Hail The Dinosaur
Unfortunately the market changes that began in the late 1980's appears to have become THE market place rather than another cycle. We knew this was happening from the late 80's when we found confusion in the market place from region to region in the United States. Some regions experienced a traumatically soft market while insurance products in other regions were impossible to get. The market place continues to shift regionally but the confusion is still there.
Unfortunately, this confusing market place has adversely effected most insurance agents in the United States. Everyone who got used to regular rate increases, stable commission rates and a hard market (in which prospects knocked at your door to get insurance quotes) could not cope with the attacks on the agency system from all sides. Insurance companies realized that their expense rates would not decline through internal measures only. They have reduced both commission rates and contingency agreements. The direct writers continue to take market share from the independent agency system every year. The banks enter the foray, believing that property casualty insurance is still a cash generator if operated properly.
Well, we agree with them. Unfortunately a generation of insurance agents have learned that "service is all we sell ", "we get all of our business from referrals ", and "customers simply aren't loyal anymore".
No, service is not all you have to sell. It happens to be the most important product that you have. However, most of the agencies that we have encountered don't perform anywhere near the service standards that are desired by their owners. More unfortunately, many owners don't seem to understand that their excellent service is a figment of their imagination (or can't do anything about the poor service encountered by his clients). The answer to the poor service encountered within the insurance agency system today is a required shift from the management of the process of service to the management of the service staff themselves. The steps of quoting, policy issuance and endorsements have been simplifies through our automated processes. However, we haven't trained our managers to manage their staff toward the grade of customer service that each one of them would expect if they were on the other end of the telephone. This requires training, monitoring telephone calls and replacing those service employees who can't consistently meet the owners service standards for the clients.
On the other hand, our licensed representatives whose role includes both sales and service are no longer as proficient in explaining the benefits of their product as they were a generation ago. For the last 10 years the key to approaching prospect seemed to have been quoting the lowest price rather than fulfilling the customers needs. Of course, there are major exceptions to this statement. These are the professional agents, personal and commercial lines, who actively listen, probe to identify the customers real needs and fill them. Price is certainly one of those objectives, but rarely the only one.
There was a time when P&C insurance was not as aggressively sold as it is today. Insurance agents (like lawyers and bankers) expected their reputation to speak for them. We each had fewer customers but those customers had strong relationships with us. Now, competition is fierce from within the independent agency system and from without. Lower commission rates and automation have both enabled and required us to insure that many more customers for each licensed person in the agency than we ever had in the past. The establishment of relationships is much harder and much shallower than it used to be. Do referrals still come our way ? Absolutely! Are many of our customers still happy with us? Absolutely! But now, the agency referral program must convert from a reactive program response, responding to referral initiatives from the customer to a proactive program in which we actually ask the customers for referrals. We still use the agencies relationship to gain new accounts but we will do so much more effectively by asking our clients for the names of their friends and associates .
It took almost an entire generation for us to train our customers that they can always find insurance cheaper. Why do we now blame them for learning what we have taught them? Many of our readers have told us that their clients are still as loyal as they ever were but now the agent had to prove that they were doing the job of analyzing the insurance needs of their customers and marketing the products to obtain the best value for the clients premium dollars. Again, we got lazy. For quite a while insurance agents used the relationship that they built with their clients to simply mange accounts or "renew as is". Now that the clients have begun treating insurance agents with the same disdain that they have for used car salesman, it will be a long, up hill battle to regain the trust that our relationships should maintain. Every agent must work for each client each year in order to maintain the integrity of their relationship.
As we implement Best Practices Programs and Quality Initiatives in insurance agencies around the country we have come to realize that the majority of insurance agencies in the United States can not be saved. Like the dinosaurs, they are used to eating from the top branches of the trees. Now that those tender shoots have disappeared, they refuse to change their habits to those that would permit them to survive. However, their demise is noisy. They bellow about declining customer base. They bellow about lower commissions. They bellow about disloyal customers, employees and companies. However, the answer and the keys to survival are available to them just as they are to the successful agencies who will continue to grow, thrive and profit during the transition. The agencies who will not survive are simply led by the dinosaurs who point outward for all of the ills that have befallen them but failed to take the opportunities available to them to change the way they do business in order to perpetuate their business.