What if you could determine when policyholders were considering switching to another carrier and then identify which of those customers were profitable enough to justify trying to keep them? And what if you could determine the effectiveness of a marketing campaign while it was in progress, changing your strategy before investing a lot of money?
Such accuracy and efficiency is possible with marketing analytics and campaign management tools, according to experts. But few insurers are using them.
With a price tag typically at $500,000 or more, these high-end tools may still be too expensive and obtuse for the risk-averse insurance industry. Instead, most carriers are opting to use less expensive, more familiar Web-based technologies to reach their target markets.
The insurance industry is not on the top of the list of industries using marketing analytics and campaign management tools, says Bill Chambers, principal analyst at Doculabs, a Chicago-based independent technology research firm.
Banking, retail and pharmaceuticals have been the early adopters, he says. However, some carriers are beginning to show interest in the technology, which, at this point, is still best suited to large carriers with sophisticated marketing departments.
Last year, Aetna Inc. implemented Fair, Isaac and Co. Inc.'s Market-Smart Decision System on a test basis-an arrangement that reduces Aetna's risk with the new technology, according to Len Havens, director of marketing at Aetna.
The Hartford, Conn.-based health and group benefit plan provider is using the system to create targeted worksite marketing campaigns to sell additional Aetna products, such as long-term care and supplemental term life insurance, to eligible employees in Aetna group plans.
The system enables Aetna to develop multiple campaigns for specific sectors of employees for each product offering-rather than issuing one mass mailing.
For long-term care insurance, age and gender are crucial distinctions that determine the content of Aetna's targeted mailings.
"Long-term care insurance is a complex product," Havens says. "When you try to market this to a whole group at once with the same message, you're sending the wrong message to most of the people."
By using marketing analytics, Aetna is able to provide more relevant information to help people make more informed decisions, he says.
For example, women live an average of seven years longer than men, they're the primary caregivers, and they typically haven't been as involved in financial planning as their husbands. Therefore, Aetna designed a mailing specifically targeting women with research about their unique long-term care scenario.
The company also has customized kits for baby boomers, young people and seniors. And the kits can be personalized-with the prospect's name and enrollment period, and the cost of the product at their actual age.
Aetna's targeted campaigns begin when Aetna receives basic information about eligible employees from its employer customers-information such as their name, address, social security number and date of birth. After that information is captured in Aetna's system, it is transferred to Fair, Isaac, which builds and maintains the data warehouse.
Fair, Isaac scrubs the eligibility list and appends it with additional data about the employees-such as income, marital status and gender-obtained from third-party consumer data firms.
Finally, Fair, Isaac provides Aetna with various profile reports, updated on a monthly basis, which Aetna analyzes to develop its worksite marketing strategies and campaigns.
"We receive a very broad profile report that shows what (an employer) company looks like," Havens says. "Then we get in deeper and do an age breakdown of those employees. When we mail to those people, we know who they are. And when they purchase, we know who they are. So we can tie results to those initial mailings."
Aetna can determine not only how many people purchased the product it offered, but also if one group purchased at a higher rate than another group.
So far, Aetna has conducted two small direct mailings for long-term insurance, and one for supplemental term life. Havens declined to discuss the results because they are proprietary, he says. But he admits he was surprised. "We realized we thought we knew who was purchasing our products, and we know better now."
Knowing customers better is precisely what proponents of marketing automation tools tout as their primary benefit.
"Many companies are trying to focus on targeting their most profitable customers," Chambers says. These tools enable companies to determine profitability by customer and the return on investment of their marketing campaigns.
Even more important, he says, a marketing department can analyze a campaign while it's still in progress. If the campaign isn't working, the company can change direction-targeting a different group or using a different offer.
Marketing analytics is enabling Aetna to sell insurance directly to employees, which is "a different ballgame" for the group health insurance company, according to Havens.
"Group insurers sell to employers," he says. "We're taking quite a leap here."
Previously, Aetna knew only employees' names and addresses. With more detailed customer profiles in hand, the company is no longer taking a one-size-fits-all approach to marketing. "Target marketing is much more efficient," Havens says, "We can afford the extra expense to do it, because we know it works."
Although evidence suggests that marketing automation tools are effective, insurers are still approaching the technology cautiously. Fair, Isaac has developed approximately 100 marketing models for 40 to 50 insurance companies. Most of those projects involve developing customer profiles and segmentation-the most basic use of marketing analytics, says Mark Gorman, vice president, insurance market, at Fair, Isaac.
