As an insurance advisor, lead generation must consistently be on your mind. Having an efficient lead-generation strategy is critical to your success, but exactly how efficient is your process?

New customer acquisition often takes center stage over retention and referral marketing strategies. Yet acquisition is far more costly than retention, especially in the insurance industry. On average, insurance agencies spend seven to nine times more to attract a new customer than to keep one. And while referral marketing has been proven as one the best ways to reduce the costs of gaining new clients, more time and investment is often still going into traditional sales strategies.

When it comes to sales, it’s always best to look at the numbers. So, the question is: are you doing the right math to maximize the ROI of your insurance sales?

The ROI of Cold Prospects vs. Referrals

Cold calls, lead-generation lists, sales conferences and advertising are all traditional ways of acquiring insurance sales. But research shows that referral generation is the most reliable way to convert more prospects and get a higher return on investment.

In one major study, cold-call prospects had a closing ratio of 11% whereas referral prospects yielded a closing ratio of 40%. In other words, the chance of a successful sale nearly quadrupled when prospecting from referrals. Another industry statistic shows an even larger divide with cold calling resulting in about a 1–3% success rate for getting an initial appointment versus a 40% success rate among referrals.

While there is some variance in the success of cold calling, the marketing math is clear – connecting with referrals results in more sales and less time making calls.

Additional research on the closely related banking industry found that referred customers are more profitable and more loyal to their agent and have a 16% higher customer lifetime value than non-referred customers.

The Value of Retaining Customers & Their Families

Customer retention has a serious impact on your bottom line. According to research from Bain & Co., when customer retention increases by just 5%, profits increase by 25% to 95%. Why is retention so valuable? It ensures you get return on your initial investment into the customer, reduces churn rate and often leads to more product sales with the customer over time.

Your current clients are also your best source of referrals, particularly among their own families. It’s helpful to think of “retention” as more than just keeping your customers. You should also strive to “retain” your clients’ families as well so that you’re organically growing sales across multiple generations.    

To quickly show how connecting with families can benefit agents, let’s run a hypothetical comparison. Imagine two life insurance sales agents, both of whom have a client with a $1 million death benefit.

  • Agent #1 met and connected with the client’s entire family, including children and grandchildren. When the client passes away and the family receives the death benefit, they keep it with the agent to invest. Since they trust the agent, they continue working with him and buy additional coverage, also worth $1 million.
  • Agent #2 doesn’t connect with the client’s family. When the client passes, the family accepts the $1 million death benefit and takes it to another advisor. The connection is severed, and family referrals are lost.

In this scenario, Agent #1 keeps the $1 million death benefit and sells $1 million in additional coverage, resulting in an easy transition for the family, revenue retention and new business revenue. In contrast, Agent #2 has now lost the client and policy and must invest time in finding new clients.

The numbers show that referrals, especially among clients’ family network, are highly valuable for insurance agents. The challenging part is getting those referrals without seeming pushy or annoying your clients.

That’s where the automated learning provided by an insurtech platform comes into play.

Building a Book of Business with Insurtech

Insurance agents can gain client referrals more naturally and automatically using an insurtech platform. A digital file storage and sharing platform, like Link by LegacyShield, acts as a secure virtual workspace where agents and clients can communicate with each other and share important policy information. Clients can also connect their family members and friends to their platform so that they can be sure the right information is shared with the right people at the right time.

When clients connect these family members and beneficiaries, they become your new referrals – and the platform is a natural way to reach out and create direct relationships across multiple generations.

As you uncover your best referral sources, you are creating your very own viral referral marketing engine. More clients onboard more clients leading to more clients. You get to spend more time building relationships with your clients and less time trying to convert cold leads.

To learn more about how relationship-building increases your insurance sales, check out our blog, “Why Insurance Agents Should Care About Collaboration.”

Dan Pierson

Written by Dan Pierson

Dan Pierson is an insurance industry veteran, having run several insurance businesses and eventually selling a nationally recognized life insurance general agency. Dan started LegacyShield to help other insurance advisors grow their practices by focusing on the consumer experience.