ACG - Agency Consulting Group

The PIPELINE

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

Soft Market Selling

We know many agents who love a hard market. We know many more who are frustrated that they can reach many prospects whose prices are going out of sight, but they have no carriers who are willing to take new risks. The agents who love a hard market have low loss ratios and strong enough relationships with their carriers that they will continue to entertain new clients from those agents while denying markets to most other agents. This seems to give those strong relationship agencies a competitive advantage when everyone is seeking alternative insurance programs.

In most parts of the country we are in the depth of a soft market. Most carriers are willing and desirous of increasing their policy count and are willing to lower prices to do so. Many incumbent carriers talk a strong line against lowering prices but will negotiate prices for profitable accounts if the alternative is losing them completely. The profitable agencies (from a loss ratio standpoint) who had strong relationships that gave them market preference in the hard market now feel they are competing with everyone and that the carriers don’t differentiate between agencies because they are all striving for growth to bolster their premium writings.

From a client standpoint his prices are going up in a hard market and down in a soft market. His buying decisions are based on a few things; 1) his relationship with his agent/company, 2) his trust that his agent can and does market his account to find the best product at the best price, regardless of market condition, and 3) his own bottom line. If the client is growing and doing well, he can absorb expected growth in insurance premiums that seem to be related to his own growth. If the client is doing poorly, he needs to find ways of trimming costs, including insurance costs, regardless of whether or not they are changing annually.

All three of these conditions work together to determine if the client will work with his agent alone, will entertain other agents if they approach him, or will actively seek other quotes for his insurance needs.

Your parents are not going to change agents, are they? They have a strong relationship with you. Your best friend and your most trusted client will probably not move either. They also have strong relationships with you and, more importantly, they TRUST you to look out for their best interest. The agents with the strongest trust relationships are a part of the clients’ management team. They know the clients’ growth and profit status and help them control their insurance costs accordingly.

However, most agents who call us asking how to motivate their producers to sell more and retain more clients in this soft market are concentrated on only two things, getting into more prospects and getting them quotes that beat the incumbent. No matter how often we explain how relationships develop stronger, longer lasting clients, these agents are attuned only to the ‘hunt and kill’ method of sales.

Even the best ‘hunters and killers’ are finding that they are certainly active enough, but they are not “killing” nearly as many targets as they used to do. The insurance buying public, who we trained over the last 30 years to consider their insurance policies simple commodities – that price was the only difference – are now becoming wiser. In order to avoid changing companies and agents every year or two in the effort to keep their premiums down they have begun forming their own relationships. If they find a competent agent they will provide them with your quote and ask them if they can give them a similar price. You do the work – the incumbent gets the benefit.

The reason this happens is that your producers are seeking TARGETS, not RELATIONSHIPS. Targets are easy to find. Every business owner is a potential target. However, it takes some skill, talent and experience to determine if they are relationship material or just a target in a shooting gallery. Those gallery targets are sometimes easy to pick off, but I wouldn’t try to eat one. You can enjoy a productive relationship for years while nurturing it without ever harming it.

So how do you sell in a soft market?

1. Change your mindset. Go to every prospect as if you are a clinical physician. You are in great demand and have thousands of businesses to whom you have not yet been introduced. You are there to examine the prospect and evaluate his insurance program – if he will let you.

2. You are interviewing the PROSPECT, not the prospect interviewing you. Your first job is to determine if he needs or wants your help. If not, gracefully back out and move to the next prospect. Follow the Agency Consulting Group 15-Minute Rule (you should be able to qualify a prospect within 15 minutes of meeting him once your are trained in the 15 Minute Rule qualifying device).

3. Once you have determined that the prospect is open and willing to accept your help, form a relationship before you get to the prognosis. It should take no fewer than two visits (and possibly many more) to know the prospect well enough to both analyze his insurance needs and provide answers in the ways that he will find most palatable. If asked why you haven’t provided a quote yet, tell the prospect that you tailor insurance programs to the individual client and you need to know all of his asset protection needs fully before you can cogently provide the best protection device for him.

For you fly fishermen out there, treat every prospect like a prize trout in a stream. While it is possible to hit a lucky strike on the first cast, it is much more likely that you will cast your line many times, learning how the fish reacts and tempting it in a variety of ways to find the best way to land it. Don’t try to beat the fish with a bat. Let it take the bait- it will cooperate with you when you know it well enough. Treat your prospect similarly. Get to know him and his business well enough and he will ASK YOU to become his agent. Your will still have to use the right “bait” (product and price), but he, too, will cooperate to become your latest client.

4. DON’T QUOTE. Your goal is to evolve a relationship strongly enough that the prospect wants you to become his agent. Most insurance programs ARE, in fact, commodities. Only insurance professionals with strong insights into the client’s specific needs can take the commodity products and tailor them to fit the exact needs and wants of the client.

By now most agents in the U.S. know that Agency Consulting Group, Inc. is spearheading the effort to re-teach agents how to form strong relationships instead of selling price as a way to get and keep clients. As you can imagine, we are now getting several calls each week from frustrated agents who are looking for ways to make their producers more effective in this “soft market”.

Some never call back when we tell them that there is no difference between soft and hard market when it comes to relationship building. They are not looking for ways to evolve strong, long lasting clients. They simply want ways to get prospects to talk to their producers in order to get more of them to take quotes. The agents assume that the prospect can be won by price. Unfortunately, these agents don’t pay attention to the clients after the sale so next year they will likely lose the client to someone else’s price.

These agents call us, as well, asking for ways to enhance retention. Our answers are still the same. Even if you have won the clients by price, you can still integrate them into your agency by how you treat them after the sale. Relationships are best formed before the prospect becomes your client. However, those agencies whose owners are smart enough to convert to relationship agencies can form those relationships with their existing clients by performing the same analyses after the sale as they should have before the sale.

If you have sold by price for many years, consider taking your producers’ time to better learn all of your clients’ asset protection needs through a series of visits each of which are designed to concentrate on another aspect of their insurable risk (i.e. health, LTC, commercial, personal, life, etc).

In a hard market clients are desperate to change because of rising prices. You may have the opportunity to create relationships but if you can’t provide them solutions as well due to restricted markets, a trust relationship will be hard to establish. In a soft market, you have a wide variety of carriers desiring growth. In a soft market combined with a declining economy, you are in the Perfect Storm – markets wanting new business and willing to do whatever needed to get it combined with prospects who need new solutions to their insurance budget restrictions.

Call us (800-779-2430) if you would like help establishing marketing programs that will get your producers exposed to commercial prospects throughout your marketing area. Once that occurs, use relationship building programs to establish trust relationships and convert the prospect to a client before ever closing the sale.