Policy renewal increases and customer quote requests are keeping agents busier than ever. With a finite amount of time available and knowing that it is unrealistic to expect agents to apply equal attention to all incoming work, effective prioritization becomes critical. One way to address this challenge is by developing a segmentation approach for Personal Lines.
What is Segmentation?
Segmentation is the process of dividing a larger group, such as customers, into definable and approachable subgroups based on shared characteristics, needs, and the actions to which these subgroups are most likely to respond. While there are many ways to segment larger groups, there are four primary types of segmentation: behavioristic (past purchases, shopping), geographic (zip code, urban/rural setting), demographic (homeowner, occupation), and psychographic (attitudes, values).
Agents looking to determine what variables to use for segmentation should ask the following questions with respect to their clients:
- What do clients need? (i.e., auto, home, life)
- How do they choose to do business? (i.e., digital, face-to-face)
- Why do our clients work with agents? (i.e., price, service, advice)
- Who are our clients? (i.e., homeowners, income level, occupation)
- How much business do clients have with us? (i.e., policies per account, premium per account)
- Who do our clients know? (i.e., large families, centers-of-influences)
- How much do our clients advocate for our agency? (i.e., referrals, reviews)
- What type of underwriting risk do our clients present? (i.e., number of recent claims)
Segmentation Approach: Variables
Once the variables to use are determined, agencies should consider how many subgroups (segments) should be created. As an example, an agency may differentiate segments by letters as A(typically VIP), B(preferred), C(standard), and D(other). While there may be different opinions as to the right number of segments to use, agency owners should make sure the process does not get too overwhelming to manage.
Defining segments and determining which variables to use should be led by agency owners with staff input. It should be well-reasoned to illustrate different characteristics that justify differentiated experiences. For example, using the above, “A” clients should be the most profitable, most likely largest average premiums, rounded accounts, and strongest referral source. “B” clients may look very similar, but perhaps they are not as strong of a referral source. “C” clients may be those with either monoline accounts or perhaps higher-than-average claims experiences. “D” client may look like Cs but perhaps they are also the most difficult to service (i.e., unreasonable expectations, do not value insurance advice). Regardless of how segments are defined, it should be clear which client segments most impact an agency’s overall operations (typically in terms of revenue and return on time invested).
Differentiating Client Experiences
Once segments are well-defined and categorized, determining how to differentiate client service experiences is where agencies will most gain time efficiencies. Since those clients in the most preferred segments have greater impact on an agency, more priority, time, and attention should be directed towards retaining those clients. For example, annual reviews may be more thorough for “A” clients. For “C” clients, rounding the account may take more of a priority. In another case, agencies may consider a lower premium increase threshold for “A” and “B” clients. An agent may only consider requoting “C” clients upon request. Again, differentiated experiences for different segments should help to prioritize tasks and help agents save time.
Developing a segmentation approach to personal lines will take some time. The plan should be developed, written, and communicated to all agency staff. Incorporating a segmentation plan into an agency workflow using existing agency management and CRM systems is also ideal. Segmentation in and of itself is not the goal. Instead using segmentation to help gain time efficiency is the point. So periodically reviewing a segmentation plan (perhaps annually) and adjusting to maximize results is also critical.
If you would like to discuss creating a customized segmentation plan for your agency, please reach out to Russ Durst to schedule some time.