The insurance industry has not grown in the last few years.  According to figures supplied by the Independent Insurance Agents and Brokers of America and others, the p&c space has had nearly zero to slightly negative premium growth in recent years.  While there has been growth in other financial sectors, why has insurance not broken out?

The problem may be the industry’s conventional focus on core lines of business such as auto and home, while at the same time neglecting specialty lines.  Specialty lines and alternative products may be the key to jump-starting growth in customer policies, direct written premium, and overall lifetime value. 

What if focus on specialty lines could be the innovation spark that extends into the overall p&c space?  Long the second fiddle to core lines, specialty lines offer a low-risk way to “fill in the cracks” and reinforce existing customer relationships.  

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 sector spent the most of any industry on Google Ads in 2011, totaling $4 billion. Focusing on cross-selling or up-selling specialty lines may be an effective tool to prevent customer churn. 

The specialty lines opportunity is significant, considering policies per household average only 1.7 to 1.9 today.  The typical carrier may have over 10 policies and rider products available to consumers, leaving a lot of money on the table, exposed risks for customers, and potential customer dissatisfaction.  Our research shows that selling only one additional policy per customer can result in over $38.4B in annual incremental premium, resulting in an average growth of over 7.9 percent.

The Focus 

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

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

Cross-selling and up-selling policies are a natural approach to growing revenues.  However, carriers have struggled to get agents, who still sell the majority of property-casualty insurance today, to focus on specialty lines.  Some of the reasons include:

• Misalignment of incentives—With lower average premiums and retention, specialty lines commissions often are insufficient to encourage agents to devote resources to them in place of more profitable, core lines of business such as auto and home.
• Lack of familiarity—Agents are often less familiar with the specialty lines than they are with auto and home and therefore, shy away from selling those lines.  If the specialty lines are quoted on a different IT application than the core lines, this increases their reluctance.
• Fear—Some agents lack confidence in the specialty lines products, especially if they are being offered by an outside partner.  They fear that a poor customer experience with a specialty lines product could put the core lines at risk.