Also in this issue:
Group Company Myopia
Employer Attitudes toward Voluntary during the Recession
Tough Economy? It’s Conservation Time
The Product that was Supposed to Have Died!
Are We in the Voluntary Business or the Benefits Business?
Economic Lessons
Managing the Budget in Uncertain Times
Who Will Serve the Micro Group Market?
Return of Premium Term – Implications of a New Actuarial Guideline
|
Spring 2009/ No. 79
Tough Economy? It’s Conservation Time
As an industry, our conservation efforts are embarrassing. While account-level conservation gets attention from most reps and brokers, individual conservation efforts rarely do. Brokers often feel that it’s not profitable to conserve individual business, and companies rarely give it the priority it deserves.
An informal poll suggests that less than 10 percent of companies have a meaningful conservation program in place. And “meaningful” here excludes leaving brochures with the HR staff to hand out to departing employees. We know that rarely happens and we know it’s rarely effective. As a result, the conversion rate is terribly low for most companies, hovering around the five percent industry average. (That is the percentage of employees coming off of list bill who successfully port, convert, or otherwise retain their coverage on a non-payroll premium-paying basis.) Aside from the obvious advantage of retaining this business (it’s a very large premium amount, and has already paid most, if not all of the acquisition costs and commissions involved in getting it on the books), there are three other factors to consider.
The five percent you now retain is probably a text book example of adverse selection. From a risk standpoint, it’s probably the worst business you could retain. Every dollar of premium you add to that group sweetens the overall pool. Some observers with true conservation programs report loss ratio results in line with their in force block. Why keep only the most suspect risks?
In hard economic times, the value of conserving existing business and the associated customers grows. While we all agree that conservation is a worthy goal, in a recession, its value proportionate to new sales is likely to increase. And anecdotal evidence from other industries confirms that investments in retention and conservation are important strategies during difficult economic times. Why not learn from experience?
Conservation works. During our 20 years of work with carriers, we have installed a variety of conservation programs. Our best effort brought a national carrier from an average of five percent to a high of 28 percent successfully converted. Do the math. What could quadrupling your successfully retained customers do for you?
For more information on improving your conservation program and retention results, contact Eastbridge at (860) 676-9633 or email the company at info@eastbridge.com.
|
