Updated: Feb 19
At Engagex, we have worked with thousands of insurance agents over the past 15 years. We have found that the most effective method for improving the value of an insurance agency is to meet with existing customers for insurance review meetings. These meetings lead to new cross-sell opportunities, improved retention rates, and more referrals. However, if you have a particularly small book of business, customer insurance review meetings may not provide the volume of new leads you are looking for at a quick enough rate. A common question that arises for insurance agents is, “Should I purchase insurance leads from the internet?” Let’s talk about that.
The Case Against Internet Leads
An important factor to consider is that federal and state laws have recently been passed by the FCC under the Telephone Consumer Protection Act making insurance agents the target of huge fines for cold calling people who are not existing customers. Calling cold leads for prospecting purposes could leave you in big trouble, so make sure you're familiar with the legal side of contacting prospective customers.
Another thing to consider is that the consumer mindset has changed over recent years. People don’t answer the phone for numbers they don’t recognize. At Engagex, we used to provide lead prospecting services for insurance agents and found that the response rate for a simple quote was 1 interested person per 400 calls. With a 0.25% success rate, it hardly seems worth your time or money. Cold calling is simply one of the least effective ways to sell new policies in terms of conversion.
"Cold calling is simply one of the least effective ways to sell new policies in terms of conversion."
A popular topic in the insurance industry right now is The Commoditization of Insurance. The Commoditization of Insurance is the idea that most insurance providers offer identical insurance coverage, so for the consumer, the only real factor in choosing a provider is price. When you buy insurance leads, you purchase a list of buyers who have been using online quote tools specifically for the purpose of finding the cheapest insurance. Even when you close a policy from a lead like this, it is difficult to keep the client happy and your lapse/cancellation ratio suffers. These clients are never satisfied with their premiums and in 6 months or a year, they are likely to leave you for an agency that can offer lower prices.
"When you buy insurance leads, you purchase a list of buyers who have been using online quote tools specifically for the purpose of finding the cheapest insurance."
The Case for Internet Leads
Despite these shortcomings, internet leads are a consistent way to gather new leads, even if they are lower quality. You can always purchase a list of leads to cold call and find a little success. Scratch agents or small agencies may find the idea of internet leads comforting because of their quick and simple approach. If you have a skilled sales team dedicated to quickly and effectively calling internet leads, it isn’t a terrible acquisition tactic. However, as mentioned before, internet leads often create a terrible turnover problem because clients come into your book of business for a short time, and then leave you because they have no real reason to stay with your agency, but you can give them a reason to stay.
How to Make Internet Leads Effective
If you choose to purchase internet leads, we recommend coupling that effort with customer insurance review meetings. When you meet with your clients for customer insurance reviews, you demonstrate to them the value you actually provide as an insurance agent, beyond premium rates. Through these meetings, you show the client your expertise first-hand and establish a reputation as a trusted advisor by helping them avoid risks. When the client knows and trusts you, they are likely to stick around, even if they pay a few extra bucks each month. You may also be able to cross-sell your clients, and when a policyholder owns multiple policies, their retention rates improve dramatically. This way, you can continue relying on the simplicity of cold calling while securing your new sales with customer insurance reviews.
"When you meet with your clients for customer insurance reviews, you demonstrate to them the value you actually provide as an insurance agent, beyond premium rates."
If you are unfamiliar with the process of customer insurance review meetings, our blog is full of details. We also offer The Agency Thrive Program, which is a bundle of services and resources that explains exactly how to conduct customer insurance reviews in a way that results in improved retention, cross-sell opportunities, and referrals.
So, should you buy insurance leads? If that has been an important part of your agency’s acquisition strategy, or you’re unsure how else to grow, then go ahead! To avoid the negative effects on your retention rate, you need to be meeting with your customers regularly. Make sure to use The Agency Thrive Program to get the most out of new sales that occur.