The insurance industry has not grown in the last fewyears. According to figures supplied by the IndependentInsurance Agents and Brokers of America and others, the p&cspace has had nearly zero to slightly negative premium growth inrecent years. While there has been growth in other financialsectors, why has insurance not broken out?

The problem may be the industry's conventional focus on corelines of business such as auto and home, while at the same timeneglecting specialty lines. Specialty lines and alternativeproducts may be the key to jump-starting growth in customerpolicies, direct written premium, and overall lifetimevalue.

What if focus on specialty lines could be the innovation sparkthat extends into the overall p&c space? Long the secondfiddle to core lines, specialty lines offer a low-risk way to “fillin the cracks” and reinforce existing customerrelationships.

Indications are that customer churn is rising in the industry,in part due to substantial investments on SEO/SEM, content farming,and lead splitting. Of note, the insurance and financial sectorspent the most of any industry on Google Adsin 2011, totaling $4 billion. Focusing on cross-selling orup-selling specialty lines may be an effective tool to preventcustomer churn.

The specialty lines opportunity is significant, consideringpolicies per household average only 1.7 to 1.9 today. Thetypical carrier may have over 10 policies and rider productsavailable to consumers, leaving a lot of money on the table,exposed risks for customers, and potential customerdissatisfaction. Our research shows that selling only oneadditional policy per customer can result in over $38.4B in annualincremental premium, resulting in an average growth of over 7.9percent.

The Focus

Auto and home insurance are mandatory for most consumers. However, specialty lines present an opportunity to cross-selloptional coverage to increase growth and gain greater wallet shareamong current customers.

As policies per household increase, so does retention ascustomers become more reluctant to shop due to the effort requiredand the benefits of multi-line discounts which lock them into theirexisting carriers. In addition, cross-selling more lines toexisting customers helps keep competitors from gaining entry intothe household to potentially steal customers away.

Cross-selling and up-selling policies are a natural approach togrowing revenues. However, carriers have struggled to getagents, who still sell the majority of property-casualty insurancetoday, to focus on specialty lines. Some of the reasonsinclude:

• Misalignment of incentives—With lower average premiums andretention, specialty lines commissions often are insufficient toencourage agents to devote resources to them in place of moreprofitable, core lines of business such as auto and home.
• Lack of familiarity—Agents are often less familiar with thespecialty lines than they are with auto and home and therefore, shyaway from selling those lines. If the specialty lines arequoted on a different IT application than the core lines, thisincreases their reluctance.
• Fear—Some agents lack confidence in the specialty linesproducts, especially if they are being offered by an outsidepartner. They fear that a poor customer experience with aspecialty lines product could put the core lines at risk.

The Solutions

Enhance the agency channel's willingness and ability tocross-sell specialty lines.

• Differentiate incentives for specialty lines vs. the corelines, potentially increasing the percent commission to encourageagents to devote their valuable time and resources to cross-sellingthese lines.
• Increase training on specialty lines products andtechnology. Consider migrating specialty lines to a common ITplatform with the core lines, if possible.
• Educate agents on the strengths and capabilities of outsidepartners to instill confidence.
• Provide message points, such as customersatisfaction metrics, for agents to share with theircustomers.

Consider less costly, alternative channels to cross-sellspecialty lines.

• Leverage newer, digital methods to identify customer needs andeducate them on coverage options. Remove the burden ofselling these customers from the agents and deliver only ready tobuy, hot leads for them to close.
• Consider creating call center teams specifically focused andcompensated on specialty lines sales.
• Introduce online quoting and binding capability for specialtylines to enable straight-through processing and minimize leakagefor customers coming to you from online search engines and socialmedia sites.

Importantly, the vast majority of consumers are alreadyconducting online research to select carriers and coverages. Using digital methods to reach specific targeted customers with theability to help them learn about risks can bring real organicrevenue. Remember, search engines are not your friends, asthey expose customers to other carriers and options. Thosecarriers that present meaningful, timely information in a digitalformat to assist customers in the shopping process have thepotential to crack the code on specialty lines cross-selling.

Why it Matters

Mandatory policies such as auto and home are heavily penetrated.Now, carriers are poaching each other's customers, which is gettingincreasingly costly. Given this situation, carriers must seekrevenue growth in new areas. This is where specialty linesgrowth can support overall carrier and industry needs. Fearnot; luckily for us, the new customer acquisition is gettingcheaper and better as we use technology channels to reachproactively our own books of business.

Chirag Pancholi is CEO and Melissa Loew is vice president andgeneral manager for Wisemuv.