Segmentation-Based Predictive Modeling Approach in Insurance Marketing Strategy

Insurance markets have changed radically and deeply in the past 20 years. Deregulation, globalization of insurance institutions, intensified competition, electronic commerce, bank assurance and the emergence of new risks are among the challenges faced by insurance markets. This is forcing the insurers and financial houses to rethink their marketing strategy, moving from traditional brand-based strategy to Customer Equity (CE) (Blattberg et al., 2001). The paper discusses the importance of CE as a marketing strategy, and an attempt is made to demonstrate the impact of advanced analytics on CE strategy through cross-sell by targeting the right customers with the right products. This attempt is a deviation from traditional segmentation approach. It has been proved beyond doubt that advanced analytics can help insurers in strategizing and creating profitable target base using analytics approaches. The paper attempts to develop models, product group-wise, to capture the aforesaid differences and apply the patterns learned from one product group on other product groups to maximize the chances of cross-sell. The value analysis showed substantial cost saving through preferred product suggestions per customer