Rider Marketing After The Sale: A Non-Traditional Approach That Works
Most insurance companies will readily admit they are largely dissatisfied with the sales generated from the myriad of riders they have worked so hard to develop. And agents often view these riders as unnecessary complications that increase the price of the underlying products they are trying to sell.
With most life insurance companies, thats the end of the story. Few give any real consideration to the opportunity to sell riders after the issuance of the base policy.
This reality is the result of traditional thinking, the fact that riders are “smaller ticket” items, and an acknowledgement that agents dont want to be bothered.
This is unfortunate because the opportunity can be meaningful. Post-issue marketing activity can generate significant amounts of new premium at low acquisition costs, resulting in substantial increases in the return of investment on profitable business. It also can often be the difference between profit and loss on business that has not performed as originally priced.
Now, you probably are thinking: “This sounds good, but if the agents are not willing to sell the riders, how do I capitalize on the opportunity?”
The answer is direct marketing. If executed properly, a direct marketing program involving riders can meet the needs of the companyincluding its agents and its policyholders.
Many companies shy away from direct marketing opportunities because of concerns over distribution channel conflict. However, we have seen repeatedly that, if handled correctly, agents actually welcome the activity, seeing it as a way to service the majority of their portfolios they cannot properly reach.
It is very important that the agent not be overlooked in the process of developing a direct marketing plan for riders. If a company follows a simple formula, there will be very few problems with disgruntled agents. If they do not, problems are inevitable.
The formula consists of 3 basic elementscommunication, compensation and control (see box for description).
This formula recently was applied by a major life company in North America with more than 17,500 agents. Of that large field force, only 26 agents chose to opt out and there were virtually no complaints.
Most significantly, despite the fact that the marketing campaign was for a specific benefit, there were more than 1,900 calls requesting contact by an agent to discuss other opportunities.
It is also important to note that a direct marketing approach may be the only way to service the needs of “orphans,” or policyholders who have lost touch with their advisors. Given the industrys well-publicized challenges with agent retention, the number of policyholders falling into that category is quite likely to grow at most companies.
There are several key issues to consider in developing a rider direct marketing plan:
Planning: Strategy development should be approached from a long-term perspective. The real opportunity to generate significant revenue comes from a comprehensive multi-product and multi-channel strategy, rather than 1 or 2 campaigns a year. Determining your path can have a significant impact on how you approach even the very first campaign.
Distribution: Inherent in the development of the long-term strategy is the selection of the appropriate direct marketing distribution channels. Direct mail, telemarketing (inbound and outbound), advanced premium statement marketing, and the Internet all are viable options. Each offers its advantages and disadvantages.
We have found the most successful programs blend a combination of channels. For instance, there are several highly effective techniques for integrating rider offers into the premium billing statement. However, there is also a growing trend in most companies to push customers toward Automated Clearing House or credit card collection, where billing statements are not generated. To maximize the opportunity in a situation like this, statement marketing should be combined with direct mail.
Product Selection: It is also important to assemble the right menu of benefits to be offered. As one would expect with direct marketing, the simpler the offer, the better the result. Any benefits that can be offered on a guaranteed or simplified issue basis are ideal. Term, accidental death, spouse coverage, guaranteed insurability and critical illness all offer high probabilities of success. Offering some of these benefits post-issue may raise underwriting concerns, but these often can be addressed by carefully controlling both the timing and amount of the offer.
It is also important to note that while most, if not all, of the benefits can be offered as a stand-alone product rather than a rider, our experience suggests a rider configuration will yield 2 to 3 times the result.
Direct marketing of riders can be a very powerful weapon to add to an insurers arsenal. Fortunately, more and more companiesand their agentsare beginning to understand the opportunity.
is chief executive officer of the ReMark Americas insurance marketing firm, based in the Atlanta office. His e-mail is [email protected].
Reproduced from National Underwriter Edition, June 4, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.