How to lower customer acquisition costs for insurance companies

The insurance industry belongs amongst the most competitive ones. Therefore, the cost of customer acquisition is gradually increasing. This article will provide you with information on how to spend less on customer acquisition and selling premiums.

What is the cost of customer acquisition in insurance?

The cost can vary significantly based on the marketing channels used. The cost per acquisition can range from €462 for direct insurers to up to €854 for captive and independent-based insurers. The overall cost consists of marketing spend and agents’ provisions.

Insurers relying on paid online campaigns can see a cost per click (CPC) ranging from €4.50 to €34 depending on a keyword. With an average conversion rate of 5.10% for the insurance industry, the cost per conversion can be between €88 to €465. 

However, conversions do not necessarily result in purchases but rather second-page visits or quote requests. Therefore, the cost per acquisition can be substantially higher than the conversion rate.

Note: this research focused primarily on motor, home and multi-policy related keywords in the United Kingdom and Ireland. 

Acquiring new customers vs retention

Acquiring a new customer can be 5-25 times more expensive than retaining an existing one. Also, the probability of selling to an existing customer is 60-70%, while the probability of selling to a new prospect is only around 5-20% (Market Metrics). 

If a customer purchased a premium from your company, you already likely established a relationship and built a level of trust, so there is a higher chance that they would trust you with other policies as well. Hence you can sell more policies without acquiring new customers. Although new customers are vital for your business, retention can significantly lower your overall cost.

Lower acquisition cost with email and SMS automation

One of the most effective ways to retain customers is through email and SMS campaigns combined with automation. It is recommended to keep constant contact with your customers and engage with them on a regular basis. 

The insurance industry records one of the highest open and click rates for email and SMS campaigns, so there’s a high probability your message will be successfully delivered and read. 

Circulator’s insurance clients see an average open rate of 220% and an average click rate of 28%, while the industry averages are 21.36% open rate and 2.13% click rate.

There are several automated email campaigns that can help you decrease the overall acquisition cost since email is one of the most cost-efficient channels to reach your customers. Below you can find examples of email campaigns and tips to lower your cost.

Cross-sell

Speaking of customer retention, implementing cross-sell campaigns is a must. With cross-sell campaigns, you can offer your customers additional or complementary products and maximise customer value without spending more on marketing efforts.

You’re targeting people who already know your business and are interested in your products. Therefore, the probability of a successful conversion is high. A popular cross-sell combination is home x motor / motor x home. However, you can test any combination and find the one(s) that will generate the best results for your business.

Policy renewals

Another way to retain your customers with minimal spending is to utilise policy renewal emails. With these automated messages in place, you can secure your customers’ loyalty for the upcoming period, and you will not have to think about renewal dates. The renewal process should be started anywhere from 45-60 days prior to the renewal date.

Personalisation

As consumers are getting targeted with more offers across channels, it’s crucial to offer them what they need at the right time. That can be a quite difficult task since every customer is different. Nonetheless, with personalisation, you can analyse customers’ statuses,  interests, purchasing behaviour, or spending habits. This can help you predict their future behaviour and target them with a suitable offer that will increase the probability of conversion.

You can also target users that are not your customers, for example, those who have subscribed to your emails. This way, you do not have to limit yourself only to retention but also to acquire new customers virtually for free. The more data you have about your users, the more personalised and tempting you can make your offers.

Circulator specialises in providing communications solutions for insurance companies. Learn more about our products and solutions. 

Please contact us directly if you’re looking for assistance with your digital communication, and learn how Circulator can help your insurance business.