Segmentation - Segmentation and Its Significance in the Insurance Organization

Segmentation is very crucial for insurance organizations. The main aim here is to balance the service one offers with profitability. By observing and analyzing the present service models and the current customers of the organization as well as revenue by account, one can easily help identify the most and the least profitable customers. After this the process of segmenting the service model actually helps create the much needed balance and allows to focus on greater resources based upon the needs of the clients, build extremely strong relationships and utilize the operational resources prudently and more competently.

There are several ways to segment the book of business however; the best way is to follow:

  • The most critical steps in the current processes and the amount of time spent on each of the processes.
  • The number of clients one possesses
  • The total revenue each client generates.
  • The number of clients who tend to generate greater revenue but require much more attention.
  • The clients who generate comparatively low revenue but end up taking too much of the time resources of the staff and enterprise.

It has to be borne in mind that the goal is to offer a balance of the service offered along with profitability. One can actually calculate the cost of servicing each account within each of the segment or the tier. Observe the processing time it requires to renew an account. For instance the producer’s time to pre-market the renewal and the account managers time to market the account to several carriers for the renewal quotes apart from analyzing and observing the staff’s compensation which would include the salary as well as other additional costs such as benefits, taxes, bonuses etc for each individual who is involved on account to help determine how much it is spend per account on an hourly basis.

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