New lead model question - could cost per sale work?

[bakulmm]

I am a little late to the conversation. Are you looking at doing health and life leads?
I am starting a new agency in North Carolina and would be interested in looking at this model.


Thank You.
www.protectionfromlife.com
919-525-1781

[d's insurance store]

I'm resurrecting this thread to update anyone interested in the challenge of insurance internet leads on what transpired over the past six month between myself and the original poster who was asking for opinions on a business model for P&C Auto Internet leads. To keep this update in context, I would strongly suggest going back over the entire thread to understand the history.

The Gentleman from the new business lead company contacted me outside of the forum to see if I wanted to experience his product on a testing basis and give feedback. Of course, there would be no charge to me during this testing period. Hey, free leads? Count me in. Joking aside, his request was sincere, and I gather he had some others around the country (I'm in California) on his test list as well.

It took close to 4 months for the business model to be launched. I would receive periodic emails telling me they were still testing and refining the system and that actual leads would arrive 'shortly'. I was happy to be patient and actually was looking forward to a newly launched lead business venture that according to the initial postings, was going to be a step above what I and many others here had experienced in our P&C lead purchasing experiences. As presented, these leads were going to be of far better quality than the Bankrate type of leads many of us have grown to hate.

Finally, right after the first of the year I was told the leads were on their way.

They started to arrive in batches of 3 or 4 on a slightly delayed basis because not being a true subscriber, the lead company had to batch them and send them out each morning, so they did not have the immediacy that a subscribing agency would have in real time.

I'll interject at this point that what I would look for in a purchased lead is a ready, willing and able prospect in my marketing state who really wanted a chat about insurance rates and coverage and in the best of all worlds was interested in a potential agency relationship that could begin with the initial purchase and then expand onto other lines. In other words, a prospect with some degree of standing and the ways and means to enhance the client base. Sure, I'd expect the usual collection of crazies and people without the financial means to make a second payment and the usual pure price shoppers who were looking to save $5 from their current rate, but most reading here would know what I mean.

Well, by and large the testing leads proved to be mostly what I'll call 'low value' prospects...the minimum auto coverage type with an older car, no current or Geico/Progressive current and minimal need or potential for future sales. I will say that the majority of leads that were sent my way fully acknowledged they had requested a quote and that alone is far better than the usual quality of leads from mainstream vendors who deny they even asked for an insurance quote.

There were a couple of leads that had already purchased due to the time delay and that too was to be expected given the situation. Would they have developed into clients had I been able to contact them sooner? I'll never know, but clearly they were almost all conscientious price shoppers and not interested in a bona fide insurance agency relationship with all the attending benefits that we all profess to offer a quality client.

A large percentage of the leads were casual shoppers, and some had bad phone numbers or didn't answer.

After experiencing about 20 or so leads, and offering my real time opinions of each lead worked, my testing ended by mutual agreement. We sort of decided that there might be value in putting the leads into a drip follow up system and working them until what I've always called the 'buy or die' mode, where contact continues for months or years until the prospect either buys something or dies off.

But a drip system is not what my agency is about. Frankly, I'm not big enough to devote a dedicated staff person to spend all day contacting purchased leads that didn't pan out over the past number of months, hoping against hope that contact is made at that vulnerable point in the purchase cycle to land a sale. My agency is set up to either immediately deal with a prospect, or with sincere interest follow up a time or two, or move on to selling and servicing the current clientele. Money spent on leads either gives my agency access to that valid buyer or it's not giving a ROI that's worthwhile.

I'm not diminishing the value for certain agencies who acquire leads and then work them constantly. It must be nice to have that kind of girth and cash flow and staffing to spend the time and resources. But it's not my agency.

All in all, I found these leads, that were so highly forecast at the beginning of the thread, to be of equal value as a prospecting investment to the current quality of leads from the mainstream vendors, and that too me at least, is worthless.

