On the hunt for lost customers

For life insurers, hunting down former customers was once a futile
exercise. Today, thanks to advances made in database analysis
technology, the task has been greatly simplified and for those
insurers that harness the technology there are potentially rich
rewards. Charles Davis reports.

Insurers spend millions on television ads to capture the public’s
attention, as every-one invests in chasing the elusive new life
insurance customer. Some of that money may be better spent chasing
those customers the insurers once had on the books – orphan
accounts, in insurance parlance.

Orphan accounts were once all but impossible to target, as an
increasingly mobile US society meant that families who once spent
generations in a single address fanned out across the country. As
long as they paid their policies, the insurer had a lifeline, but
as policies lapsed and addresses changed, it became difficult to
keep track of orphans – so difficult that many insurers gave up and
chased new leads instead.

Advanced database technology has altered the cost-benefit analysis
of orphan accounts, according to a recent study by Sam Radwan, a
managing director at Novantas, a management consultancy based in
New York.

Radwan examined the orphan account issue industry-wide and found a
rich potential revenue source left untapped by many insurers. His
conclusion, for many insurers, was that a systematic effort aimed
at capturing even 5 percent of orphan accounts could result in
significant new – or newly rediscovered – policy sales.

“Producers traditionally have led the charge in life insurance
marketing and sales, with customer knowledge largely residing in
the heads of local agents and their managers,” he said.
“Centralised databases can change that equation, however, by
allowing the company to track and target orphan accounts across the
enterprise.”

System-wide customer information

The emergence of system-wide customer information means that within
insurers that experience high agent turnover, there are vast pools
of customers who no longer are served by the agents who initiated
their accounts. In some cases, this is up to 30 percent of the
total customer base, Radwan said.

“Let’s say you have a policy and you’ve been sitting on it for a
while just paying your premiums, then there is little we know about
you,” he said. “But we can obtain information from your mortgage,
address changes, investments, and by doing so, we can start
painting a picture of you and where you are in life stage, and most
of this is bureau data that can be acquired and centralised pretty
quickly if insurers will just get in and do it.”

Worth the effort

Radwan said his study of orphan accounts dispelled the common
notion that orphan accounts are hardly worth the effort of finding
and re-establishing sales relationships. On the contrary, in fact,
many orphan account holders are nearing retirement and are focused
on asset protection, giving insurers an edge over traditional asset
management competitors. And this group has more than twice the
assets and income of the average policyholder, Radwan said.

“Orphan accounts have exactly the sort of metrics that insurers are
looking for in new leads, but the real advantage is that the
insurer already has won half the battle,” he said. “This is a
customer who once purchased a policy from them and was probably
quite happy with it. They just fell through the cracks and now the
tools exist to find them easily and target life events to get that
business back.”

The problem is that newly created central databases, while
essential, still aren’t completely sufficient for new marketing
initiatives to this group. Containing only internal information
about accounts, balances and transactions, they fail to provide
insight on the total customer wallet, for example, and recent and
impending life events.

“Orphans are just sitting there waiting and the bar is low. If you
hit them at the right time, the shift to asset protection is a
great moment,” Radwan said. “They are nearing retirement and
starting to really think about how their money is
performing.”

He said that marketing teams are breaking out of this trap as they
learn to augment customer records with rich external information
and then perform a series of deeper analyses that set the stage for
specific campaigns.

It’s not easy to restart an orphan account. Yet richer marketing
analyses of orphan accounts can still pay off handsomely, in direct
mail campaigns, in directing the activities of customer service
representatives and in matching new agents with untended accounts.
The end result is much higher cross-sell penetration, Radwan
said.

He added that across the industry, there are literally millions of
50-something customers who maintain life policies purchased in
their earlier days, but who ceased additional purchases with a
particular carrier when the issuing agent stopped serving the
account.

“These are great prospects and database technology can really be
put to work on these households,” he said. “The big difference is
that databases allow insurers to create targeted outreaches that
can be managed centrally.”

Knowledge is vital

While such efforts are no replacement for direct customer-agent
interaction, Radwan said, there are still huge opportunities to
harness customer information to recreate some of the vital
knowledge that is ordinarily gleaned conversationally in active
relationships.

“Looking at the data, the insurer can ask whether the last child
recently moved out, or whether the client recently relocated and
cut back on spending, perhaps indicating recent or impending
retirement,” he said. “These life events often signal opportunities
to provide new products and services to the customer.”

Radwan said the real power of database technology lies in
broadening the view of the orphan account. By using information
from the credit agencies, insurers can extract salient household
characteristics and event triggers that provide insight into
customer needs, providing a much richer context for marketing
outreaches.

“Knowing the orphan account holder just retired is a huge advance
over predicting that they might be retired,” he said. “You can be
much more precise in your marketing efforts, because you know so
much more.”

Insurers don’t have to win back every orphan account to see a huge
lift in sales, Radwan concluded. While some players will count
themselves fortunate to cross-sell five out of every 100 orphan
accounts, others will double or triple that ratio. The difference,
in large measure, will be marketing success in connecting with
customers’ emerging needs.