Its Universal: Cross-Selling
Improves Customer Retention
Not long ago, few people could imagine loading their shopping carts with groceries, car batteries, clothes, cosmetics and nearly anything else they needed all from one store. But todays super-department stores allow shoppers to do just that. As a result, they are gaining a tight grip on consumers who are too busy to visit several different stores in any given day or week.
Many of the most successful property-casualty insurance agencies were practicing this same marketing technique long before retailers ever thought of stocking pantyhose next to snow tires. Instead of focusing on one line of personal or commercial insurance, these agencies expanded their marketing to include lucrative sales of life insurance.
Cross-selling enables a p-c agent to increase revenues and profits from existing customers with minimal expense. After all, its much more efficient to increase sales from an existing customer than it is to find a new customer.
Selling other insurance products, such as life insurance, can actually improve the retention rate of other products the agency sells. A 1998 report (the most recent) by the Life Insurance Marketing and Research Association Inc., based in Windsor, Conn., showed that the retention rate of automobile policies improved when the customer purchased more than insurance from the agency.
The retention level improved from 61 percent to 83 percent in policy year five when a customer purchased three or four products from the same agency. The rate improves from 44 percent to 75 percent in year 10 and from 35 percent to 71 percent in year 15.
Yet, the percentage of American households who own multiple lines of insurance from the same agency remains small. Only 6.9 percent of all households have purchased p-c and life insurance products from the same agency, LIMRA reported in that study.
If an agent is not asking its clients about what financial needs they have beyond auto and homeowners coverage, the producer is limiting the agencys growth potential. The agent is also exposing the agencys flank to a competitor who offers more comprehensive service.
A good starting point for defending the agencys turf while expanding its horizons is life insurance, particularly universal life insurance with a guaranteed death benefit.
During the great bull market of the 1990s, variable universal life insurance eclipsed universal life as the product of choice. Both life plans include death benefits, but they offer different investment plans and premium payment schedules. The variable insurance plans invest in stocks.
Americans, completing their financial metamorphosis from savers to investors, spread their wings and eagerly included equity investing as part of their life insurance planning. Then the bubble burst.
The prolonged bear market dampened variable universal life sales as consumers gravitated to products with guarantees. Many customers began looking for non-equity-oriented products to protect their families futures. Universal life suddenly became the fastest growing life insurance product on the market. According to LIMRA, sales are up 32 percent for the first nine months of 2002 as compared to the same period last year.
Universal life insurance policies make cross-selling easy. A p-c agent does not need a securities license to sell universal life. He or she does not have to explain dozens of variable investment options. And the producer does not have to worry about re-balancing the policys cash value between different investment options over the years to retain the clients original investment objectives.
The agent only has to focus on the clients permanent life insurance needs.
Todays universal life policies emphasize lifetime insurance protection over cash value accumulation. Some people in the industry refer to these new policies as term life insurance to age 100. They are more affordably priced than many permanent or cash value life insurance policies. At the same time, however, they are designed to provide lifetime protection as opposed to a specific term of 10 or 20 years.
The new generation of universal life policies guarantees death benefit protection for as long as the policyholder pays premiums. Thats an important contrast to the death benefits of variable universal life policies that can fluctuate as their cash values rise and fall with the stock market.
After clients review their life insurance needs with an agent, they might even decide to toss more of what the p-c agency is selling into their shopping carts. (See sidebar for tips on how to conduct a life insurance review.)
Now, if they could only buy tires, Twinkies and computer software from you.
Daniel Munroe, is an advanced sales consultant for Hartford Life Insurance Co., based in Simsbury, Conn. Mr. Munroe can be reached by e-mail at damiel.munroe@hartfordlife.com.
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, January 20, 2003. Copyright 2003 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.
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