Now, as I've indicated in earlier postings, there may well be a geographic difference across the country in the quality of leads and my state (CA) may just produce crappier leads overall than say some states in the middle of the country, but having had the opportunity to experience the product of this startup in the early stages, I would not be a buyer. This in spite of the fact the person I dealt with was certainly sincere in his goal to offer a product that was indeed 'different' from what is widely available. And I offer up my heartfelt thanks to the company for allowing me to at least try them out.

By the way, I did make one sale from the offerings...minimum coverage to an out of state contractor who had a vehicle in California. That policy came in at about fifty dollars a month and is about to crap out for non pay after lasting about two months. Had I paid for that lead at a going price of about $20, I would have barely made any return on my money if the policy had lasted the full year...and obviously, it won't last longer than two months.

I continue to look on this site for some agency owner to jump in and refute all of my cynical assumptions and tell the forum just how successful the leads have been from the such and such company, but that doesn't seem to happen. So, I'll continue to stand by my experiential outcomes with lead vendors and avoid them like the plague.

Opinions and observations are always welcome.

[lonestar]

D's, as always, you have written a very well thought out post. I'll throw my .02 cents in as well. The lead folks contacted me too outside of the public forum, and I too welcomed the idea of a brand new lead vendor, that would be better and different than before.

My experience here in Texas was almost exactly as yours in CA. I had to stop the program after the first twenty leads. Granted, I did not have the time(or did not take the time) to call the leads. I did however, email each one what I thought was a very short and sweet reply to their request for an auto quote, and let them know that I am an agent that represents several companies with a nice logo / link to my website, which I think is better than most.

Responses? Zilch. As in nada. As in not a single reply.

The lead folks I worked with were very sincere in their belief that they would be able to offer something different. I can't fault them for trying, and I am grateful that they let me try their system for free.

So, this confirms my thinking that a large percentage of these daytime internet auto insurance rate shoppers are perhaps taking a 5 minute break from their job to see if they can lower their auto rate by a $1. As D's said, these are by any agent's definition a low value prospect. There must be a reason E-surance is not making money for Allstate. And the reality is, if an agent writes this client by saving them a $1 on their auto policy, then the chances are very high that this same client will be shopping again in 6 months, if their policy does not lapse again before renewal.

I would also like to hear from an agent that can point me to a lead program where they are growing their agency base by $200,000 of premium per year or more. I just have not found that agent yet.

However, if I developed a lead system like this that I could sell to agents, then I could see the money potential in this type of program, as the seller of the leads. But as the buyer of the leads, so far all I have seen is many feathers and no chicken.

When I left the captive world, I was used to a closing ratio of 10%. As an IA, I am used to a close ratio of 50 to 60%. I just don't see the value in using a lead system that by my experience, would be in the low single digit conversion range. Heck, direct mail will give me a 1% response rate. I too, am open to opinions and experiences of others who have had great success with these leads. Maybe I am looking at this all wrong, who knows?

It appears that these internet "leads" might have some value to someone who is creating a large database to drip on the leads until they "buy or die" as D's mentioned. But I am not ready to spend the time, money and effort to place business that is based on low value clients for many reasons that those agents running a preferred book of business will understand.

[d's insurance store]

I think that the whole insurance internet lead 'game' has evolved (perhaps devolved is a better word) into a place where the disenfranchised and low value prospects are the only one's left who are willing to go through the on-line questions, either for an incentive or not, and who have devalued the insurance product to the point of buying only when the price point is the absolute cheapest offered.

The days when a more high value prospect would embark on a serious journey for a new insurance relationship are, I fear, long gone. Pretty much everyone using the internet today in the more educated categories knows that filling out a form on a 'blind' site is an invitation to hear from large numbers of 'new best friends' who want to separate the prospect with their money.

And that, perhaps, is the crux of the disconnect between our expectations as Insurance Agency Principals spending marketing money for valid leads and the lead industry, that at least over the past 5 to 7 years, is capable of only over promising and under delivering on the product.

I can share two more stories about my lead involvement.

