do you do?