Why to start with the insurance industry
The insurance industry is particularly tricky. Ask around and most people find it boring and unappealing. It is, though, one of the most interesting businesses around. It is not only a phenomenal business but one with numerous intricacies. It is a complex environment, with ruthless competition and plenty of talented people doing their best. On the surface is a stagnant sector that moves slowly and is waiting to be disrupted. Lots of incumbents and new players pop up every day trying to get a slice of the pie.
For the next pieces, I wanted to start with the insurtech and their churn rate vector. We know about the traditional insurance industry, but not so much about how insurtech is addressing retention. It seems interesting to focus and research it deeper. For a reason, I love the thrill of unravelling complexity hidden under a simpler shape. This will be written as a series and might need further corrections down the road, so bear with me, please.
On the other hand, there are lots of takeaways that can be useful for different industries if applied. Some concepts can be extrapolated to your own business. Approaches and ideas can be replicated successfully in different areas or markets. That is the goal of this series and I’d like you to read it like that in mind. “What can I take from this that would make my SaaS company stronger?”.
Churning is hard to grasp a problem. Sometimes, for different reasons, teams struggle to strategize around it. Something that helps is reframing it instrumental for the health of the business. Churning is key to the health of the company, that is a hill I am willing to die on. That and the need of putting it in the context of your marketing efforts.
Reframing Churn rate
The insurance industry is (sometimes infamously) known for high CAC (Customer Acquisition Costs). Assuming the impact on costs is equally distributed among policyholders, the revenue will be directly tied to the churning or retention of said customers. Acquiring customers that remain as such and with a profile that has the lower possible cost towards the company is the key for the sector.
In simple words. The longer the customer sticks with the company, the more money it generates. The better the client is in terms of health/life expectancy/accident rates, the better. Not all acquisition channels are equal. We know that some bring to the company clients with a healthier profile than others. In the same way, we attach revenue or accident rate to acquisition channels, we should add churning rate to our marketing reports.
Why are most teams reluctant to do it? because there is a lack of control on the churning. It is perceived as a metric hard to leverage. Hard to change, hard to own. I’ll build my case, the need to include it, around the belief that with a proper frame it can be effectively reduced.
In the next articles, we will review how is the retention addressed in the insurance industry. What some of its side effects are and what can be done about it.