The first is from a Life Insurance MGA. I use them to submit and manage my life cases, as their facility gives me access to 15+ companies and handles all of the exams and other assorted components of a life case. They approached me with a proposal that involved me giving them money that would be applied to them purchasing leads nationwide and those leads would be worked by their telephone sales staff and any cases that went to application and finally issuance would have a commission split of 50% between them and my agency. They then promised that I would receive a return on my money of a certain per centage, in other words, I'd receive $1+ for every dollar I gave them.

I figured that who better than a Life MGA would first know where to purchase the best nationwide life leads and secondly, who better than a trained and dedicated staff of phone people would know how to convert the largest number of those leads to sales.

Having purchased life leads in the past, I know what an effort is required to convert the leads to applications and finally to issuance and then to placement to get paid, so the opportunity to out source that with a promised return was too good to pass up.

I wish I could tell you this was a license to print money, but it wasn't. After a year and a half...and yes, the program is still limping along, I have yet to fully recover my investment. I'm close...close enough to feel that I've kind of broken even and won't lose money, but still, there's been no positive return back to me.

So, in this experiment, even the so called industry experts can't even crack the code to using leads to a profitable end. Prior to this, my forays into life leads worked by my agency were break even at best and most often money losing enterprises.

My second story comes from one of my P&C carriers who initiated their own lead program with the intent of sharing the cost of the leads with subscribing agencies.

Ten plus years ago, that company's lead program was very successful for my agency, and most other subscribing agencies as well, but as we've indicated on this forum, times have changed. They are now up to charging as much as $40 per lead for what they define as 'high quality' leads with married/multi car/home owning/ prior insurance attributes with minimal MVR activity. But except for the high volume and high cash flow agencies with the ability to drip these until that 'buy or die' inflection point, most of the small to mid sized agencies have dropped out of the program, as the ROI just isn't there.

There may be no hope after all...

[JimatJKD]

Does anyone have an opinion about social media lead sources like Yelp or Yodle?

My experience with internet leads is the same as others: not worth the expense. I even know of one company that was actually telemarketing to create leads to pump through their own internet site as though they were web search generated.

I research on forums about Yodle has gone both ways, with some saying they will make their ROI, barely, and others put off by their service and sales tactics and drop it after 3 months. I see a difference in this type of source because someone searching online will find you via these services using their smartphone when they are looking to make a transaction, and are choosing you from a list to talk about their needs. This is different than filling out a form and seeing what you get back.

[agent14]

Sorry, I'm a little late to the discussion here, but I have yet to find a lead program like this produce a positive ROI.

[insurewithaba]

Although we agree with most of the previous posts that a traditional agency would most likely not be able to make the numbers work to consider any type of shared commission concept but, fortunately our agency is quite unique so we are very interested in what you are proposing. Because of the fact that we have almost no competition in the entire US for our insurance product, if you have the ability to target your lead program to specific geographic areas then we can provide a very viable opportunity for your company to participate in a very significant long term residual income. We would love to explore the concept with you in more detail. Since I have not previously posted any comments in the past on this site, I am not familiar with the proper method for us to make a direct contact with you. If you would like to discuss this further just reply to this post and let me know the best option for us to continue this discussion privately.

Thank you

[statsinsurance]

HI gang. I am new to the insurance industry and am strictly in charge of marketing for a P&C Agency (I am not licensed and do not write policies). I keep a CPS (Cost Per Sale) at around $120 or lower. I am new to this only 10 mos in but have since been able to keep that well under $120 per sale. We purchase our own leads through Google and also buy leads from traditional lead gens (when I started we had crappy leads like Bank Rate which came in well over $250+ Cost Per Sale).

We have around 10 agents at any given time that are required to sell at least 10 policies a week (auto, home, umbrella and Motorcycle all count as 1 policy regardless). We utilize a Lead Management system and some semi-sophisticated reporting (Like Call tracking - $20 extra month - for Leads that call in) to build a model that works well for us. We can then use this model to track Contact Rates and Cost Per Sale.

