In Insurance, most of the times we focus on the high premium paying customers as the most important customers and focus our marketing strategize to grow these customers. Consider the following scenarios for these high premium paying customers
- Some of them may stop paying premium after sometime (Lapsation)
- Some may not buy any other policy thereby limiting the revenue they can generate
- Few of them may be involved in fraudulent claim activities
On the other hand they may be customers whose premium is less but they are loyal and may buy more policies in the coming years. These customers end up giving more revenue and profits for the organization.
Clearly premium amount cannot be the only parameter to decide the valuable customers. A comprehensive approach it to analyse the Customer Life Time Value (CLTV).