Direct Marketing of Insurance Integration of Marketing, Pricing and Underwriting

As insurers move to direct distribution and database marketing, new approaches to the business, integrating the marketing, underwriting and pricing activity will be increasingly important. Many insurers today are adopting increasingly sophisticated approaches to direct marketing, especially for automobile insurance. Large, sophisticated customer databases and sophisticated analytic approaches are used to direct marketing efforts. The underwriting, pricing and marketing roles at these companies are evolving but are still largely segregated. Each area functions in a highly specialized area, linked to the others but still compartmentalized. Marketing analyzes customers and customer lists to predict response rates and thus profitability of the marketing activity. Actuarial analyzes experience data to estimate loss costs by type of insured. This is often done with special actuarial databases, making little use of more extensive customer databases. To achieve optimal results, more integration of these three roles is needed. The actuary will need to have active hands on involvement in the marketing process, helping the marketers move beyond response prediction, to analysis of loss costs as well. This paper explores how companies should operate in this new environment.