Buying leads can work. But as you all know, the market (and most importantly the same leads you are buying) can change. Filters are great...who cares if with filters like Homeowner, Prior Insurance for 12 mos, 2+ Cars, etc.. Cost $20 more than a traditional lead? As long as your Cost Per Sale is holding steady it shouldn't matter how much the lead is. I believe the challenge for most (as is ours) is sheer number of able working bodies to keep everything in check such as Agents, Data Keeping, Accounting, Managers/Supervisors, ETC. It's extremely hard for us to find quality insurance agents that can utilize our fast-paced system.

Just my two cents strictly from a Marketing point-of-view that is new to the P&C game! Love all the insight I have read thus far though!

[d's insurance store]

Many of us old timers would call your business model a 'bucket shop', where the phones are constantly ringing in one direction or another.

Your cost per sale of about $120 would likely work in high premium areas where the agency could offer a competitive product for the bread and butter lines and the agency itself had enough cash flow from existing business to support the expenses of the kind of operation you describe. But for a small or medium sized agency presenting as the 'trusted insurance advisor', the cost of doing business is just too high, especially if the premium average is lower.

There are lots and lots of ways to run a successful retail agency, primarily offering personal lines and light commercial with a smattering of life and health to round things out. My views over the recent years haven't changed and I still see a sunset on the horizon for the small/medium generalist agency model in the next 5 to 10 years, and I accept that others will disagree and cite various surveys showing the buying public wants the attributes of a local, caring agency, but from what I can factually gather, the raw numbers don't support continuation of that business model as consumers increasingly turn to their smart devices for commodity shopping and cars become smarter and carriers think up new ways of capturing revenue that used to flow to the agency.

I'm so very glad that I'm the age I am after a successful 34 year career selling insurance.

[TechStarter]

I may get killed but we would like to re-open this thread again!! We are experienced tech investors that have built many lead/customer acquisition companies across numerous verticals/industries.We have been very successful in cell phones, Credit Cards, Long Distance through VOIP, Satellite Television, and even Auto Loans.

We became intrigued, with what we perceive to be a gap, in the insurance industry. Agents and agencies work with an ever changing internet medium attempting to participate in nascent technologies and may not be equipped to master what needs to be mastered.

Our value proposition is simple: We take all the media risks, we deliver qualified inbound calls directly to agents, and we are paid on a % of commission or Cost per sale. We are not just a phone dumping system or as seen by many in this forum, a "Bankrate" type lead provider. We are a media/technology company that will assist agents in closing a higher % of sales from inbound calls. Because our goals need to be aligned, we have spent time in building systematic-algorithms in order to achieve ultimate success! Over time, our system will provide inbound phone calls of consumers looking for quotes with the agents who have shown a history of closing these consumers the best.

Facebook inquiries maybe great for one agent, but not for another. Warm phone transfers from a recent mortgage quote maybe a slam dunk for Bobby at XYZ agency, while Kim should handle any call in lead from Google. We use a significant number of attributes in order to model which sources of inbound call traffic your agent(s) should receive. A millennial may be better suited to speak to a millennial agent when it is between the hours of 1-4pm local time. We won't know until we start to test. You can filter by home ownership, income, marital status etc....but did you ever think to examine the agents filtering? We did in other industries, and it works!

Why pay for leads or calls ever again? We believe we can be paid by policy and make it work for all parties involved. Our pedigree of success; we have placed 4 companies on the Inc 5000 over the past 10 years and sold 2 to Private Equity groups. At launch we will be Lic. & Bonded in almost 12 states (you cannot share commissions with an unlicensed producer). We have done our homework and we believe we can keep your phone ringing with the prospects you can actually close!

If this is of any interest let us know. We will not be launching until 6-15-17. Lastly, we will not take unlimited clients and just any agent/agency. If we are buying large amounts of quality calls across multiple mediums, we cannot afford to work with uncommitted groups or producers who can't close.

[MBRCatz]

Well, good luck with that. IMHO the fee for sale is too close to an illegal practice for me to want to risk participating in it. And if you're talking about personal lines leads - there's NO profit on those the first year; service is pretty intense; and internet based leads tend to have a significantly lower renewal rate. The vast majority of commercial internet leads are labor intensive "fishing expeditions" that rarely bear fruit.

