It’s a familiar conundrum for many insurers: Ordering loss history is expensive, but not having all the facts until just before binding a policy may lead to a second rate call that’s significantly higher than the first.
Up-charges, hidden costs
Obtaining loss history information just before bind might seem like a good way to cut costs, but this common practice often leads to up-charges and potential hidden costs that can hurt an insurer’s business.
In our experience with insurers, we’ve seen as many as 60 percent of initial auto quotes adjusted near point of bind.1 As prospects drop out of the sales funnel, the quote-to-bind ratio may deteriorate, which can increase the overall cost of policies written.
It’s time to bring insurance quoting into the 21st century. Here are six reasons to consider moving loss history to point of quote:
- Meeting the digital expectations of new applicants. Consumers—conditioned by digital expectations set with other online purchases—view the second rate call as deceptive and sometimes leverage social media to express their dissatisfaction.2
- Enhancing relationships between agents and prospects. When an agent is the insurer’s point of contact with the customer, trust is critical in the agent/customer relationship. The ability to deliver a quote that doesn’t change can reinforce that trust.
- Increasing potential close rates. Disappointment over shifting rate quotes can drive business elsewhere, but an attractive rate that’s consistent with the first quote has a better chance of going through to bind. And that may reduce the overall cost of policies written.
- Avoiding the hidden costs of lost opportunities for cross-selling and renewals. Even if a customer tolerates up-rating before bind, the result may be a frayed relationship—not conducive to cross-selling or an easy renewal for the next policy term.
- Avoiding additional hidden costs of pursuing nonviable leads. When reports are ordered late in the quote flow, significant time has already gone into cultivating the prospect. If subsequent up-rating drives the customer away—or reveals disqualifying risk information—then time, effort, and money are wasted.
- Competing more effectively against disruptors. New and forward-thinking competitors are already tackling the problem of eliminating the second rate call. But the same solutions used by these innovators are within reach for other insurers that want to move to the front of the pack.
A way to move forward
Realizing the unrecognized costs of up-charging, many insurers are rethinking their quoting process. An insurer that obtains loss history up front can avoid the pain points that accompany late discovery at the end of the sales process. Clients that have moved loss history to point of quote tell us that making the right underwriting and rating call early yields a combination of benefits, including a better customer experience, with faster and better decisions for the business.
The timing of loss history reports isn’t just about making the sale—it’s about making the right sale. Ordering only at bind can limit opportunities to optimize and use valuable data early in the sales cycle. Conversely, access to point-of-quote indicators and detailed loss history reports may reduce overall underwriting costs and result in a higher-quality book of business.
Verisk has a powerful contributory loss history database, delivered through the A-PLUSTM Auto and A-PLUSTM Property loss history solutions, to help underwrite and rate personal lines policies more accurately with information about actual historical claims activity. These reporting tools enable immediate decisions and deliver information on a variety of loss and coverage types.
Verisk also offers the A-PLUS Claims Activity Profiler (CAP), which provides point-of-quote indicators as to whether a claims history exists for a prospective policyholder. A-PLUS CAP helps decide—at the start of the quote flow—whether to order full-detail reports.
1. Source: Internal studies and Verisk interviews with insurers
2. Actual social media posts from dissatisfied customers. Insurer names anonymized. Source: Verisk social media listening research