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Shifting KPIs for Auto Insurance Marketers – Part 2

In Part I of this series, we discussed replacing traditional metrics such as customer quotes, percentage of bindings, etc., with using long-term value (“LTV”) as a key KPI in the auto insurance business.  In Part 2, we discuss some of the step necessary to make this transition.

Familiarize yourself with LTV terms
First, insurance companies need to understand exactly what long-term value means for their organization.  Clearly, studying organizations who have already implemented marketing strategies that target LTV successfully is a great place to start.

Leading insurance marketers like Progressive and Allstate utilize comprehensive customer data upfront to calculate the lifetime value against the total acquisition cost, known as the “LTV-to-CAC ratio” (Lifetime Value to Customer Acquisition Costs). This ratio helps marketers determine whether investing in a campaign makes sense by estimating how much a customer will cost in claims over their lifetime. Adopting this language allows marketers to keep pace with the C-suite and actuarial departments, which increasingly employ longer-term metrics like LTV in decision-making.

Collaborate with the right teams
To gain an edge, insurance marketers should collaborate with actuarial counterparts who already understand the advantages of low-risk customers versus high-risk ones in the long run. Additionally, data science teams possess knowledge of LTV and its relationship with risk, enabling them to validate whether marketing tactics genuinely drive profitability.

Target intelligently, target safely
One strategy to increase customer LTV is to exclusively target the safest drivers in marketing campaigns. Safest drivers have the lowest accident rates, resulting in lower costs for insurance companies. However, effectively delivering campaigns solely to drivers with impeccable records is easier said than done. Fortunately, third-party data partners provide information on individuals’ driving habits, going beyond traditional “driver scores.” This data empowers marketers with more opportunities to target the safest drivers based on their actual driving behavior.

Be patient
Change doesn’t happen overnight. Adopting LTV as a key performance indicator is complex and requires time to prove its effectiveness. However, one undeniable fact is that certain driving behaviors lead to better LTV. Once these drivers become the target of campaigns, it’s crucial to communicate this shift to higher levels of management. The CFO is unlikely to object when marketers consider the long-term impact of new customers on the company’s bottom line. Obtaining buy-in and setting clear expectations around these new KPIs for executives and management is critical. The eventual outcome of transitioning to LTV metrics will be well worth the wait.

Insurance marketers can learn from savvy professionals and leverage this period of change to realign their strategies. By targeting safer drivers, preparing executives, and redefining how success is measured, marketers who follow this advice will find themselves in a more confident and advantageous position during future downturns.