2009 was quite a year, wasn’t it??
For many agencies 2009 was a dismal follow-up to 2008 during which clients were lost, rates and premiums for renewals were sliced and diced and the agency’s revenues suffered. Some agencies froze compensation (their greatest expense), but few were able to reduce compensation sufficiently to maintain a reasonable profit margin.
But we are pleased to announce a significant number of agencies turned their “lemons” into “lemonade” and then sold it by the glass at a profit. The soft and hard markets are realities of life, but the reaction to market conditions is indicative of the state of mind of the agency owners and staffs. If you think the world is going to end, you act that way. You are less likely to save for a rainy day. If, on the other hand, you truly believe that every market has opportunities, you react by planning and implementing your actions to grow WITHIN whatever market conditions exist at the time.
This is the time of year that we can generate inventive and innovative Strategic and Tactical Plans to drive our clients’ businesses forward by providing the products and services needed and desired by our target markets from within the economic and insurance realities in which they find themselves.
A significant group of agencies form the core of our APM (Asset Protection Model) Relationship Agencies that have abandoned price competition in favor of relationship building as their chosen method of growing new clients and retaining existing ones. Last year their revenue growth was 15% and their pre-tax profits averaged 14% – not extremely attractive in the best of times, but certainly far above the industry averages in 2009.
The common activities that permitted these agencies to grow even in the softest of markets were:
They Strategically and Tactically Plan – Both large (well over $10 MM revenue) and small (as little as $500,000 commission) agencies have thoughtfully and realistically determined the direction of their local economy to create the opportunity areas expected for 2010 and beyond for both growth and profit of their agencies.
They create marketing plans within their Tactical Plans that are aimed at the products and services needed by their target markets (and supportable by their primary carriers) and implement them diligently, monitoring activity and results.
They acknowledge the importance of a fair price for the services and products that they provide, but concentrate their efforts on building and maintaining the relationships with their clients and prospects that will respond to their needs more than to the needs of carriers or even of the agency, itself — they become totally customer-centric.
They are all aware that they are NOT insurance agents anymore. They are business owners who happen to be in the insurance business. They aim their daily, weekly, monthly and annual activities toward a) customer retention, b) building relationships with new clients, c) internal cost control without harming customer relationships, d) growing the productivity of their employees.
To achieve these goals they have implemented new, productivity-oriented compensation programs that tie employee compensation directly to the goals of the agency. They have made their (former) producers into “Relationship Managers” by charging them with levels of customer and prospect contact not seen by most producers for many years (if ever). These agencies have taken away all non-customer contact activities from producers and holding the producers fully accountable for the generation of new relationships every month and the maintenance of strong enough relationships with their existing clients to maintain customer retention in the high 90% bracket.
As 2010 gears up, we look forward to a transitional year during which soft and hard market conditions will meld into each other. This is neither good nor bad – it just IS! If you would like to learn how to proactively change your agency so that you no longer simply “react” to the market, please call Al Diamond or David Diamond at 800-779-2430 and let’s talk. We know that most insurance agents will scurry from soft market to hard, but if you are both tired of this ‘rat race’ and feel that you and your agency still have a future in this business, let’s talk.