Auto Insurance Customer Acquisition Spend

Goals

Gain information on how much auto insurance companies pay per year to acquire and retain customers/members, in order to understand the value of improving customer satisfaction to maintain customers compared to spend on gaining new customers

Early Findings

  • Insurance companies allocated about 44% of resources to customer acquisition compared to 18% on retention.
  • The average cost per customer acquisition for direct insurers such as Progressive and Geico is $487.
  • The average cost per customer acquisition for captive insurers like State Farm and Allstate is $792.
  • Insurance companies using independent agents increased their average cost of customer acquisition by as much as $900 per acquisition.
  • Customer acquisition rates for insurance companies are about 3-8% of the net profit margin on average.
  • An increase of 5% customer acquisition rates can increase an insurance company's profits between 25-95%.
  • According to one study, loyal customers are likely to lead to referrals, as they often speak highly of insurance companies that exceed expectation, so focusing on existing customer satisfaction contributes directly to acquisition.
  • Auto insurance companies GEICO, Progressive, and Automobile Club of Southern California had the highest ROI for their advertising in the personal auto insurance space.
  • A study on those companies showed that customer acquisition wasn't just related to overall marketing spend, but rather "factors such as advertisement content, advertisement demographics targeted, word of mouth, brand reputation and other items".


Proposed next steps:

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Provide 2-3 case studies on auto insurance companies that focused on lowering costs or increasing ROI of customer acquisition
Provide 3-5 key trends in customer experience in the auto insurance space
Provide additional data on overall marketing and ad spend in the auto insurance space