Currently, few carriers are experimenting with more sophisticated analysis-such as using predictive models and scores to determine customer retention, loss ratios and product pricing.
"The insurance industry is not at the same level as other sectors of the financial services industry in the use of predictive models and scores," Gorman notes. And not many insurers see the need for campaign management tools-another component of marketing automation-because the majority rely on agents, not direct marketing, he notes.
Among those carriers that have experimented with marketing analytics, few are willing to discuss their experiences. Magnify Inc., a Chicago-based predictive analytics outsourcing firm, has worked with three insurance companies to build models to determine customer profitability, satisfaction and attrition. However, the carriers will not speak about their projects.
Several factors contribute to insurers trailing behind other firms in adopting marketing automation, industry experts say.
For instance, state regulations make it difficult for carriers to test different product prices in the market, which is a useful application of the technology. Plus, insurers have organized their databases around products rather than around customers, which often makes it difficult for them to retrieve the data they need for refined analysis.
That situation may be changing, however. As carriers offer banking and brokerage products, they realize they need to take a more holistic view of the customer, rather than just a product view, Fair, Isaac's Gorman says. "They need to understand the different elements that play on that customer's long-term relationship with the firm-even if it is an agency firm," he says.
Agents as targets
Because agents are still the primary distribution channel for most insurance products, many carriers are targeting their agents to help them reach key customer prospects-rather than trying to reach those prospects themselves.
Marketing analytics could certainly be employed by carriers to equip agents with richer customer information for cross-selling products, according to industry observers, and perhaps insurers will move in that direction. For now, however, the industry is investing in more pervasive Internet technologies.
Seattle-based Safeco Corp., for example, has partnered with Agency Revenue Tools LLC, a Conway, N.H.-based independent agency and agency consulting firm that developed Web-based billing software to help agents sell personal insurance to employees at their clients' work sites.
Called Worksite Marketing Manager, the software enables agencies to coordinate billing from multiple insurance companies for multiple products. Agencies can automatically bill employers with a consolidated invoice, which includes payroll deductions for each employee, then remit premium payments back to Safeco-and approximately 50 other participating carriers, including The Hartford, Travelers, Progressive, Kemper and Encompass.
The software makes it easy for agents to sell personal insurance to employees because people prefer monthly payroll deductions over paying premiums themselves, says Dwight Bagwell, president of Bagwell Insurance Services, Augusta, Ga., a user of the software since August. And customer retention is higher with payroll deduction, he says.
"This is a powerful way for independent agents to tap into existing client relationships to write more personal insurance," says Alice Cameron, marketing director at Safeco.
For every 1,000 customers an agency writes in this program, the agency can expect to increase revenue by at least $200,000, depending on commission per account, according to Agency Revenue Tools. That $200,000 in revenue represents $1 million to $1.5 million in written premium, according to Cameron.
"That's doable for a lot of agencies," she says. "And that's attractive to us because we are firmly committed to independent agents in this marketplace. If independent agents are successful, we will get our share of the business."
Although Safeco's personal systems were designed for direct billing, the company didn't have difficulty setting up agency billing, Cameron says. Safeco simply established an agency code for worksite business and tapped into an old agency billing capability that existed in-house.
"Once we shifted our mindset, it was very easy to make the switch," she says. "Now, we're presenting the agent with a monthly bill, and the agent is responsible for the premium and managing that process. So we freed ourselves from individual account reconciliation we were doing every month."
AS EASY AS POSSIBLE
In a similar approach to Safeco's, The Hartford Financial Services Group, Hartford, Conn., has partnered with USADATA, a New York City-based marketing services firm, to provide a direct mail Web portal for agents to target prospects for flood insurance. The Hartford's goal is to write polices for uninsured properties in flood communities, says David Moore, assistant vice president of marketing communications and strategy at The Hartford.
Agents who visit thehartford.usadata.com can click on a specific region on a U.S. map, and-powered by geographic information technology -the site zooms in on the region, showing flood zones. The agents select ZIP codes in a flood zone, as well as a mailing piece-which they view and personalize on the site. After reviewing the cost-which is under $1 per lead-the agent pays for the mailing via credit card. USADATA mails the piece, instructing prospects to call the agent directly.
"Our philosophy is to make it as easy as possible for agents to access programs, choose collateral, pay for it, and have the program run on their behalf," Moore says. "And we believe we can do that and drive out cost for the agent by delivering it through the Internet."
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