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By Martin Boddy, CEO, Jaywing 

The insurance marketing industry has changed dramatically over the past ten years. The emergence of aggregators and their dominant spend on both TV and online advertising has made it almost impossible for brokers and direct insurers to compete using the same media. To add to this, directories, once the insurance industry’s best-performing media channel have been in rapid decline. In light of these developments, Martin Boddy, CEO, Jaywing, explores the evolution of insurance marketing over the past decade.

Ten years ago insurance customer acquisition was about two things; directories and renewal dates. Prospect records with renewal dates were the mainstay of cold direct marketing campaigns, sourced from specially-built prospect pools or created on a monthly basis as part of complex data processing tasks to merge files from numerous sources.  Targeted communications focused on brand affinity rather than offers and was driven by age and affluence assumptions about the type of customer attracted to the brand.

Effective use of data

At the beginning of the noughties some of the most sophisticated insurers were starting to get smarter with the use of their data, using customers to build quotes and conversion models. This information allowed them to target different acquisition offers, ensuring investment was used most efficiently, whether it was deciding who received full mail packs, post cards, follow-up calls or gifts to encourage a quote. The more data literate companies began to use their skills to deliver better targeting for cross and up sales, but only those with fleet of foot IT teams were able to deploy these new approaches. Data literate marketers really succeeded in this space.

Incentives were another key focus back then. These were targeted within renewal cycle, such that customers were given greater incentives for renewing early. For example, they would receive one or two additional follow-up phone calls as opposed to a letter to encourage responses to renewal invitations.

The emergence of price aggregators

Martin Boddy
Martin Boddy

The advent of price aggregators like moneysupermarket.com in the mid noughties changed the insurance landscape completely. One of the most fascinating developments is how the aggregators have created a media channel of their own outside of the traditional distribution channel. This is partly down to the type of brand advertising they have used (as opposed to direct response advertising traditionally used by insurers) and their media sales approach to attracting new insurers.

Nowadays it’s rare to see brokers advertising above the line as they focus most of their acquisition spend on aggregators who spend huge amounts on brand awareness via TV and digital channels. Aggregators are now typically responsible for generating in excess of 80 per cent of all new leads for insurers who use them to recruit.

The rise of these aggregators brought with it a major change of direction for the industry. The emphasis for brokers and insurers shifted from brand squarely to price, with brand playing a secondary supporting role to encourage conversion.  Brand is still important in insurance of course, but largely for the aggregators. Consequently, the challenge for insurers became one of competing on price in order to sit near the top of aggregator-based rankings ensuring visibility. The key for insurers was not to discount on price so much that all business was written at an unrecoverable loss. Price modelling and optimisation became much more important, and once again those brands that were more data literate were best able to take advantage of the situation.

Insurers developed sophisticated price models that traded-off price discounts against the estimated income and lifetime value of the consumer. These are based on estimates of conversion, add-ons, cross sales, risk and renewal. In other words, brands are putting in place a holistic value-based approach where marketing spend is managed by a clear understanding of the long-term financial returns from new customers. This expertise has helped insurers to deploy data-driven approaches to manage more effectively all aspects of the customer journey. Decisions about who and what to target and how much to charge have been underpinned by a detailed assessment of the value and return associated with that decision.

Establishing relationships with customers through the use of data

Given that aggregators are now in possession of huge volumes of data, insurers have been forced in recent years to take a much more considered and data-led approach to marketing.

All insurers, whether direct or otherwise, now operate in a tremendously competitive marketplace where promiscuity is the norm rather than the exception. The emphasis has shifted to better management of the customer relationship, ensuring that value is extracted by well-informed marketing interventions based on an understanding of consumers underpinned by data.

A good example of this new world of data-driven marketing in the insurance sector and how it can be employed to gain cut through in such a competitive market is Sky’s new AdSmart system. AdSmart enables companies to embark on TV advertising targeted only at agreed, highly niche groups at a fraction of the cost of traditional TV advertising using household postcode data. Through the customer’s Sky box it is then possible to monitor the views of the advert and see if those viewers have visited the brand’s website or bought a policy. One brand that has already jumped on this opportunity is 1st Central Insurance, one of the very first companies to sign up to the scheme. The company tested the technology earlier this year with their very first TV commercial that saw the brand experience a significant uplift in conversion and click through to their website. It is possible that we will see more of this in the near future with brokers, in particular, starting to return to traditional media such as TV, which, if it doesn’t initiate a direct response, will help build brand awareness that will ultimately benefit their presence on the aggregators.

In such a low-involvement, commodity product like insurance, it’s key for brands to establish a relationship with the consumer immediately following a purchase. Some insurers now run ‘on-boarding’ programmes where they focus on building the relationship with softer interventions aimed at providing supporting information about the brand and gathering information on customers. These early interventions, including tailored emails, calls from specially-trained staff and welcome surveys, help to engender greater brand association and loyalty. This approach, combined with the data collected, help to form the basis of relevant targeted conversations over the following 11 months prior to renewal.

If all of this is executed correctly and the data is recorded, updated and held within an infrastructure that can be easily accessed, these ‘on-boarding’ approaches provide the data and insight to deliver significant returns, by raising opt-in rates, Net Promoter Scores, cross sales and renewal rates.  In our experience, this can be by more than 40 per cent over and above traditional approaches, making it rather hard to ignore.

The last 10 years has seen some dramatic changes in the way insurers take their propositions to market. Much of this has been fuelled by digital technology and the rise of the aggregators.  The net effect is that insurance brands, having ceded control and become less distinct, are now unable to compete on much other than price.  The best insurers and brokers have worked hard to re-enforce their value post acquisition through directly improving customer experience. This is built on having a sound understanding of their customers and ultimately leads to improved cross sales and retention.  But for many insurers, the reliance on aggregator sourced business can’t continue – perhaps it’s time for the more innovative data driven insurance brands to spearhead another decade of change.