Whether it’s the GEICO Gecko or Flo and Dr. Rick from Progressive, insurance ads are everywhere. The goal? Customer acquisition. But in a crowded market, how do carriers – especially startups who can’t afford to spend millions on TV commercials - cut through the noise?
As in other areas of our lives, technology is leading the way. Consumer habits are changing, giving way to the emergence of smart tech as a way for people to insure and secure their homes. According to the 2020 Xfinity Cyber Health Report, the average home is projected to have 13.6 networked devices by 2022. As demographics shift, younger digital native buyers will expect technology to be built into the products and services they use — including their home insurance.
Smart Home Tech: A New Customer Magnet
For insurers, this digital shift is changing the way they do business. McKinsey reports that automation through smart home devices has cut the cost of the claims process by as much as 30%. But the real game-changer, and the top reason we see insurers use smart tech, is for customer acquisition marketing. And cutting costs isn’t the only reason they do it.
Take a look at Hippo, an insurer embracing technology to boost its lifetime customer value to 5.4X the average customer acquisition cost. Smart tech has become a strategic piece of the customer acquisition — and retention — puzzle.
Let’s dive into three ways smart home tech is being leveraged for customer acquisition marketing.
Layering customer benefits
Insurance packages typically have similar coverage, similar risk profiles and little wiggle room on premiums. It’s not that different from what we’ve all experienced in the cell phone market. Carriers used to compete primarily on price, until some upstart carriers started to disrupt the market, adding value by paying for a customer’s digital music, video streaming or other services.Similarly, most insurance providers still compete on price or convenience (e.g. “the bundle”), compared to adding customer value or being proactive. Layering smart tech onto the insurance offering is a great value add for customers and can entice them to stick around longer.
For carriers working with agents, especially agents selling multiple carriers, this is a way to sell added value. Lower prices are appealing to customers, but offering smart home tech in addition to a great deal is a clear way to differentiate in the market. It amounts to a win-win situation for both customers and carriers.
Optimizing customer acquisition costs
Advertising is extremely expensive. In 2019 alone, several insurance carriers spent billions on mass-market ad campaigns. By offering smart tech to customers, insurance carriers can tap into their marketing budget to pay for technology like smart sensors and professional monitoring. We’re already seeing leaders in the market including Hippo, Nationwide and Lemonade do this today to win over customers. This can be a much more cost-effective way of acquiring new customers compared to the traditional marketing efforts — ads and direct mail — that can drain budgets fast.
Boosting customer engagement
Smart tech can cut costs while creating positive customer engagement. Customers can learn something about their home or small business from the tech they’re using, instead of just filing claims or renewing their policy. And as Forrester Senior Analyst Jeffery Williams notes, “Consumers are increasingly interested in sharing data for discounts.” Today’s customers crave that data and interaction, and in return, they understand the value that smart tech brings to the table. Compare this to a television or online ad that doesn’t do much beyond pointing the consumer to an insurer’s website for a quote.
And customer engagement can go a long way in retaining customers for the long haul – a major customer acquisition cost-cutting benefit. In fact, it can cost five times more to attract a new customer than to keep an existing one. Positive engagement can be extremely valuable for any insurer looking to grow their business – and make customers more “sticky” thanks to this mutually beneficial technology.
Smart tech is a proven differentiator in this crowded insurance landscape where everyone is looking for a competitive advantage. That’s a unique value proposition smart tech can offer, creating and sustaining a proactive relationship between homeowner and insurer while reducing property risk.
Becky Hamel is senior manager, strategic partnerships at Notion, a Comcast company. She may be contacted at [email protected].