ACG - Agency Consulting Group

The PIPELINE

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

THE INSURANCE AGENCY AS A MARKETING AND CONSULTING BUSINESS

THE INSURANCE AGENCY AS A MARKETING AND CONSULTING BUSINESS

For many years when we asked agency owners what made them “different” from their competitors they often claimed that their “service” to clients differentiated them from their competitors.

Each time the answer is “service” as a point of differentiation, I simply asked whether they believed that their competitors didn’t ‘service’ their customers. This resulted in puzzled expressions because “servicing” customers is the minimum expectation of the insurance buying public and not a cause for celebration. Almost every agency we have encountered responds to service requests adequately. If they didn’t they would lose their customers rather frequently as they sought insurance suppliers that fulfilled the minimum requirement of customer service on demand.

Two questions arise when “service” is claimed to be the most important point of differentiation:

1. Just how much ‘expertise’ is necessary to know basic auto, homeowners, package policies, GL, Workers Comp and Umbrellas?

a. Heck, even I understood these basic insurance policies and I’m certainly not nearly the most knowledgeable insurance professional I know!

2. Don’t you agree that the client expects good service and gets upset if and when they don’t get what they expect as service?

a. Good Service is expected and the standard

b. Bad service is one of the reasons people leave you (and don’t tell you why)

c. Great service is hard to do because it requires extraordinary circumstances that rarely happens.

MARKETING is the outbound expression of why people should do business with you.

CONSULTING is the product that you have to offer insurance clients – If your customers believe that you are more interested in them than in the sale, they will stay your client forever.

If you don’t spend your time as owner identifying ways that more people can use your services, you have abandoned the marketing concept in favor of the internal strengths of the insurance expert or guru. People are only attracted to the experts and gurus if they know that you can help them! Why aren’t you telling more people every day that you are here for them, not to sell an insurance product.

RULE 1:

Market your agency every day! But “marketing” is not a spur of the moment issue and many of us are not marketers by nature. Plan for marketing that provides new marketing tools every month with metrics that measure which are effective (those that you will use again) to those that are not particularly effective (that you won’t do again). The metrics that count are the number of calls resulting from the marketing effort, the number of policies sold and the revenue earned (annualized) vs. the cost of the marketing. You should have at least six months of marketing efforts in place before you start and you should update marketing plans every month to keep six months ahead. This will become much easier after the first year when you have several ideas that you will do again sometime in the next year.

RULE 2:

At first, everyone is motivated by cost savings. But once you get over the ‘P’ word, potential clients are sold by building a trust relationship. If your employees are not interested in building relationships with their clients and prospects, replace them! People do not buy insurance based on knowledge and expertise, they buy insurance based on building trust and comfort relationships with the person on the phone or in front of them. If your staff, especially the producers, can’t easily form relationships with the folks they meet, they are in the wrong business.

RULE 3:

“You don’t catch a fish by casting your line once and moving on to the next watering hole if you don’t get a bite.” Prospects and clients will react to you based on repetition. It takes five contacts per year to build a relationship. If you don’t believe a client is valuable enough to contact them five times per year, you shouldn’t have that client or prospect.

What I hear all the time is, “but, Al, how can a personal lines customer justify that many contacts?” An auto customer may give you $150/yr. in commission for his auto policy. But that same customer spends another $500 to $1000 for their homeowners insurance, another few hundred dollars for their umbrella policies. They have health insurance and life insurance (or should) and they may have the need for several other insurance products (or have friends or employers or employees who spend thousands on insurance). Without taking to your customers, you will never know the grand possibilities and opportunities.

RULE 4:

RETENTION is the key to agency success more than new business.

Repetitive contacts with clients are something that direct writers never do. Those customers are your prospects! That’s why retention consistently floats between 88% and 92% for personal lines and small commercial lines. But that means that a $1 Million agency loses between $80,000 and $120,000 every year because they don’t pay enough attention to their clients. Half of retention losses are probably uncontrollable – people retire, move and die every year. But even if you only lose $50,000 in a million dollar agency, it would take $50,000 of new commission = $400,000 of new premium just to stay even!

For every point of additional retention you make $10,000 of additional income without adding a new customer! That is revenue for which you have already paid acquisition and service costs. That $10,000 is profit potential. If your agency earned 10% profit last year, that is equivalent to $100,000 of revenue.

Would you rather contact your customers to make sure they still like you or write another $100,000 of new commission (equivalent to $1.2 Million of premium) to replace that 1% of lost business next year?

RULE 5:

The product you must sell to every client and prospect is that you are only concerned with their best interest. Insurance products are only the by-product of making sure the client is properly protected. All marketing must be directed to the concept of being every client’s insurance consultant - you want to assure them that they are properly protected or know what they need to become properly protected.

If these rules appeal to you and you are ready to TRANSFORM your agency from the 20th Century version with files and employees marking time from 9:00 am to 5:00 pm from “hire to retire” call me, Al Diamond 856-779-2430 email al@agencyconsulting.com, and let’s meet and start the process of converting your agency to a Marketing And Consulting Agency.