Insurance Customer Acquisition: Acquire the Best Policyholders

The U.S. insurance marketplace continues to be highly competitive. As carriers vie for an increased share of the market, the pressure to implement effective acquisition and retention efforts escalates—and with good reason. Policyholder attrition can significantly affect carrier profitability.

When policyholders switch companies after only being on the books for a short period of time, carriers scramble to recoup their original acquisition cost. Industry-wide research carried out by LexisNexis Risk Solutions confirmed that carriers are well aware of the impact of eroding retention rates. It’s much more profitable to retain and defend existing clients than to acquire new ones. In fact, the research suggests it can take as many as seven new policies to cover the value of one tenured policy. Acquiring with retention in mind is the solution to fortifying retention rates and avoiding unnecessary policyholder churn that can eat away at profits. But, how can carriers accomplish this? By gleaning and applying key insights and intelligence that lead to identifying—and keeping—the right prospects, carriers can eliminate unnecessary acquisition costs and create a more stable and profitable book of business.

What Carriers Are Doing and Why It Doesn’t Always Work

Carriers address this challenge in a number of ways, ranging from rudimentary lead vetting through the home office to employing highly sophisticated predictive models. Some carriers leverage third-party data to supplement in-house information and use that data to aid in targeting and segmentation. Then there are carriers that solely rely on their agents to determine lead prioritization and routing. Whatever the methodology, there are inherent problems. For example, third party data may not be insurance-specific, and so it lacks the necessary relevance and detail that insurance carriers need to really gain an edge on the competition. Agents may employ a variety of methods to determine lead value. Some may rely on their intuition, experience or in-house models to determine lead potential. It could result in agents overlooking, under-servicing or failing to convert high value leads. Conversely, low value leads could be over-serviced or prioritized and should they convert into customers, may lapse at the first renewal. In the era of Big Data, when a plethora of information about customers and prospects is literally at a carrier’s fingertips, identification and evaluation can seem so difficult. However, in carriers’ defense, identifying, attracting and retaining quality policyholders is a justifiable challenge that exists across the industry. Because of our unique insight into the insurance market and advanced analytic capabilities, LexisNexis Risk Solutions has established that the road to acquiring with retention in mind is sign posted. We have identified three key indicators that can help carriers predict who is a good and potential long-term customer and who is not. Focus on those indicators, and watch your acquisition and retention efforts pay off.

Indicators That Can Point You to the Right Prospects

The critical factor in effective acquisition and retention efforts is engaging highly predictive, insurance specific intelligence at the point of prospecting. Doing so allows you to more accurately determine a prospect’s retention potential. LexisNexis Risk Solutions has identified the following three key indicators that measure this potential:

1. Identity Verification
2. Analytical Models that Identify Potential Risk and Attrition
3. Real-time Lead Assessment and Evaluation