Broadly speaking, the insurance industry tends to focus on four main key performance indicators (KPIs): customers, policies, premiums and commissions.
However, only examining these four areas can cause people to overlook one of the most important KPIs – profitability. Measuring and monitoring profitability has multiple benefits across the business, so ignoring it can be a costly mistake.
Being able to measure profitability is essential if the business is to grow, and to do that the business needs to be as efficient as possible. Identifying and quantifying unprofitable customers and lines of business means that agents can take immediate action to better allocate time and resources.
When it comes to profitability, there are two key areas to focus on: knowing the customer and leveraging the power of real-time data. If brokers and agents can improve these, they’ll be in a good position for continued growth and long-term success.
Regardless of the lines of business an agent deals with, it’s vital to know how much profit each customer is bringing to the table, and to have this information on-demand. From the policies and premiums, to customer profitability and interactions, companies need to have instant access to this information across the entire business. We know the age old saying is true: you cannot manage what you cannot measure. By weighing up how much time a business invests in a customer and how much revenue that customer generates, brokers can easily determine the cost of doing business with each one.
Not only will this knowledge allow the brokerage to allocate resources efficiently, it will also improve the customer experience.
By deriving actionable insights from all the data at their fingertips, brokers and agents can identify and nurture their most profitable customers. They can then take it a step further and start to answer questions about how different business lines are performing, understand what a customer’s claims history is relative to policy income and other questions of this nature. Having the answers to all these questions from real-time data intelligence can inform strategic decisions which directly impact overall profitability and business growth.
Invest in Tech
When trying to increase profitability, it’s tempting to try to get by with existing technology. Whilst migrating to new systems may seem daunting, the long term return on investment far outweighs the initial cost. Reliance on old legacy systems has multiple drawbacks including fragmentation, inefficiency, operational-centric and lack of real-time knowledge across the entire business. As a result, brokers simply cannot up-sell or cross-sell, and processing claims or generating quotations becomes cumbersome when data has to be re-keyed every time.
By considering a modern broker management system, brokers can meet the increasing customer expectation for immediate gratification whilst driving further opportunities – and also spend less time and money maintaining older systems. This approach enables companies to bring increased value to their clients too. In an age where 24/7 online access is the norm, the ability of brokers to be competitive and profitable will depend on their ability to be seen as valued and trusted advisors. Furthermore, if a broker is able to have real-time access to the goldmine of data, they will be able to offer an all-round more personalised service to their customers, cementing their place in the insurance value chain.
Yes, it is extremely important to consider customers, policies, premiums and commissions. All of these KPIs are vital if a business is going to accurately monitor its success and identify opportunities for growth. However, measuring profitability should be the KPI that rules the roost.