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Marketing and Customer Segmentation Becoming Top Priorities Among P&C Insurers

Posted by Guest Blogger and Marketing Sage, Ian Turvill

A report published by Gartner's Kimberly Harris-Ferrante today indicates that: Marketing and customer segmentation have become top priorities among property and casualty insurers. Insurers should tightly integrate customer data and marketing initiatives with product development projects to ensure profitable growth.  (See Marketing and Customer Segmentation Becoming Top Priorities Among P&C Insurers on the site.)

I think Kimberly's really onto something here.  As she suggests, leading insurers have made significant investments in underwriting and product development, and to continue to innovate and attain a competitive edge, they need to focus on

I've written extensively over the past 18 months about how insurers can use predictive analytics and other techniques associated with Enterprise Decision Management to improve their marketing capabilities.  Two of my articles in Direct Marketing magazine during 2005 address different facets of this issue, first for P&C insurers, and second at life carriers.

In "Marketing: The New Policy for Insurance" (PDF), I assert that "Insurers of all types must deploy superior decision-making capabilities to be on the right side of a consolidation process that likely will occur across all lines of business".  While Kimberly indicates that insurers are placing greater emphasis on marketing, I suspect that there will remain many insurance executives who will remain very resistant to adopting marketing methods.

My article recognized this issue, and suggests a potential solution: "Marketers have a golden opportunity to help insurers address this challenge, but it will be tough. Actuaries and underwriters are naturally wary of adopting new customer strategies that perhaps conflict with well-established approaches.  The solution may be for marketers to demonstrate that their methods really aren't all that different from existing analytical and decision-making approaches."

I suggested that there are some strong analogies to be drawn between common insurance and actuarial activities and the ways in which marketers approach their art,  The table below provides several straightforward examples:

Insurance DecisionMarketing Equivalent
What risk should we insure? Product development
At what rate are we willing to carry that risk? Pricing
Which customers are we willing to underwrite? Customer selection
Which agents shall we use to distribute our insurance products? Channel design
Should we pay this claim? Customer service

In "Policy Protocol" (PDF)  (I didn't pick the title), I argued that the difficulties associated with marketing life insurance, particularly in promoting policies to the "under-insured", meant that: "Marketers can and should step up to help actuaries, underwriters, agents and others in the insurance industry develop products that are easier to understand, and to promote them in ways that are likely to spur consumer action."  I recommended a five step process that life insurers could follow to improve the marketing of their products.

Finally, I recently wrote an article for Fair Isaac's ViewPoints online magazine ("The 21st century insurer: Beyond price—Successful responses to shrinking opportunities") and referenced here several weeks ago.  In it, I introduced several marketing tools that insurers are adopting to improve their understanding of customer behaviors and motivations.  Among my favorites is Pre-Market Offer Testing, which allows insurers to rapidly assess the appeal of many thousands of potential insurance offers.

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