White Paper

Property & Casualty Carrier Digital Technologies: Measurement to Drive Profitability

The Growing Importance of Revenue Justification

By: David Mondgock

As property & casualty insurance carriers move to strategically align and adapt into digital marketing technologies and embed data and analytics into their customer acquisition initiatives they are faced with new challenges. These challenges include: the growing importance of revenue justification; a seemingly endless array of new marketing channels; and increasing demand from insureds for a cohesive, relevant experience across channels and devices, all of which make digital marketing feel intimidating.

In reality, the digital marketing and sales efforts of property and casualty insurance carriers generate value that is not being recognized, so the effectiveness of these efforts is greatly underestimated. The primary reason this happens is lack of a unified, stable approach to measurement. Within large institutionalized traditional property & casualty insurance carriers, it is not out of the norm for the context of measurement to keep changing: moments of value are often dropped out of measurement and these numbers can be quite extensive. Furthermore, the traditional approach of funnel-based marketing where all customers are treated with the same messaging is at best inefficient and at worst totally dysfunctional for a direct customer acquisition initiative.

A funnel-based marketing process depends on the volume of interactions with potential insureds and it does not reward for an attained customer value. This usually results in a growth result that is based upon an inconsequential measurement that masks the downstream costs to secure the insured. For example, the Belgian Insurer Corona Direct experienced this problem when the cost to secure new customers exceeded first-year revenues by almost 50%, forcing an unforeseen strategic change.

Analytics Must Yield Insights

The role of analytics is to extract insight and embed it back into the insurance carrier's customer acquisition processes. The use of analytics to mine customer insights is at the forefront of revenue performance. Used in this way, customer value is the primary KPI where efforts to secure new insureds are attributed based upon the outcome and incrementally added as a key metric of success. As more and more carriers turn their focus to the customer journey, it has become imperative that the insurance carriers align the journey with revenue expectations. To do this effectively it is essential to align marketing measurement with the behavior of prospective insureds, including:

Ensuring that intangible and often previously unmeasured effects actually get measured, perhaps for the first time. This will lead to previously unattained returns on marketing spend.

Ensuring marketing results are typically clear and easy to understand. C-level executives realize the value because the measurement approach and standards align with models already used in Finance.

As campaigns increase the value of customers, there's little doubt about the contribution to company profit.

Customer-focused metrics provide critical clues supporting expectations, engagement and experience-related issues that can be leveraged to strengthen the customer experience. By focusing on behavioral queues, an organization can stop treating all insureds equally (inefficient) and start using customer behavior to inform communications, reduce waste and deliver value. Insureds expect a coherent, relevant experience with an insurance carrier's brand across all channels and devices at key points in their journey. Campaigns must balance between acquisition and retention to generate new growth and increase customer lifetime value to increase profitability.

Insurance carriers frequently make marketing decisions such as new product innovation, channel selection, and media buying based on assumptions. Behavioral analytics provides a predictable, consistent, repeatable approach to communications that have increased relevancy.

Reliable insights are a planning necessity, not a one-off luxury. More importantly, insurance carriers must keep up with attention-strapped insureds requiring a timely delivery of insights and subsequent actionability. This timely delivery of insights has a core dependency on technology and process infrastructure. Equally important is the relevance of insights at the point of customer interaction to ensure relevant messaging, engagement, and experience. These aspects of customer behavior are not inherently tangible, but through behavioral models, an insurance carrier is able to measure and manage accordingly. Behavioral models allow the right message at the right time and with an experience that is intuitive to the insured, the device and the screen. This is the competitive differentiator that can directly influence revenue and profitability.

Contextually Relevant Experiences

Groundbreaking analysis is futile without effective execution. Insurance carrier stakeholders unfamiliar with analytics often misinterpret results and place data out of context, diminishing the value of data-driven decisions. A fresh approach is required to implement contextually relevant experiences that factor the insured's state of mind and intention when they intersect the brand with an informational request.

High performance companies such as Apple, Google, Netflix, etc. are all branding through experience using behavioral analytics to indicate preference of communication, decision-making criteria and intent to purchase that has been woven together by a connected customer journey. In direct comparison, Xfinity, aka Comcast, has been continuously rebranding their traditional service that is operationally hindered, poorly perceived and escalating in service costs to fulfill customers. According to Google, 69% of digital customers agree that the quality, timing, or relevance of a company's message influences their perception of the brand. Going further, the preference of communication and media to impart messaging will further impact the experience and resulting perception of the brand of the insurance carrier.

