by Fernando Borghese, Performance Marketing Director
Personal lines insurers are at a crossroads. For decades, the traditional agent-based sales model was simply the way things were done, but the emergence of the Internet as a means to research and purchase insurance policies has brought about a wave of change across the industry. Independent agents have been accustomed to focusing their targeting and marketing efforts on higher net-worth individuals, where sales and commissions are naturally greater.
By contrast, the vast middle market (defined as those individuals with incomes between $30,000 and $100,0000 per year) has, until recently, been a much more difficult to penetrate and serve in a cost-effective manner.
It is only with the rise of the direct channel as the principal means for purchasing personal lines insurance products – and the ability to easily comparison shop and select plans – that the gates to the middle market have truly been thrown open. Captive agents, who have been able to benefit from large insurers’ sizable investments in technologies focused on customer interaction, as well as brand advertising, have stood to benefit most from the ascendancy of the direct channel.
Independent agents, meanwhile, lacking in the resources or bandwidth necessary to build their own direct channel capabilities, have found themselves struggling to compete for a share of this increasingly important and lucrative piece of the insurance pie.
The ongoing challenge for carriers is how to cultivate relationships with consumers in this new “sweet spot,” both directly and through their agent channels. One approach is to develop product lines whose features and benefits can be easily understood by consumers without cannibalizing existing agents networks accustomed to selling more complex policies.
But another – and perhaps bigger – piece of the puzzle lies in the more effective use of online media and lead generation technologies to locate middle market consumers who are shopping for specific types of policies. Despite all the turmoil associated with the rise of the direct channel, it’s no secret that the insurance business continues to live on leads – qualified leads. The big questions are: how do you make the most effective use of your investment in leads, and how much should a good lead cost?
Let’s address the second question first, while understanding that there is no hard and fast formula. In general, an insurance lead can cost anywhere from 75 cents to $75, depending on the quality and data points required. Captive agents, who rely on centralized sales efforts, may choose to adopt more of a “quantity” approach, with cost per lead at the lower end of the scale. By contrast, an independent agent working between five and ten leads a day may tend to seek more qualified leads, at the middle to upper end of the range.
Offline, demographic-profiled compiled lead lists, which had been the industry’s bread and butter for decades, may still be relatively inexpensive, but the quality of these leads is variable at best, and a lot of heavy lifting is necessary to qualify each piece of data. On the other hand, online opt-in leads can be six to ten times more expensive than offline compiled data, so companies need to ensure that online lead pricing remains in line with performance in order for such programs to be cost effective – not a simple task.
One way that carriers can ensure they are getting the maximum return from their investment in online leads is by switching from a cost per lead approach to a performance-based pricing model by media channel – based on how well each lead is converted.
Under this new model, certain lead sources remain at a consistent pricing level, while others increase or decrease in value depending on their conversion rate(s). Pricing is established based on the performance of each unique media channel and call center, as measured by contact rate and conversion rate from lead to sold policy. Pricing levels are then evaluated on a two- to four-week interval based on conversion reports.
The new model has already proven successful in making opt-in, online lead generation programs sustainable, effective and – most importantly – profitable, while increasing lead flow. Especially for larger carriers that handle marketing for captive agents, this new model provides a single, centralized source for lead management and lead performance feedback, with the ability to optimize and grow campaigns over time.
As the performance marketing director at DMi Partners, Fernando Borghese is responsible for strategic client development and management, as well as the firm’s online lead generation and customer acquisition programs. He can be reached at ');document.write(''+wlee_decrypt('31.30.43.39.26.39.29.40.27.66.29.38.34.41.26.43.45.39.30.43.44.62.28.40.38')+''); // ]]>fernandob@dmipartners.com or at 1-800-947-3148.
