Customer Lifetime Value (CLV) in the insurance business

Gain a competitive advantage and pave the way for sustained growth and success in the dynamic insurance world.

Whether you're already familiar with Customer Lifetime Value or new to CLV, we're here to assist you. Let us help you unlock the full potential of CLV, transforming your business for enhanced revenue growth, long-term stability, and a unique competitive edge.

What is CLV?

CLV isn't just about calculating how much a single customer is worth to the company, or, in other words, how much profit an insurance company can reasonably expect from each insured party for the duration of the business relationship. CLV is much more. It's a game-changer. By harnessing CLV calculations, insurers can gain extraordinary knowledge, which, when used properly, can revolutionise their businesses.

How to use CLV to achieve maximum return?

There are several strategies which insurance companies can adopt based on calculated CLVs:

The primary objective of this strategy is to identify and acquire those customers who promise the highest potential for long-term profitability. CLV is a tool that helps companies to identify those high-value segments, and then craft marketing campaigns and strategies tailored to attract these customers. By directing efforts specifically towards these high-value segments, companies aim to initiate relationships that have the potential for long-term profitability, setting the foundation for sustained growth and maximising return on investment right from the outset.

CLV-based segmentation enables companies to categorise customers based on their long-term value and profitability. Identifying the most lucrative clients allows for tailored incentives such as personalised offers, VIP access, and exclusive benefits. These initiatives not only nurture ongoing engagement but also contribute significantly to the customers' attachment to the brand, ultimately bolstering the company's profitability.

In today’s dynamic world, the ability to pitch the right product to the right customer at the right time has become an essential element in business. By utilising CLV insights, often combined with other advanced methods such as the Alternating Least Squares (ALS) algorithm, companies are able to deliver tailored solutions precisely when it's needed, meeting customer demands, and ultimately enhancing overall satisfaction and driving sustained growth.

Keeping customers happy and loyal is a big deal for any business. When customers leave, it's called churn, but preventing that is crucial. CLV can be utilised effectively by identifying high-value customers and understanding their behaviours, preferences, and needs. By recognising these patterns, companies can tailor retention strategies, offer personalised incentives or services, and allocate resources more effectively to retain these valuable customers.

What are the benefits of using CLV?

CLV possess amazing power. It revolutionises how businesses operates, offering the following key benefits:

Revenue Growth

By focusing on high-value CLV customers, insurance companies can optimise profitability and long-term revenue streams.

Long-Term Business Stability

Retaining valuable customers and optimising revenue streams contributes to the overall stability and sustainability of the insurance business, providing a foundation for continued growth and success.

Efficient Resource Allocation

The efficient allocation of resources helps insurance companies focus on activities and customer segments that drive the most profitability, optimising marketing spending and efforts while reducing wasted efforts.

Cost Efficiency

By ensuring that marketing and retention efforts are directed towards segments with the highest potential for returns, the insurers can reduce unnecessary expenses and wasted efforts.

Enhanced Customer Relationships

By tailoring strategies and offers, businesses foster stronger relationships and create a sense of exclusivity and appreciation among customers, thereby reducing churn and increasing retention rates.

Competitive Advantage

Attracting and retaining customers sets the brand apart from competitors through personalised experiences and targeted initiatives.

How can we help you?

PwC specialises in developing CLV models tailored to various company's needs, catering to both short-term and long-term company strategies. We can help you select the most suitable method that aligns with the needs of your insurance company and its long-term strategies.

We can also offer our services for both new and well-established insurance businesses.

To insurance companies new to CLV we can offer:

CLV Assessment – We can help you develop CLV strategies aligned with your specific goals and objectives.
CLV Implementation – We can help you to fully implement CLV principles in your company’s business model.

To insurance companies already using CLV:

CLV Audit – We can help you evaluate and fine-tune your current CLV strategies, and identify areas for improvement to maximise returns.
Advanced CLV Strategies – We can design advanced strategies for increased effectiveness.