Insurance carrier marketers that continue to focus on awareness and exposure neglect the notion of customer development. Marketers can no longer sustain growth through acquisition alone and must manage the entire customer life cycle to maximize value for the organization. This requires a change from managing campaign execution to managing the customer experience in its totality. The breadth and depth of analytics capabilities, either in-house or through strategic partners, must reflect this change to ensure adequate intervention. Applying analytics across the life cycle of insureds identifies opportunities to extend the customer experience and generate value. With customer value as the underlying goal, organizations acquire more profitable insureds through increased targeting, reduce costs only by spending in those channels that foster communication and identify cross-sell and upsell directly to the right insureds, increasing share of wallet.

Strategic Forecasting

The insight gathered through behavioral analytics and customer profiling have the ability to repeatedly predict future communication with increased effectiveness. The next step is to further refine these models with propensity in relation to a business objective, i.e. propensity to purchase, propensity to terminate service, propensity to disengage, etc. These refined behavioral profiles allow insurance carrier marketers to intervene at key points of a customer journey which are both highly emotional and influential. For example, Lincoln Financial built several churn and propensity models to represent key behaviors that reduced churn and improved new acquisition strategies by integrating analytics and market research. Essentially, these models define customer segmentation that defines the differences in customer experience, engagement preferences, decision making criteria and how to drive deeper engagement.

Profitability growth will no longer be relegated to a single customer acquisition strategy but coordinated across multiple strategies supported by a unified measurement approach (new acquisition, increased retention, upsell/cross-sell and value perception). Strategically, insurance carrier marketers can target accurately and timely to drive brand affinity and better facilitate up-sell/cross-sell opportunities with a higher degree of precision. Additionally, in-market timing and brand targeting are further facilitated by narrowing the customer universe to those who are actually shopping for the coverage and the brand. Value perception is facilitated by increased relevancy and an experience indication to drive coverage adoption. These are the pieces that, when coordinated together, have the ability to forecast insureds' potential value and potential growth increases to profitability. The analytics transform backward-looking analysis into predictive growth across all strategic disciplines.

Personalized Marketing with Next-Best-Action

Understanding the future worth of customers by understanding customer acquisition and retention should be pervasive in any insurance carrier. However, the dimension of where customer analytics opens possibilities to become more personal with offers and coverages is the bigger strategic differentiator. Adding context to the customer interaction by using predictive rules that are integrated across an organizational ecosystem, it allows for a personalized communication with clarity of objective and purpose that is measured uniformly. Further-more, by proactively anticipating the insureds' preferences and timeliness of messaging, a personalized experience delivers value to both the insured and the carrier. This delicate balance is rarely achieved due to the fact that a customized business case for each insured is required. Most insurance carriers suffer from operational constraints, inhibiting personalized interactions. But analytical models enable the ability to get ahead of the issue and, through machine learning, articulate these use cases using outcomes desired by the business. Moreover, it is the consistency across channels over time that has bearing on customer value attainment and profitability growth that has higher strategic interest. Machine Learning facilitates recommendations concerning next best action based upon specific business context, leveraging communication methods (inbound/outbound) based upon customer value projection and cost of activity. The result is a personalized message in the preferred communication medium with an offer that is aligned to a specific business objective that is grounded financially and predictable.

Recreating the Marketing Strategy

Within the insurance industry the entire revenue creation process is ripe for disruption, reimagination and fundamental reinvention. As mentioned above, marketing is much more than simply being tactical (advertising, branding, conversion, etc.). Today's digital technologies require a proficiency in ascertaining where insureds reside in terms of relationship with the carrier and their preferences of communication with specific messaging to create mutual value. Essentially customer-centricity equals relevancy. Insurance carrier marketers must increase competencies in recognizing patterns within these cycles to predict problems and take corrective action before the insured has a negative experience. Luckily, analytics rooted in customer behavior boosts efficiency by defining the customer state and life cycle for marketers to intervene more meaningfully and timely toward the ultimate goal of a personalized experience.

About the Author

David Mondgock is partner at GreenFrog Marketing Intelligence and a leading expert in digital marketing and marketing intelligence. David drives GreenFrog's analytics innovation in digital, social, and analytics domains.

GreenFrog is an affiliate company with Global Insurance Service Innovations (GISI).

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Chris Christensen


About Global Insurance Service Innovations

Global Insurance Service Innovations seeks to disrupt the way insurance is sold. We innovate technology-driven insurance products and services through a proprietary and turn-key single source customer acquisition platform - Quik-Linesm for risk mitigation, management, and protection. Quik-Linesm is supplemented by expert-driven Professional Services and support systems.

Chris Christenson

Chris Christenson is Chief Revenue Officer of Global Insurance Service Innovations He brings a strong understanding of the insurance industry and software solutions.