Unlocking The Value Of Closed Blocks Of Business

By Jon Cooper

So you’re a life insurer with closed blocks of business on your books. What can you do to unlock their value?

Closed blocks of business can be a thorn in the side of life insurers. Whether a result of discontinued products or included in a merger or acquisition, these policies remain active and must be serviced, but over the long haul, they may have become very unprofitable.

Maintaining policy administration systems for these blocks is increasingly expensive. Operational costs remain constant although no new policies are sold to offset the per-policy costs, and administration costs continue to increase.

Life insurers typically deal with closed blocks by looking for ways to reduce operating costs without negatively impacting customer service or selling the unprofitable blocks to another insurer. Some keep closed blocks in-house, tapping an outside provider to operate and manage the policies. Life insurers that outsource the management and operation of their closed block policies can save money and improve service while reducing per-policy administration costs.

Open The Value In Closed Blocks

As an industry, life insurers must start thinking of closed blocks as opportunities and not closed doors. Closed blocks of business don’t have to be merely a financial burden to life insurers. Instead, they can be a source of opportunity and a pathway to business growth.

The key to unleashing the value of closed blocks is improving customer engagement. This can open the door to a deeper relationship between carriers and policyholders, reduce lapsed policies, improve retention and even increase cross-sell and upsell success.

For companies already struggling with closed block profitability issues, the idea of investing in additional customer engagement capabilities might seem counterintuitive. However, the benefits far outweigh the costs. Better customer engagement means carriers can ramp up the customer experience and increase meaningful touchpoints throughout the entire policy lifecycle instead of just reaching out with annual statements.

Having a digital platform in place to facilitate these touchpoints can help life insurers build on their customer relationships directly or through the agent channel. And, generally speaking, customer engagement capabilities let policyholders know that they are important, and they can open the door to increased communication – potentially leading to more business.

There are multiple benefits of reaching out to closed-block clients. Engaging closed-block business can help drive growth and profitability in five ways.

1. Convey persistence. Engaging a closed block of business demonstrates persistence and conveys the carrier’s commitment to its long-time policyholders. A proven track record in driving persistence is especially relevant in today’s environment, where there’s competition for new sales with high acquisition costs. In the current low interest rate environment, businesses of all types are focused on cutting costs. Retention is one of the most profitable ways to sustain a business in a low interest rate environment. It’s harder for carriers to justify spending a lot for marketing to acquire new customers than it is to make current customers more profitable.

2. Understand current risk. Engaging more deeply with customers enables you to gather insights around the risks of the closed-block business. Presumably, this business was written years and years ago, so getting a window into the current lives of policyholders can give carriers an idea if they’re on track from a risk perspective, or if the business is less risky today. This way, the carrier can determine if it wants to double down on less-risky business or shed the business more quickly if the risk has grown.

3. Empower agents and advisors. Closed blocks of business might only be considered closed from a carrier’s perspective. These blocks may be active and vital clients for agents who only have a small share of wallet they want to grow. Adding customer engagement capabilities can empower agents to offer a top-notch experience to the closed-block clients, potentially giving them a path to new business. The ability exists to automate the outreach and ongoing engagement so agents can stay top-of-mind to clients and concentrate their time and energy by focusing on clients who may be qualified and open to new insurance offers.

This also opens the door for insights about a client’s health, financial well-being and life events that can help agents advise their customers more comprehensively. These events give agents and advisors a reason to engage with end-customers and deepen the relationship and create opportunities to approach clients with suitable, personalized product offers.

4. Boost cross-sell and upsell success. Digital customer engagement can be a path to organic growth. Once carriers and agents start to engage with closed block policyholders, a customer engagement platform automates the whole upselling and cross-selling process to qualify, nurture and cultivate closed-block customers into leads for new product sales. So instead of touching customers only once a year at statement time, agents can use automated and digitized customer touchpoints to reach out to clients weekly or monthly. Agents can further build a relationship and have direct digital access to customers via an integrated engagement/rewards program that incorporates wellness aspects and gamifies health education while opening the door to remote advice.
5. Help agents grow their business. A digital customer engagement strategy is especially helpful for more junior agents who are starting to build individual relationships. In addition, some carriers assign junior agents the “orphaned” closed block clients where the agent has retired or moved on. A junior agent has no relationship with the policyholder, so the customer engagement capabilities can help the agent reach out to insureds, determine the qualified leads and help grow their book of business.

Even seasoned agents and advisors with robust books of business can typically have 100 clients in a life or wealth management business. They may engage with only 20 per quarter, so they can only have one touchpoint with each client. Focusing on a higher-touch level of customer engagement gives them a way to stay in closer and more frequent contact with their policyholders and helps them grow their business because they can manage more clients more successfully.

The benefits of a digital customer engagement strategy are far-reaching for life insurance organizations with closed blocks on their books. Agents are happier because they can reap the rewards of increased engagement with their insureds. Carriers can benefit from the increased persistency and higher customer satisfaction. And policyholders get more value from their carriers. It’s a triple win.

Jon Cooper is co-founder and CEO of Life.io. With more than 15 years of experience in the insurance industry, he has held leadership roles spanning technology, consulting and corporate development. Jon may be contacted at [email protected].

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