Insurance Marketing - Changing Focus (1,584 words)
"Trend" is Even Better
The overall dollar growth of the total insurance market is a relatively slack 1.5 percent to 3 percent a year, depending on the sector. But the growth of the direct marketing share of that market is a robust, double-digit average, 14 percent annually.
In 1997, companies following the insurance direct marketing concept generated $72.2 billion in revenue. In 1998, that number increased to $84.4 billion and at the end of 1999 revenue growth reached $95.5 billion. At the present rate of growth, companies following the insurance direct marketing concept will exceed $110 billion in revenue by year-end 2000.
That's a mouth-watering trend.
Share of Market and Share of Mind
It seems apparent that to succeed in the years ahead, there are three strategic issues every insurance company must face:
• Success requires an end-user focus. These are the consumers of your products and services who pay the bills.
• You must understand the buying behaviors of your customers and prospects, and you must seek to favorably modify those behaviors.
• It is critical to link understanding customer needs with financial performance.
Now one P&C company has "gotten it" big time. Understanding how the business works has made dramatic growth possible for GEICO, which recently signed its four millionth customer.
In a speech given at the 1999 Auto Insurance Reports National Conference in Boston, Vincent J. Dowling, senior analyst at Dowling & Partners, focused on a philosophy that most insurers mired in statutory accounting haven't yet grasped.
Dowling quoted Warren Buffet from the 1998 annual report of Berkshire Hathaway, which acquired a majority interest in GEICO in 1996. Buffet writes:
The direct writing of insurance—that is, without there being an agent of broker between the insurer and its policyholder—involves a substantial front-end investment. First-year business is therefore unprofitable in a major way.