ACG - Agency Consulting Group

The PIPELINE

A national monthly newsletter for agency principals dedicated to agency management topic

Total Quality Management - Part 02: Finding The Silent Minority - Recovering from Mistakes

Can you satisfy every customer - every time? Probably not. The cause of dissatisfaction could range from carrier problems to human error on the part of your staff to dissatisfaction for no particular reason (simply paying for insurance is enough to make some people irate).

So what do you do when a customer is dissatisfied?

Most agents do nothing at all !! -- but that's not because they don't care. Rather, they do nothing because they rarely find out about dissatisfied customers.

The While House Office of Consumer Affairs conducted a study that determined that 96% of unhappy customers don't complain to the company with whom they are dissatisfied. That doesn't mean they don't complain - it just means that they complain to their friends instead.

I know that it seems that the verbal 4% who complain seem to more than make up for the 96% who don't. But we must begin considering those complainers as opportunity areas. In reality, every complaining customer is giving you the opportunity to make amends and satisfy his needs. Customers who don't give you the opportunity to "make it right" or at least to apologize will be the ones who cause your retention rate to mysteriously decrease.

Why it is important to identify dissatisfied customers and what to do about them defines the difference between those agencies committed to Quality Management and those paying lip service to quality and service.

The Basics of Creating a Recovery Strategy:

1. It is cheaper to keep a customer than to get a new one. (If anyone questions that comment, please call me.)

2. You can not please all customers all of the time.

3. Those agents who openly seek to respond to customer problems will realize greater retention than those who do not.

Do your employees feel that bringing problems to you will cause you to congratulate them for locating the complaints - or will they feel that you will crucify them (whether or not the problem was caused by their actions)? If you are not sure, ask them ! You, as the agency owner/manager, have three great challenges;

1. Finding the customers with problems - We suggest that you conduct Customer Satisfaction Surveys at least once each year. Some Quality Managers send customer questionnaires to 20% of the customers who have experienced contact with the agency (soon after that contact). The contact could be a renewal, a claim, an endorsement, or a general question. A few brave agents commit to calling a few customers (experiencing a transaction with the agency) each week to personally thank them for dealing with the agency and to ask them if their recent contact was satisfactory, or, if not, what were the problems.

2. Getting your employees to openly seek problems and view them as opportunities to recover and make the customer happier with the agency - Many agents become angry at employees for mistakes that have been made. Many agents even get mad at employees for mistakes that did not even involve the employee. If you want the opportunity to correct errors and recover to again be viewed as an excellent service provider, you can not penalize or berate your employees for uncovering mistakes. A radical step that has been taken at agencies is to reward employees for identifying "recovery opportunities". Understanding that no one works to make mistakes, you must assume that your best chance of identifying and correcting errors occurs when the employees are not fearful of exposing mistakes.

3. Developing a Recovery Strategy - Once a "recovery opportunity" has been discovered, you have a great opportunity to make it a positive experience. However, the best method to turn a bad experience into a good experience is to permit the employee recognizing the complaint to solve it. This involves giving employees more authority than you may have in the past. You must be careful, of course, of permitting latitude to inexperienced staff members. However, assuming an experienced, knowledgeable service staff, they should not have to come to the agency owner to correct their errors. In order to protect the agency, a Recovery Strategy should be formalized and written. It should provide as much latitude as possible to each level of employee in solving client problems. And reward the employees exercising their recovery authority to support their continued use of this valuable tool for retaining and recovering valued customers.

If this proposal seems radical to you, let us ask one very, important question: HOW MUCH IS A CUSTOMER WORTH TO YOU? The correct answer is much more than the annual commission of the policy in question. For instance, a 45 year old married couple with children could easily generate $1,000-$3,000 of commission each year. Unless the client has reason to shop elsewhere for their insurance, they can have an "insurance lifetime" of at least 20 years. You may be looking at a value to your agency of $20,000 to $60,000 over the lifetime of the customer. When you lose a customer to poor service or to mistakes left uncorrected, you lose the rest of the lifetime commission earnings of that customer. An analysis of the annual value your average personal lines customer and of your average commercial lines customer can provide you your own statistics of the long term value of an existing customer. This is why a Recovery Strategy is of critical importance to insurance agencies in the 1990's.