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The new economics of a data-forward auto quoting strategy

By Jason Polayes  |  May 20, 2019

Sunk costs—substantial investments of money and other resources in legacy processes—can keep companies anchored to the past. But when it comes to turning prospective customers into policyholders, auto insurers may need new ways to catch the ship of profitable growth before it sails.

Change can start with questioning some long-standing economic assumptions about the quoting process, especially when to call on key data resources such as driving and loss histories. Because such data costs money, traditional thinking typically counsels against spending on business that’s not guaranteed.

Faced with shrinking margins, many insurers have drifted into this approach, pushing data acquisition as far along in the quote flow as possible. The result, however, is a process that alienates consumers because they can receive two or more rate quotes before bind—assuming they make it that far. Many do not.

Is a new economic model possible? Can insurers contain the cost of the quoting process while still gaining opportunities to better serve customers, be more competitive, and achieve profitable growth? The answers to these questions may lie in a data-forward strategy that moves critical underwriting and rating information to quote start, eliminates the off-putting surprise of Rate Call 2, and helps insurers adapt to evolving consumer expectations.

Shoppers are game changers

Consumers’ shopping behavior is intensifying as billions of dollars flow into both advertising and InsurTech venture capital. Meanwhile, online shopping experiences outside the realm of insurance are setting expectations that customers bring to their insurance buying venture.

In response, over the past three years, 50 percent more insurers report pursuing transformation initiatives, defined as “significant investment and changes in business and technology platforms,” according to the Insurance Ecosystem Surveys by Strategy Meets Action.

The winners in this transformation fall into two main categories: digital front-runners and agile InsurTech start-ups. The new economics begin with a data-forward strategy. Consider this case study to better understand the new value-matched economic reality for auto insurers.

Reducing the effort, boosting the return

An insurer’s legacy quote process involves an online application with 25 long-winded questions, taking 18 minutes to complete on average. The insurer doesn’t use prefill and collects additional data before Rate Call 2, when the policy looks likely to bind.

A data-forward strategy and simplified application process can hold the close rate constant, but with higher sales funnel throughput, quote-to-bind, and conversion ratios. This more than doubles the number of policies bound—and nearly doubles the conversion rate.

What do these gains cost? On a per-quote and per-sale basis, the marketing cost is less—much less—under the new economics of one-rate acquisition driven by a data-forward process. And that’s before accounting for the potential hidden costs of Rate Call 2: quotes that don’t make it to bind, negative word of mouth, and business that doesn’t stay on the books past the first year.

Download the new Verisk Innovation Paper, Unlocking One-Rate Auto Insurance Acquisition, to see another case study, explore seven keys to competing in the InsurTech revolution, and learn about LightSpeed™ Auto from Verisk.


Jason Polayes is a senior product manager at ISO. You can contact him at Jason.Polayes@verisk.com.