Fall 2010, No. 85
Account-Level Lapsation
In our last newsletter, we talked about individual lapsation and the importance of conservation. Two easy steps demonstrate the importance of having a modern, vigorous program.
First, simply look at the amount you write in a year and the amount you lapse in a year. Both are premium (and the lapsed premium has already absorbed commissions, etc.), but consider the efforts you put into the first as compared to the effort you put into the latter. Does that make sense?
Second, have your finance officer compute the value to your bottom line of saving 10 percent of those lapses. Try twenty percent. The defense rests.
Accounts also lapse. The decision-maker decides to end deductions for your company, either dropping your types of products or moving to a different carrier. In either case, your relationship is over.
Maybe you call. Or you have a rep drop in to see them. You always contact the broker. But the reality is the decision has been made and it’s the first you’ve heard of it—and only rarely can you do anything about it.
The key is that the decision to drop deductions should not be your call-to-action. By then, you should have exhausted all remedies available, not just starting them. The decision to drop you should not be a surprise.
The answer is to identify the markers that predict account lapsation, collect that data, and build a proactive program of responses.
The most obvious marker is participation. A low number of participants in many cases and a low percentage in large cases are well-established markers. What is the danger point for you?
And what other markers are indicative for you? Reenrollment frequency? Broker relationships? Total premium? New product additions? What else?
The good news is that the data are at hand. These are your clients and you can talk to them. The bad news is that few companies pay any attention to markers, meaning that few companies collect the data that might avert account lapsation.
Conservation is good business.
For more information on our conservation services, give one of our consultants a call.
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