And Karnack Says …

‘AND KARNACK SAYS …’

by Diane Herbert and Pamela Millard

Take a close look at your capacity and take the steps needed to position your agency for the wild ride ahead.

NO SURPRISES!

We don’t need a crystal ball to tell us we’re living in challenging times.
Regardless of market conditions, preparation is everything. The best way to keep your agency healthy is to clearly identify potential problems and prepare solutions in advance. Also, make sure you identify the opportunities and find ways to take advantage of your strengths and turn opportunities into prosperity. Now, more than ever, planning is critical. Start by assessing the situation.

• Look at your carriers. Where are they relative to appetite and pricing? If you don’t know, ask them. Now might be the time to talk with that company rep you’ve been dancing with for a year. Although most companies aren’t aggressively expanding their agency plans, good carriers are still looking for quality over quantity. Can your agency offer them a distribution outlet that will provide a flow of business they want to write? And what about the markets you’ve been wondering if you should keep? It might sound like a contradiction to say you should get rid of carriers, but you can’t afford to feed markets that aren’t long-term players in the types of business you’re best at.
• Look at your staff. Do you have the sales and service capacity you need? Can your salespeople sell value rather than price? Are your account managers providing quality customer service, or are they already spread too thin? Will they have the capacity to assimilate the additional remarketing that’ll be required? Are there pressing training needs you’ve been putting off because you’re too busy?
  Don’t underestimate the value of their input to help with the analysis. Customer service representatives and placers who are talking with the carriers every day might be in a better position to tell you what the companies want than your producers. Your staff is already seeing the pricing trends. Even though they might need some help organizing their thoughts about it, they can help you identify your most competitive markets and your biggest problems.
• Look at your customers. Are there particular customer segments that’ll be most affected by pricing and placement problems? Many agencies already rank their customers based on their importance to the agency (revenue size, centers of influence, and so forth). This year you should also rank your customers based on the impact of the marketplace — pricing increases and problems finding coverage.
  Don’t overlook Personal Lines. The impact of losing any one account might not be as great as losing one of your large Commercial accounts. But in our experience Personal Lines is generally profitable business that you want to keep. It’s often the agency’s bread and butter.

PREPARE YOUR STAFF

Expect your staff to be frustrated at times. To minimize morale problems, help them feel that they have some control over the situation. By getting out in front of the problems you’re giving them a chance to avoid some of them. Make sure you communicate your concern — and your optimism.

Delivering great customer service will be more important than ever. Cement relationships with customers by demonstrating your professionalism and value-added service. Make sure your organization can handle the extra work this will require.

Training has never been more important. Not only do you need well-trained staff, but they might require additional training to handle the new challenges.

Be prepared to add to your staff as needed. If you succeed in retaining clients, your revenues will support additions. Think about part-time or temporary positions to start. With the right kind of planning for training and allocation of duties, this can be a cost-effective way to build for the future.

PREPARE YOUR CUSTOMERS

One of the most important roles you play is to educate the insurance buyer.
Make sure your customers know and appreciate the value-added service that your agency can and does provide through individualized counseling as well as general information. After analyzing your customer base, sort customers into categories of action needed. Your list might look like this:

This type of analysis and activity will take some work. Without it, you’ll probably still be doing the same counseling and remarketing and reselling, only in a reactive mode. Defensive action isn’t the same as providing value-added service up front — and your customers know the difference.

WHAT CAN YOU DO?

Commit to a comprehensive, proactive business retention plan by following these four steps:

1. Revisit the planning process. Analyze your strengths, weaknesses, opportunities, and threats. Identify important accounts or books of business that might be problematic this year. List companies that are restricting availability in classes of business important to you. Look at likely pricing problems. Review staffing issues and training needs.
2. Involve your employees. They have valuable input, and they’ll be the ones on the front line. Communicate your concerns and your optimism for the future. Enlist their enthusiastic support. The more your organization is involved in implementation, the greater the chance for success. Don’t forget to bring in extra help as needed.
3. Focus on your customers. Categorize customers by line of business, size, and class of business. Define the issues most likely to affect each category. Design and execute a proactive visit/call/letter program to meet the needs of each segment.
4. Monitor your progress. Periodically review the progress you’ve made in reaching your objectives, and share the results! Adjust your plan as needed, building on successes, and making changes when what you’re doing isn’t working as well as you’d hoped.