[TechStarter]

If we are licensed (fully licensed via our home state as a producer), and receive subsequent lic. in other states and obtain bonds for extra measures why would we be considered illegal. We will be a fully lic. agency. We will be providing inbound calls. If you don't mind me asking, what is the typical renewal rate for internet policies? Also, we will be driving calls from billboard, call center's, and affinity partnerships.

Thanks for the feedback.

[d's insurance store]

And, away we go....

There's a perception that when a prospect is ready to purchase a personal lines insurance policy through an agency, then at the point of sale, the agent goes into the back room, pulls a policy from inventory, blows the dust off of it, looks at the wholesale cost and doubles it as in a retail environment (the doubling of cost for resale is called a 'Keystone'.)

In fact, most agencies are probably working for anywhere from 8% to maybe 20% commission rates on policies.

It is pretty well accepted by those of us who've played with internet leads over the past decade or so that retention (or for the uninitiated, how long a policy is likely to stay on the books, offering up residual income without the need for remarketing the risk) is much lower for clients who've originated from a web inquiry.

In reality, the motivation for such a shopper is primarily price and the policy itself is viewed as a simple commodity along the lines of a jar of peanut butter or a 3 pack of socks. And, at least in my experience, the loss experience, which also can impact agency revenue, is higher for this transient class of business.

Many agency owner's who congregate on this site are not likely to be looking to stock their book of business with what is often referred to as 'low performing' business. So, to commit to sharing revenue as a finder's/acquisition fee for the perceived lower quality business won't be of interest to me. Of course, I'm old and cranky and very opinionated and have scheduled my retirement departure for another 18 months to two years, and I don't play around with social media for my agency, so I may not be the prime market demographic for this sort of proposal. But if I go back over promotional expenses from prior years, there are literally tens of thousands of dollars that I've spent for internet leads with not a whole lot to show for it, so if that clouds my outlook, then so be it.

As always, your mileage may vary.

[TechStarter]

d-

Your feedback is invaluable. To clarify, we are designing this software to take into account the special needs of the insurance industry. We understand the specific hurdles agents currently face, and the challenging margins some agencies work off as well. That is why, limiting any waste on unsuccessful marketing ventures is a priority for most. We have over 20 years experience in regressive marketing models (industries that rely on monthly or annual re-subscription for the model to be successful but experience different levels of cancellation/churn).

As retention can be low on internet shopper leads, one size does not fit all, and one medium does not either. Our solution is not 100% internet based, it focuses on the producer's best medium to close incoming calls. Something to ponder, on the poor performing internet leads you received, what data subsets did you analyze to see why they performed so poorly? Where you able to place trend reporting on the policies that were written? Did you close more women or men; was distance from your office a consideration; or where they non-exclusive/follow up leads? We wouldn't expect you to do or know all that, that is what we do!

Inquiries that convert higher, typically have a more positive feedback in regards to their experience with the agent they worked with and trend in higher sense of loyalty and/or agency brand awareness. There more receptive to trickle/CRM messaging and renew better. The goal is to create matching experiences that level out the transient price shopper, and model them into a more traditional insurance customer who is looking for their agent to service their account and provide them with the best experience/customer service and recommendations.

The internet isn't going anywhere, and needs to be an arrow in every agent's quiver. Ideally it would be a large % of the arrows if it is done correctly. We have a fair amount of experience in buying media for various channels in varying vertical/market categories. We have bought hundred of millions $'s of it! We are banking on 1 thing, getting a quote from a "local agent" and then analyzing the data model higher levels of success after each subsequent sales call. We are looking for producers/agencies in certain states to sign! But, if there is a thought that we are sending over a "batch" file of people looking for a quick quote, from some un-named website, that is absolutely incorrect. Our solution is as far from this, as Earth is from Pluto.

If this peeks anyone's curiosity please feel free to send me a private message! Remember we can only work in the states that we are licensed as resident/nonresident producers.

Cheers!