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Robust Analytics Boost The Hartford's Direct-to-Consumer Efforts

The insurer worked with database marketing agency Merkle to develop a data and analytics framework that helped identify a wide range of profitable customers and target direct mail to them.

Faced with declining response rates, The Hartford (Hartford, Conn.; $24.7 billion in 2009 revenue) wanted its direct mail to deliver more ROI. Working with Columbia, Md.-based database marketing agency Merkle, the company has used customer data to develop a testing and analytics framework to optimize messaging, shoring up its direct-to-consumer efforts.

"I think at the very beginning, in some respects, it was basic," says Kathy Bromage, chief marketing and strategy officer for personal lines at The Hartford. "Our goal was to try and achieve a five to 10 percent productivity gain per year."

Beginning in January 2009, Merkle helped design an analytics framework incorporating both policyholder and marketing prospect data from The Hartford and information from outside sources. The goal was to create marketing programs that were built around the customer receiving the communication from The Hartford, rather than around the product advertised. It also helped the company design tests and execute differently in order to achieve its desired gains.

"It's all about how you think about grouping customers from a response, conversion and profit perspective," Bromage says. "Merkle was a good partner for us in an objective, outside-in look at how we were using direct mail, how we were defining our universes and developing lists."

By July 2009, Merkle was on an analytics retainer with The Hartford, with the insurer impressed with the new customer focus. The strategy shift meant that The Hartford was able to learn — and take into account — more about prospective customers than it had before. This was important for the company, which is looking to increase its direct-to-consumer sales.

"It really is about appending the model that you use to go beyond response, conversion, average premium and loss ratio, to also include propensity to bundle home and umbrella, whether they own offroad vehicles or boats or how loyal they are," Bromage explains. "Some of that we know, but some comes from watching their behavior with other financial products."

The robust data also helped it begin looking to new markets. Beginning this year, The Hartford began to look at analytics that showed the lifetime value of a customer showed that some prospects it had traditionally not marketed to could, in fact, be just as valuable as their prime prospects down the road.

"Merkle helped us try to predict profiles of people who today would look like they're not terribly preferred — low credit score, behaviors on their record that maybe look less responsible — but they develop over time to a preferred profile," Bromage says.

But these analytic services do not come without significant technology investment, notes John Lee, VP and general manager of insurance and wealth management at Merkle. His company hopes that this initiative proves the business value of clean, informative data across all business units — not just marketing.

"We're using some of the Hartford's infrastructure and some of Merkle's infrastructure" to house and analyze data, he says. "It's much more difficult to do on a repeatable basis, so that's where the longer-term marketing analytics warehouse or the data warehouse comes into play."

The partnership has already begun paying dividends in that area. The Hartford's strategy has changed, Lee notes, and the lessons it has learned in shoring up its direct mail is positioning the company better to grow its direct-to-consumer business.

"The last two years The Hartford has evolved away from focus on the campaign and program level optimization," he says. "They don't want to just get more calls into their call center, it has to go hand in hand with that lifetime value."

"The whole question is, 'Can I predict the lifetime value of the customer?'" Bromage concurs. "We're working to develop the drivers of value for us — and the proxies in the marketplace, if not the actual data development — so that you're executing your media in ways to attract higher lifetime value customers."

Nathan Golia is senior editor of Insurance & Technology. He joined the publication in 2010 as associate editor and covers all aspects of the nexus between insurance and information technology, including mobility, distribution, core systems, customer interaction, and risk ... View Full Bio

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