The Situation

Leading agent-based insurers such as Travelers, Nationwide and others are heavily investing in their direct-to-consumer distribution channels to acquire more online shoppers. Forrester data shows that U.S. insurance buyers’ (auto, home and life) typically use more than one channel (Web, phone, agent) to research and purchase insurance. Firms with well-integrated direct and agent distribution strategies are well-positioned to win in the marketplace.

Unfortunately, “going multichannel” is very difficult. Carriers must integrate customer data and channels in order to support customers who start online but purchase via the phone or in-person. Any insurance CIO will echo that the blueprint of multichannel is much easier than the implementation.

Multichannel buying behavior has also greatly increased the complexity of marketing and distribution. Carriers are using media-mix optimization and integrated multichannel marketing and lead generation campaigns with TV, radio, print, search and display. Agent-based insurers have the added challenge of supporting their agents with local marketing, co-op and lead generation. Finally, independent and captive agents are entrepreneurs; and many invest in their own local search and lead-generation campaigns.

At the same time, a large number of insurance lead “aggregators” permeate the search world. These firms make their money by selling leads to carriers and agents. Aggregators get leads through paid search in the same way that carriers and agents do—by bidding on branded terms (e.g. Travelers or Nationwide) and non-branded terms (e.g. auto insurance or car insurance). This added layer of competition also contributes to rising marketing costs.

The Problem

The combination of corporate paid search, local agent search and aggregator search is adding another log to the channel conflict fire, as these entities compete for the same customer. Corporate marketing and eBusiness executives are trying to optimize their allowable costs per acquisition. However, acquisition costs remain high as more money is invested in search and costly lead generation. Carriers cannot control or manage the search activity for every agent. In addition, local agents are even bidding branded local terms (e.g. State Farm San Francisco) to generate traffic. Conduct your own local search and you will see the challenges that paid search is causing for major carriers and agents (see below), who are bidding against each other and against aggregators for the same branded term. Competitive bidding for the same term ultimately increases the cost of that branded term, and, in turn, increases the overall customer acquisition cost.

This example, (see below) shows the extreme competition in the “generic” or “non-branded” search terms such as “auto insurance.” Extracting ROI from these very expensive search terms will always be a challenge.

The Solution

Major carriers are looking beyond their digital agencies to find more effective search solutions to help manage rising costs and channel conflict between agents and corporate eBusiness. eBusiness and corporate marketers at insurance carriers should evaluate:

Performance-based search. Most search firms or agencies offer a cost-plus model that pays on clicks and other traffic or, ultimately, how much money the client spends. In reality, search is completely measureable and the compensation model should be based on results—not client spend. A top 10 P&C carrier has increased its paid search results considerably while producing a measurably lower cost per policy sold by working with performance-based search firm Vantage Media. Vantage ties all compensation to the carrier’s completed and qualified leads, turning their investment in search into a guaranteed ROI program.

Improved channel management. Vantage also reduces the channel conflict between corporate marketing and its agents by managing the search process in its entirety. Vantage is helping the top 10 P&C carrier streamline the bidding processes internally around the critical “branded” terms. Reducing internal competition keeps cost down as well. A key element to successfully reducing channel conflict is tracking the performance of corporate generated leads versus agent-based leads so that agents can see the value in allowing corporate to manage the lead generation process. Many high-performing agents are seeing stronger conversion and lower acquisition costs when using leads from corporate. The agent reduces their marketing spend on paid search and relies on corporate to provide high quality leads.

    The Results

    Prior to undertaking this new search initiative, the top 10 P&C carrier had experienced poor ROI from online marketing programs. This left many of the agents with a negative bias against online insurance leads. Since the performance-based search program was rolled out, first in a pilot format and later to all agents, conversion rates have been well into the double digits, numbers almost unheard of in the era of comparative shopping and price conscious consumers. Most importantly, search is now generating thousands of new policies for the agent base, making it an indispensable part of their marketing strategy.

    Do you agree or disagree?

    Chad Mitchell is a senior analyst with Forrester Research. He covers mobile and social media strategies in insurance, acquisition, cross-sell and retention marketing strategies, comparative raters, online guided selling tools, emerging Web and call center technologies for sales and service, agent portals for marketing and underwriting, and the best practices of leading multichannel firms. Additionally, he advises leading insurers on best practices for public and secure insurance Web sites—analyzing functionality for quoting, policy administration and claims.

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