Insurance direct marketing practitioners have survived decades of unfair regulation aimed at non-agency distribution. The National Association of Insurance Commissioners and several state legislators have prohibited language, delayed product filings, demanded advertising approval and created roadblocks to direct-to-consumer insurance product sales that in the agency distribution channel normally draw a wink and a nod.
The federal government got into the act last year. Congress and the administration teamed with the Federal Trade Commission to restrict use of the telephone for commercial purposes by creating the national do-not-call list. Insurance underwriters, agents and brokers stand to lose $24 billion in annual business-to-consumer premium production. Teleservices providers will lose $1.8 billion in outbound telemarketing revenue, according to the Direct Marketing Association’s WEFA report.
But this is just a drop in the bucket compared with the loss that every sector of this business segment will suffer, especially when we now face an overcapacity issue. Downsizing did not eliminate overcapacity because the physical plant still exists, including buildings, technology and workstations.
The second nail in the coffin was the robust emergence of state DNC lists, now in 40 states. Nail No. 3 involves predictive dialers. Predictive-dialing systems are used in a majority of the nation’s outbound telemarketing centers for business purposes including sales, debt collection, political and charitable fundraising and market research. There’s no question they improve efficiency, but these systems anger consumers – again and again – as they pick up their telephones only to hear dead air.
Nail No. 4 is client demand. Consider the credit card issuer that extended 36 offers to a cardholder customer, an average of 12 a week, for six different products.
The fifth nail is the shrinking market that has resulted from the 60 million households that signed up for the national DNC list.
As for automatic billing (nail No. 6), the FTC’s amended Telemarketing Sales Rule makes it difficult, if not impossible, to continue the process of automatic billing at the end of a trial period.
In an interesting move, the FTC now claims jurisdiction over the insurance and banking sectors. If an insurance company or bank uses an outsourced teleservices agency, then the teleservices agency must buy the DNC list for each client. And the final nail: shrinking capital. The ability of these government entities to manipulate the value of publicly held corporations is perhaps the saddest commentary about the state and federal attack on the U.S. telemarketing business.
OK, let’s look at the scorecard. Regulatory nails: Nos. 1, 2, 3 and 7. The industry shooting itself in the foot: No. 4. Nos. 5 and 6 – well, let’s blame those on regulators, too.
As daunting as the odds are, telemarketers’ survival is at stake, and direct marketing practitioners must step up to the plate. In the short term, anecdotal evidence suggests that the decline in sales-per-hour will continue in an endless loop for at least the next year, at least for companies depending on the existing-business-relationship exemption. It also appears that many, if not most, insurance marketers are complying with the national DNC list just as they comply with state ones.
So is telemarketing dead? Of course not. The insurance business is well positioned to take advantage of the existing-business-relationship exemption. As a group (and direct marketers aside), insurers have not been very good at policyholder marketing, yet current policyholders comprise a tremendous opportunity for underwriters to apply a professional telemarketing approach.
Another growth area is permission marketing. Since the law lets you use mail or e-mail to ask people on the DNC list for permission to call, this will become a sophisticated – and legal – way to keep leads active and call past customers who haven’t done business in the 18-month timeframe.
The message to insurers seems simple enough. The days of commodity telemarketing are rapidly winding down. Even if the laws don’t kill the large, formulaic programs, consumers will. Insurance companies (and others) need to create programs that focus on offers people want. As telemarketing grew out of control, the opposite had become true – the industry was selling products, not offers.
For insurers, this means following the more traditional agency model and doing needs assessment before offering a specific product. Underwriters need to look at the ways to recreate the success of the American Agency System but with the DMer’s mantra: better, faster, cheaper.
The future of outbound telemarketing for insurance is bright enough. Between mining the gold in the policy files, asking permission to call past prospects, using direct marketing to generate new leads and calling as a follow-up, plenty of business exists. The laws have not changed that. The insurance business simply needs to comply with whatever rules finally become law and move forward, just as it has always done.