Segmenting Your Business

Segmentation is important for insurance organizations. The goal is to balance the service you provide with profitability. By examining your current service model, existing customers and revenue by account, you can identify your most and least profitable customers, then by segmenting your service model you can create that balance. A segmented service model allows you to focus greater resources according to the needs of your clients, build even strong relationships, and use your operational resources wisely and more efficiently.

How do you segment your book of business? Look at following:

  • The major steps in your current processes and the time spent on each
  • The number of clients you have
  • The revenue each client generates
  • The clients who generate high revenue but need more of your attention
  • The clients who generate low revenue but take up too much of your time or your staff’s time

Again, the goal is to balance the service you provide with profitability. You can calculate the cost of servicing each account within each segment or tier. Look at the processing time it takes to renew an account, for example. You have the Producer’s time to pre-market the renewal and the Account Manager’s time to market the account to several carriers for renewal quotes. Then look at your staff’s compensation. This includes annual salary and additional costs (benefits, taxes, bonus, etc.) for each individual involved on the account to determine how much you spend per account an hourly basis.

How profitable is each account and where can you refine the process to make your accounts even more profitable? For example, are there work items that can be handled at a more junior level for greater operational and cost efficiencies to allow for more time to be spent on proactive touch points with your profitable clients? Instead of having your Account Manager inputting data, have them talking about the need for cyber liability insurance or stronger supply chain risk management services. This is about allocating your resources to their highest level of contribution.

Segmenting clients is a best practice for increasing your company’s capacity and scale. Not only will this grow productivity and your profitability in the long term, but it will also help improve your time management and efficiency and hone your overall business strategy.