Thinking about changing your phone plan? Add a second line and get additional data on your plan for free! Signing up for cable TV? Add internet service at the same time for a great discount! Buying a home? Bundle your homeowner’s insurance with auto insurance and save 20%! The multi-product discount is a tried and true selling approach to encourage customers to buy more products. The discounts have obvious appeal for the consumers, but what’s in it for the company offering the bundled discount?
Using the latter example of insurance bundles, the appeal is in customer retention. Studies from J.D. Power & Associates[1][2] have found that homeowners who bundle their home insurance with auto insurance are 10% more likely to remain with their existing insurance carrier than those who don’t bundle their policies. And renters who bundle their renter’s insurance with auto insurance are 24% more likely to retain their current insurance plans each year than renters who don’t bundle their coverage. The increase in retention rates the insurers see make up for the discounted premiums, making these multi-policy discounts an appealing sale for the insurance company.
But how are these multi-policy discounts awarded? It turns out that for the most part multi-policy discounts are only recognized and correctly applied by insurance companies when the multiple policies are purchased and issued at the same time. This sounds reasonable – if you buy your policies at the same time, it’s pretty easy for the insurance agent and insurance carrier to correctly record the fact that you should get the discount. But what happens when you don’t buy your policies at the same time?
For example, most homeowners already have auto insurance before they buy their home, meaning they are likely not buying their policies at the same time. When a new policy is bought, surprisingly the insurance carrier often doesn’t “connect the dots” and recognize that the person who just bought a homeowner’s policy already has an auto policy. But why?
It’s usually because matching the identity of consumers is harder than it sounds. In a perfect world, every detail about you on your new homeowner’s insurance policy (your name, birthdate, address, and so on) should be exactly the same as the details on your auto policy, meaning it would be easy to programmatically recognize when the same customer has two different policies. However, in practice, the data on your policies is often missing or different (either due to legitimate reasons like nicknames or address changes, or illegitimate reasons like typos). Meaning suddenly it’s not so easy to recognize when two different policyholders are the same person, which means you’re likely not getting your discount.
Insurance carriers have used different approaches over the years to “connect the dots” and to find matching policyholders across different lines of business. The current state of the art approach is to use a Master Data Management (MDM) solution to find and match customer identities but the results are moderately accurate, at best. A traditional MDM solution is typically smart enough to see through some typos and nicknames, but it can only work as well as the data you give it and if you have missing or outdated information, not even the best MDM solutions on the market can overcome the bad data to find the match.
To overcome these challenges, Verato has created a powerful new identity matching approach called Referential Matching. Referential Matching is a new and much more accurate way to match customer identities across any and all data sources. Referential Matching leverages a comprehensive, curated reference database of identities to supplement the policy holder data, meaning that you will find matches that you would have missed if using a traditional MDM approach.
Using Verato makes it easier to find and match identities across all of your lines of business. Which means you can find the missing discounts!
[1] 2009 J.D. Power & Associates ‘Personal Insurance Retention Special Report’ In a 12-month period, 95% of customers who bundle home & auto stayed with their insurance carrier…but only 85% of customers who do not bundle their auto & home stayed with their insurance carrier.
[2] 2013 J.D. Power & Associates ‘U.S. Household Insurance & Bundling Study’ Renters who bundle an auto policy have 91% retention rate, renters who do not bundle an auto policy had 67% retention rate.