June 2009

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Sales Effectiveness: The New Challenge in Auto Insurance Direct Marketing

By Georges Culioli and Dale Johnson

Without question, the biggest game-changer in insurance sales in recent years has been the emergence of online direct players such as Government Employees Insurance Co. (GEICO) and Progressive Casualty Insurance Co. Zooming from a negligible presence in auto insurance to a nearly 8% market share over the past five years, the newcomers have flourished in a market where the potential seems unlimited.

Steadily, however, insurance direct marketing is approaching a tipping point that will profoundly change the terms of success in that space. For one thing, the growth strategy based on geometric annual increases in advertising appears unsustainable — it is increasingly less likely that mega advertising outlays will generate corresponding sales increases as the market becomes saturated. And the field promises to become much more crowded as various U.S. and international insurance players ramp up their own direct operations.

The upshot is that insurers are entering a new phase in direct marketing. Growth increasingly will hinge on effectiveness in converting customer inquiries into sales, as opposed to just pouring more raw prospects into the top of the funnel. In turn, direct marketers have some catch-up work to do in strengthening the all-important processes that are used to convert inbound prospects into solid customers. Currently, for example, it is not unusual to see a 20% conversion rate on direct sales, meaning that for every 100 customer contacts, 80 ultimately prove fruitless.

The call center will be a focal point in improving this situation. It turns out that avant-garde insurance direct marketing often is supported by decidedly old-school call center practices, particularly as they pertain to performance improvement. After a flood of prospect inquiries is generated through mass-marketing advertising, opportunity is lost as carriers 1) waste time with low-potential prospects; and 2) miss opportunities to provide a fuller range of products and services when receptive customers are on the line.