Contact-Based vs. Policy-Based
The main difference between contact-based and policy-based systems is contact-based systems are cleaner, more manageable databases for you to work from. Not only does this make your business process more efficient, but it also helps your insurance agency grow into the future and reach the goals you’ve set for yourself. In this blog, we’ll discuss the difference between the two so you can make a more informed decision on which type of software would be more beneficial to your business process.
What is a contact-based system?
A contact-based system is a system that tracks information based on the contact. What this means is that the base of the system is the contact and everything streams from that (policies, agent, commissions, carrier, etc.) Each individual is tracked first with their information tied to it; so, if a client has 4 policies, the client will be in the system once and all of the policies will be linked to them.
What is a policy-based system?
A policy-based system is a system that tracks information based on the policy. What this means is the base of the system is the policy and everything streams from that (client, agent, commissions, carrier, etc.) Each policy is tied to the owner of that policy; so, if a client has 4 policies, the client will be entered into the system 4 times.
What are some examples of both?
When looking, the words product-based are a good indication that the system will be policy-based. Many times these systems are built as sales tools and are mainly concerned with tracking the policy and prospect connected to it. Two common examples of a policy-based system are Excel spreadsheets and paper files. There are a couple generic CRM softwares that resemble this type of system. Other than that, policy-based systems are usually homegrown solutions.
Contact-based systems are becoming more and more common because they’re more intuitive in how they track your clients and prospects. As commission payments grow smaller, many agencies are looking to expand their offerings; this means they need to be able to easily track those multiple policies. Most industry-specific Agency Management Systems (AMS) like AgencyBloc will be contact-based systems.
What are some problems I could run into?
Clean data is data that is “formatted in an orderly unit and requires continual upkeep and a team effort to maintain the organization.” Therefore, messy data would be the opposite; it would refer to data that does not follow an orderly format and likely isn’t continuously updated. Policy-based systems help to create messier databases because they require you to put a client in multiple times for their multiple policies, as opposed to the one entry in a contact-based system. If you don’t have the steps in place, then each time you enter a contact, your data could quickly resemble the image below:
Most problems you’ll run into with a policy-based system stem from the difficulties created by having messy data. To learn more about the difference between clean and messy data and why clean data is important, check out this blog: Why “Clean Data” Makes a Difference.
"The implication of a policy-based system is that if an individual has 5 policies, they’re going to be in the system 5 different times often with different spellings. Just makes it so much harder to track."
David Kline, Industry Expert
A contact-based system will track your information via the contact it’s tied to, so all four of Thomas’ policies will be under Thomas Smith. Plus, AgencyBloc’s system has specific identification fields you fill in for every contact (client, prospect, or agent) so the information will always have uniformity.
Roadblocks in Marketing
Because your data isn’t clean, you run the risk of your data impeding your marketing efforts and basic client communication. For example, say you want to email all of your clients and say Happy Holidays. This is easily done with any basic email program; but if you import your entire list and have it automatically insert the first name of the recipient, your messy data will show. You would be emailing Thomas Smith four different times while also addressing him as Thomas, Tom, T, and Smith. It’ll be confusing for Thomas, and it could come off as unprofessional and incompetent.
Having clean data in a contact-based system can help alleviate this issue. All of your data will follow the same formatting guidelines, so whenever you do decide to do a mail merge or personalized mass email where you have first names automatically inserted, you’ll come off as professional and prepared. Each individual will get the message once and it’ll be properly addressed to them.
You’re almost four times more likely to sell an existing client than you are a new one. How nice would it be to instantly pull a report to see how many of your clients have health coverage but not dental with you or Med Supp but not final expense? With a contact-based system like AgencyBloc, these kinds of reports are simple because it tracks your information via the contact. So you can pull the information, print the spreadsheet, and your answers are right there ready to go.
With a policy-based system, you have to print off a spreadsheet of all the health policies you have and then a second of all the life policies. From there, you have to manually go through both sheets and compare. Then write the information down in another spreadsheet of potential cross-sell opportunities and what coverage they need. It’s time-consuming, arduous, and a bit silly when an alternative method is much simpler and effective.
Which is better?
It comes down to the fact that a policy-based system can prevent your insurance agency from growing. For many agents, their future goals include growth of some kind, or simply working smarter, not harder. By using a policy-based system, you are committing yourself to more manual tasks, lack of ability to pull complete stats of agency health, and more effort. It comes down to these questions:
- Where is your company going?
- What do you want to achieve in the next 5/10/15 years?
- Is the process you have today going to support those goals for the future?
Ready to switch from Excel to an industry-specific agency management system?
This eBook will help you prepare you for the migration by giving you an in-depth look into the migration process from spreadsheets to software and providing you with the questions you should be asking your provider before you migrate.