Part two of two-part series Building a financially sustainable InsurTech firm — Key customer-related metrics

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The ways in which InsurTechs can maintain customer-related metrics to ensure the sustainability of their businesses.

Consumers have grown accustomed to 24/7 availability of Netflix content and personalized recommendations at the click of a button. These days, everyone from e-tailers to deliverers of freshly brewed coffee are offering a convenient, personalized customer experience. Why should insurers be any different? Millennial and tech-savvy consumers expect nothing less.

Rising customer expectations are spurring rapid changes in the insurance industry. The long-held habit of buying insurance through an agent is becoming obsolete. Policyholders want a seamless experience, easy-to-understand products, handy comparison tools, and personalized offers – all at the right time.

Moreover, competition is stiff, with today’s customers increasingly willing to purchase insurance products from banks, BigTechs, and InsurTech firms.[1] At a time when considerable gaps between customer expectations and their experiences with traditional insurers exist, agile InsurTech firms are leveraging big data, artificial intelligence, and behavioral science concepts to drive customer acquisition and earn loyalty.[2]

With digital channels being increasingly adopted in the insurance domain, the costs can increase significantly, especially the marketing spends and total acquisition costs. While my earlier blog explored cost revenue and cash metrics for InsurTech firms, I now want to discuss the ways in which InsurTechs can maintain the customer-related metrics to ensure the sustainability of their businesses.

Customer-related metrics:

1. Customer acquisition cost: B2B versus B2C acquisition costs vary. In the B2C space, firms have traditionally attracted individual consumer policyholders through agents or internal sales channels. Acquisition costs have been high compared to other consumer-facing industries.[3] The consumer might already intend to buy – or can be motivated to buy – insurance. Engagement via a direct app or channel takes more effort as insurance, unlike e-commerce or retail, is not something that attracts someone at first glance. Costs might go down in the future thanks to automation and other efficiencies, but to remain competitive, they must decrease even further.

But how? An innovative approach to channels may lead to a variety of solutions. Many InsurTechs are reaching customers through third-party software or apps that are more cost-effective than internally-developed channels. Third-party apps don’t sell insurance directly, but piggyback onto high-engagement models and sometimes can even benefit from network effects.[4] For example, Gurgaon, India-based insurer Toffee uses retail channels to sell commuter insurance for purchasers of bicycles. Toffee covers the rider as well as the cycle in a tiered pricing format. Retail channels overlap with day-to-day consumer needs and therefore lower the initial inertia in customer acquisition.[5]

The channel can be solely third party or a combination of own channel and through third-party agents depending on the customer segments addressed. However, there is much scope to innovate and lower acquisition costs. For example, an innovative way to secure more business from an existing customer is through account aggregation services that give a holistic view of customer finances that can be used for better cross-selling of products. I will cover more about account aggregation services in my next blog.

For B2B, although one must understand and estimate the customer acquisition cost, the financial model is also sensitive to the length of the sales cycle. Many factors might be beyond control in B2B, so before pursuing the opportunity, the firm should run an effort versus impact analysis (e.g., customer acquisition cost versus lifetime value).

2. Lapse ratio: This ratio indicates the number of policies that have lapsed and not renewed in a period versus the number of ongoing policies within the period. It is always desirable to have a low lapse ratio as it indicates the effectiveness of the selling process, pricing strategy, product-market fit, and the ability to retain customers.

The most effective way to maintain or decrease lapse ratio is via a holistic view of customer relationships through assessment of claims and policy data – identify the customers who will lapse or cancel before it happens through predictive analytics, and map the right customers with the right products through the most effective channel for a particular customer. Sometimes this can be as easy as notifying a policyholder about an upcoming renewal or making the renewal process easier and faster through digitization.

For B2B players, this metric translates into repeat customers or an increased percentage of revenue coming from repeat customers.

3. Lifetime value/retention: Customer retention is vital for the sustainability of a business. Along with monitoring customer behaviors, it is essential to bring about a change in customer behavior. While insurance is very different from e-commerce or the FoodTech industry, customer expectations have increased due to constant interactions with the latter. To retain customers longer, an InsurTech can try engaging better through value-added services. These days rather than merely providing a policy that covers losses, insurers often act as partners who help to prevent or mitigate damages. It can be as simple as reimbursing gym fees for health-conscious customers, rewarding points for safe driving, or early detection of threats to homes or property.

For B2B scenario, one needs to review the stickiness factors (i.e., reverse of lapse) and ease of transition from one vendor to another by segment and come up with a segment-specific retention strategy.

4. Marketing spendsAverage return per consumer: Individuals often purchase insurance a few times in a lifetime and then forget about it. The product is low engagement, unlike e-commerce or ride-hailing, where customers interact several times a week. That’s why directly copying cross-industry success may not work. Competing for space within highly populated and increasingly expensive platforms such as Facebook or Instagram won’t be sufficient either. InsurTechs need to study subtle consumer behavior and act accordingly. A major life event often triggers the purchase of insurance, and therefore, it is crucial to reach customers at the right time with the right message.

It may be challenging to accurately capture marketing spend return on investment because marketing impact builds over time, wherein accumulated impressions shape customers’ initial purchase consideration. However, the trend should be monitored carefully to avoid overspending on marketing activities that may target non-profitable consumers.

The customer-related metrics discussed above may be useful for players already running an InsurTech business with a decided product in mind. While talking about evolving customer expectations, it is not just about the kind of service and experience but also about the nature of the product itself. And, this is true for B2B and B2C customers.

The World Insurance Report 2019 explores how customers are increasingly becoming anxious about emerging risks and how the insurance industry product pipelines lack alignment with these concerns. Consistently monitoring customer-related metrics can help both established insurers and InsurTechs stay on track with their goal to meet evolving customer needs.

To learn more on the topic, feel free to get in touch with me on social media.

The author would like to thank Aditya Jain, Shreshtha Bansal, and Tamara Berry for their contributions to this article.



[1] ELEMENT, “Changing Customer Behavior and the Impact for Insurance,”, accessed July 2019.

[2] Capgemini, World Insurance Report 2018,

[3] HubSpot, “The Ultimate Guide to Calculating, Understanding, and Improving CAC in 2019,” Sophia Bernazzani, April 19, 2018,

[4] CB Insights, “Transforming Insurance: Insurance 2.0 and the Evolution of Distribution,” Kyle Nakatsuji, March 8, 2016,

[5] Finance Intellect, “Toffee Insurance announces India’s First Cyclist Insurance,” December 21, 2018,

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