McKinsey: Insurers Must Be Smarter With Marketing Spend

The firehose of money being spent on auto insurance marketing isn't a secret in the industry. But campaigns aren't as targeted as they could be, meaning that much of the nearly $6 billion spent per year (according to The Wall Street Journal) isn't very effective, according to research from McKinsey & Company.

The Winning Share and Customer Loyalty in Auto Insurance report, which is based on a survey of 16,500 insurance customers, found that being part of the initial consideration set of an insurance shopper isn't as important as it used to be. Consumers are open to dropping initially considered brands and researching new ones during the buying process. This means that broad-based campaigns designed to get into the initial consideration set aren't as necessary, McKinsey says.

"This news is particularly relevant for carriers that have neither the resources nor the appetite to match the marketing spend of the leading brands and secure a place in the initial consideration set," the report says. "...[The] capabilities and tools required to reach shoppers differ at each phase of the consumer journey, and for each segment of the shopping population. Carriers that can target these segments accurately will unlock a new way to win."

[How CIOs and CMOs can work together to manage marketing's IT spend]

In addition, McKinsey found that most customers are shifting toward a multichannel approach to insurance shopping. Shopping behavior can't be codified into simply "agent vs. direct" -- while 59% of information-gathering began online, compared to only 18% going to an agent for early information, 59% of policies were ultimately bound by an agent.

Consumers add and drop brands along the way as well. The average shopper "considered 4.5 carrier brands during their evaluation, with one brand added later in the evaluation process," McKinsey noted; of that total, 3.1 were eventually quoted. While "convenience" was heavily cited as a reason for getting a quote from a particular insurer, in the end, a human touch was most important.

"Success at the moment of purchase correlated with "relationship" as a key theme in brand perception; agents and call centers were successful because they more effectively address this need by offering a human touch, while online channels (including aggregators) were less effective at converting quotes to bound policies," McKinsey wrote.

[4 steps to incorporate big data into insurance marketing]

The company identified nine different customer segments whose purchase preferences and shopping triggers vary widely. A desire to work entirely in direct channels, for example, was as low as 10% for some segments and as high as 80% for others.

"Most carriers appeal to a particular segment and win disproportionate share in that segment, while few outperform across multiple segments," the company wrote. "Carriers must operationalize to deliver on segment needs if they hope to perform well in the long-term."

Nathan Golia is senior editor of Insurance & Technology. He joined the publication in 2010 as associate editor and covers all aspects of the nexus between insurance and information technology, including mobility, distribution, core systems, customer interaction, and risk ... View Full Bio