3 Hidden Costs of Cost-Per-Quote Measurement for Insurance Carriers

Cost-per-quote measurement incentivizes insurance publishers to sell low-value traffic and prevents carriers from competing for the market’s most valuable consumers

Optimizing for cost-per-quote can undermine an insurance advertiser's customer acquisition efforts.

For years, many insurance carriers have measured the success of their online customer acquisition efforts with cost-per-quote (CPQ) metrics. But while CPQ is certainly better than not tying your marketing performance to any kind of user action, it still leaves you a ways away from measuring things like sales and customer lifetime value (CLV) that are most important to your bottom line. After all, it doesn’t matter how many quotes you offer or how many leads you receive—your business only grows when the customer binds.

As insurance advertisers gain access to new levels of data transparency from their technology partners, it only makes sense for them to adopt more advanced metrics that more closely tie their marketing performance measurement to their business goals. If you’re not at least tracking policy sales, you’re leaving money on the table.

But beyond the fact that there are better metrics available, optimizing your customer acquisition efforts around cost-per-quote comes with several important drawbacks you may not be thinking about. And these hidden costs are likely dragging down your customer acquisition efficiency.

Here are three hidden ways cost-per-quote is undermining your customer acquisition:

1. Cost-per-quote incentivizes insurance publishers to sell you low-value advertising inventory

What gets measured gets managed. If you pay publishers by the quote, click, or lead, they’re going to try to drive as many people as possible to the action you’re optimizing for—regardless of whether the consumers who complete that action have any likelihood of turning into binds.

This incentivizes publishers to chase quotes by making exaggerated claims—“get a quote to save 20% on your car insurance”—that only leave the consumer disappointed once the actual offer is made.

As a carrier, you want your publishers to pursue high-quality traffic made up of in-market shoppers who are likely to buy from you. Above all else, it’s important that your publisher partners are honest and proactive about setting expectations, so that the consumers who click through get a quote that aligns with their needs. Buying on a cost-per-quote model makes it profitable for your publisher partners to do the opposite.

2. Cost-per-quote increases the amount of time you’ll spend working leads

A by-product of optimizing for cost-per-quote is that you’re likely to spend more time working leads that aren’t likely to convert.

Think of it this way: If cost-per-quote incentivizes publishers to help you quote consumers who aren’t likely to buy from you, that means you’re going to wind up with a high volume of leads, most of which will not convert. Each call your team members make to these consumers is time they could be spending on leads who might actually become customers.

To be sure, marketing requires a delicate balance between volume and efficiency. If you focus solely on the consumers who are the absolute most likely to convert, you won’t be able to achieve the scale you need to be successful. But all things being equal, you’d rather make a small number of calls to leads who are highly likely to convert than a large number of calls to leads who you won’t be able to get anywhere with.

Indeed, the cost of reaching out to a lead is fixed, but the value of each lead varies a great deal based on the consumer’s likelihood to convert.

3. Cost-per-quote makes it harder for you to compete for the most valuable traffic

Optimizing for cost-per-quote can also prevent you from securing the most valuable inventory in a real-time auction.

For instance, if you’re treating every quote as having the same value, you’re going to bid the same price for every user who is willing to request a quote from you. But your competitors who are bidding based on cost-per-bind or expected lifetime value will be willing to bid more for consumers who their data predicts will generate real value for their company.

So when a consumer who is highly likely to purchase a policy fills out a quote request form, your most savvy competitors will have bidding models that pick up on this likelihood and produce a higher bid to reach this shopper first. And when you offer the same amount you would for any old click, you simply won’t be bidding high enough to win the auction.

In some instances, the most sophisticated carriers will purchase a single, high-intent click that costs more than some advertisers’ cost-per-quote goals. In essence, the cost-per-quote bidding model locks these carriers out of reaching the most valuable, most in-demand shoppers in the insurance advertising marketplace.

It’s time to take the next step toward better customer acquisition metrics

As you can see, CPQ comes with a number of unpleasant side effects that make your customer acquisition less efficient than it otherwise could be. And in a highly competitive marketplace, you can’t afford to continue paying these hidden costs.

If you’re ready to take the first step toward aligning your marketing metrics with your business goals, we’d recommend reaching out to your client success manager to discuss implementing our conversion tracking token. With the token, you’ll be able to tie individual policy sales to the passed attributes, ad, publisher, and channel that drove the consumer to your site, allowing you to better understand your marketing performance and optimize toward a more effective cost-per-bind goal.

And if you really want to maximize your performance, you might even want to start exploring lifetime value-to-customer acquisition costs, a metric that allows you to predict the long-term value of every consumer you bid on. The deeper you get toward tying your marketing metrics to your bottom line, the more successful and scalable your marketing will be.