Measuring upselling potential of life insurance customers: Application of a stochastic frontier model

How much more of a service or product can we potentially sell to a customer? Recognizing the effect of selling inefficiency on upselling potential, this article offers a concept of upselling potential that is different from that currently in use and introduces a methodology for calculating customer-specific upselling potential for life insurance customers. The proposed model was applied to the data of 5,000 life insurance customers. This paper shows that the insurer analyzed could have sold an additional 25% worth of premiums for more than half of its customers. Other uses of the technique are also discussed.