Creating Competitive Advantage in Auto and Home Insurance Through Marketing Analytics

Cognizant whitepaper: Given their enormous advertising spend and stagnant growth, P&C personal lines carriers need to work smarter to generate better quality leads, improve sales effectiveness and efficiency, and design innovative products and services

Teaneck, NJ (Oct. 21, 2013) – P&C personal lines carriers face a huge challenge. Marketing spend is far outpacing the returns. The most successful carriers have learned how to leverage marketing analytics to make more informed spending decisions, and improve customer satisfaction and profitability. In this whitepaper, Cognizant describes current marketing spend challenges in the personal lines industry; why these challenges will persist; how marketing analytics can help insurers address this issue; why the time is now to adopt this function, and the benefits that can be expected from building a robust marketing analytics capability.

Executive Summary

The numbers are staggering. Almost US$6 billion in advertising was spent last year by personal lines carriers. GEICO alone spent almost a billion dollars. And if you thought that independent agency-based insurers don’t advertise, think again.

Yet for all the marketing dollars expended, what has the industry achieved? Not much, in our view. The majority of leading companies have posted annual growth rates of between -1% and 1% over the last 10 years. In comparison to the industry’s average annual growth rate of 0.9%,1 this begs the obvious question: Did the personal lines carriers spend their marketing dollars smartly? Thankfully, in this business, most customers don’t switch. In fact, despite the proliferation of ads, 30% of customers simply renew with their current insurer without getting a quote from another insurer — a silver lining to the industry’s profit tailspin.

Nonetheless, from billboards, to television, radio and the Internet, promotions for car and home insurance seem to be everywhere, and are now among the most prevalent. (Consider the popularity of GEICO’s green lizard compared to that of other brand icons, such as the Coca-Cola polar bear, for example).

Yet what is striking are the similarities in insurers’ messaging: “Call us and we’ll save you $300 by switching from the same company that just told you 30 minutes ago that it can save you $300 by switching to them.” Using this equation, a customer who switches insurers three or four times would get car insurance for free!

In our view, these types of defensive marketing strategies cannot last long, although over the last ten years they have clearly shaken the industry and separated the winners and losers. We believe that the next decade will see even more dramatic moves on the marketing stage as personal lines carriers deepen their efforts to win and retain customers, pursue distinct identities and shift to more offensive strategies. Given the industry’s questionable return on investment (ROI) from past marketing spend, insurance companies need to advance their marketing analytics capabilities to remain competitive. As we see it, the marketing spend battle will escalate before it slows down. Further, winners will be defined not only by how much they spend on marketing, but also by how smartly they spend it.

This is where marketing analytics comes into play: Having the right data, the right tools and the right skills to help make better marketing-spend decisions and better customer predictions. Building this capability isn’t easy, but the benefits are indisputable — spanning beyond marketing ROI to include better product and service designs.

This white paper describes our views on current marketing spend challenges in the personal lines industry; why we believe these challenges will persist; how marketing analytics can help insurers address this issue; why the time is now to adopt this function, and the benefits that can be expected from building a robust marketing analytics capability.

Download the whitepaper here (PDF).

About the Authors

Michael Kim is the Global Head of Cognizant Business Consulting’s Insurance Practice. He has 25 years of management consulting experience in the insurance, healthcare and financial services industries. Mike has advised leading insurance companies on strategy, operations and technology issues across sales/marketing, distribution, underwriting and claims.

Agil Francis is a Senior Manager with Cognizant Business Consulting’s Insurance Practice. Agil has 10 years of management consulting experience in the insurance industry, where he has advised senior client executives on strategy, operations and technology issues across sales/marketing, distribution, underwriting and claims.

Pushpamitra Khuntia is a Manager with Cognizant Business Consulting’s Insurance Practice. She has 12 years of business consulting and project management experience in the insurance and healthcare industries, specializing in P&C insurance.

Vishal Shukla is a Senior Consultant with Cognizant Business Consulting’s Insurance Practice. He has eight years of business consulting and project management experience in the insurance and high-technology industries. Vishal specializes in P&C insurance.

About Cognizant’s Business Insurance Unit

Cognizant is a leading global services partner for the insurance industry. In fact, seven of the top 10 global insurers and 33 of the top 50 U.S. insurers benefit from our integrated services portfolio. We help our clients run better by driving greater efficiency and effectiveness, while simultaneously helping them to run different by innovating and transforming their businesses for the future. Cognizant redefines the way its clients operate – from increasing sales and marketing effectiveness, to driving process improvements and modernizing legacy systems, to sourcing business operations.

About Cognizant

Cognizant (NASDAQ: CTSH) is a leading provider of information technology, consulting, and business process outsourcing services, dedicated to helping the world’s leading companies build stronger businesses. Headquartered in Teaneck, New Jersey, Cognizant combines a passion for client satisfaction, technology innovation, deep industry and business process expertise, and a global, collaborative workforce that embodies the future of work. With over 50 delivery centers worldwide and approximately 164,300 employees as of June 30, 2013, Cognizant is a member of the NASDAQ-100, the S&P 500, the Forbes Global 2000, and the Fortune 500 and is ranked among the top performing and fastest growing companies in the world. Visit us online at www.cognizant.com.

Source: Cognizant