Once understood to be a sunk acquisition cost to the insurer, we at FCB.ai have created a solution to turn uncontactable leads into premium paying policyholders. This article is intended to explain how our solution can help the insurer reintroduce these leads into their existing business model, lower acquisition costs, thereby increasing profitability and taking the user through a pre-qualification journey, quote or full end-to-end sale.
AI in the insurance industry – FCB.ai
The solutions that we at FCB.ai have created will help our insurers in the following ways:
- Revenue driven initiatives to increase the number of new business policies written
- Cost reduction by lowering the acquisition cost per policyholder
- Operational efficiencies using front of, mid and back of the lifecycle funnel solutions
What are uncontactable leads in the insurance industry?
In order to understand this concept better, we need to understand who the uncontactable leads are, where they fit into an insurer’s business model and how we can turn them into revenue for the business.One of the most important functions for any insurer is the writing of new business on a monthly basis. This is due to the attrition or churn rate which usually averages 5 to 10%, which means that existing policies on their book will lapse, due to a variety of factors, resulting in lost revenue. Insurers will aim to have a growing book, meaning that they are writing new business at a rate higher than their existing attrition rate. Without new business, the insurer’s business model is not sustainable and is the main reason an insatiable appetite for new business is vital.Insurance Companies have a very specific marketing strategy, aimed at a target market determined by the policies that they offer, their customer profile and capacity to render the services needed for retention of the policyholder. Their marketing strategies may include both above-the-line advertising i.e., Print media, television and radio OR below-the-line advertising i.e., Digital media, email, SMS and social media. Any one person who responds YES to any of these marketing strategies, is considered to be a lead. In other words, a lead is someone who has opted in to receive further communication from the insurer and a Call to Action has been initiated.
The lead will then be funnelled into an Outbound Call Center, which is the primary mechanism to convert leads into quotations and ultimately sales for most insurers. The Call Center agents are given a clear indication as to the number of new leads that they can contact versus the continuation of leads that they are in discussions with, to remain as effective and efficient as possible. The agents must establish Right Party Contact and then begin the pre-qualification process. This is accomplished by asking them a set of specific, pre-determined questions to ascertain suitability for the products offered. If the lead answers NO to any of the questions, they do not meet the insurers criteria for new business and the call is politely terminated and the lead is not pursued. If the lead answers YES to all the questions, the agent will move into the quotation stage and should the lead accept, they then become a sale and premium paying policyholder.Each company determines how often a lead should be contacted before they are deemed to be uncontactable. This rate is estimated at around 50%, and these leads are then deemed as a sunken acquisition cost i.e., not recoverable and lost business.
Other factors which contribute to an increase in the acquisition cost include:
- Only 70% to 80% of leads are funnelled into the Outbound Call Center
- Right Party Contact cannot be verified
- 40% of leads do not meet the determining criteria for pre-qualification, so no quotation is proposed
- 20% decline the quotation due to price or unsuitable terms and conditions offered
So the big question for the Insurance Company is what are they prepared to spend in order to acquire a premium paying policyholder (Target acquisition cost) and this forms the basis of performance models? They will also factor in the average length of time that a policyholder will remain on their books before they lapse (Persistency & Retention). The acquisition cost per policyholder is usually measured by the premium payable multiplied by a set number of months, before they will start seeing a profit from the policyholder. To put it simply, a company’s acquisition cost must work to improve profitability and performance.
How can FCB.ai help turn uncontactable leads into policyholders?
And this is where FCB.ai are proposing that they go back into the uncontactable leads pool and start engaging with them, with the intended purpose of bringing them to pre-qualification stage and re-injecting them back into the Outbound Call Center. If a mere 10% of these leads are successfully underwritten onto the Insurers book, then the acquisition cost is significantly reduced.
We are very proud to be associated with some of the leading insurers in the market, including Santam, Sanlam, Hollard, Momentum and MiWay and our success models alongside these companies, are a true testament to the value, efficiency and profitability that our solutions can offer.If you have any questions about our solutions, or conversational AI in general let’s chat – we’re happy to help you turn your Uncontactables into premium paying Policyholders.