ASSESSING YOUR FIRM'S RESOURCES
by Bill Schoeffler and Catherine Oak
Today, it is critical for insurance agents and brokers to plan their own destiny. One can never be quite certain what the future may bring. You can’t control the market cycles, legislative activities, or the strategies of your competitors. But you can control your own firm’s activities.
As consultants, we have evidence that following a well-thought-out plan is certain to increase the firm’s value over time. However, less than 10% of all insurance agents and brokers have developed and followed a written business plan. Even fewer have developed a marketing strategy.
Those who have taken the time to develop and implement their marketing plan are outperforming their peers in internal growth, productivity and overall profitability. All three of these factors seriously affect the firm’s value.
The owners of these growing high-performing firms are reaping more benefits today in the form of higher incomes, nicer cars, more perks, and better-paid employees than their peers. Tomorrow, when they sell their firms, either internally or through sale to a third party, they will undoubtedly receive the highest price for their stock.
What’s the secret to their marketing success? It’s simple. They have planned and streamlined their marketing time and efforts by emphasizing their strengths and minimizing their weaknesses. To do so, these strengths and weaknesses need to be identified.
The first step in planning is self-assessment. If you don’t know where you’ve been and how you got there, how can you possibly plan for the future? This article focuses on “Assessing Your Firm’s Marketing Resources”-the first critical step in the process of planning your marketing strategy.
We will explore how to assess your marketing strengths and weaknesses by looking at the characteristics that set you apart from the competition and identifying the classes of business and evaluating the tools that are available. We will also explain how to critique those who produce in your firm and identify compensation motivators.
Marketing Defined
What is marketing? It is the process of identifying customer needs within a geographical area, developing or offering products to meet those needs, and efficiently using the firm’s resources to distribute your insurance products.
There are two kinds of marketing in the insurance agent and broker distribution system:
1. Selling to your clients
2. Placement of accounts with your carriers
Importance of Planning
What is the importance of the marketing strategy plan? Your growth should be planned to:
• Replace lost accounts
• Attain the growth levels expected (and promised)
• Make a profit
• Continue to increase your firm’s value
New sales are the lifeblood of any firm or brokerage firm.
Assess Your Resources
The first step in the process of developing your marketing strategy, assessing your firm’s resources, is the most critical. Start with assessing your marketing strengths and weaknesses by listing the specific characteristics that set your firm apart from the competition.
These characteristics could include: technical expertise, level of service, other services offered (e.g., risk management, financial expertise, underwriting authority), community involvement, firm reputation and image, and carrier representation. Be specific as to which of these characteristics set you apart and why.
The second step is to critique your level of service. How could service be improved? What slows down service that is within your control?
Next, you need to assess the classes of business you write that are: (a) easiest to sell, and (b) hardest to sell. There are two sales to every account. The first sale is to the underwriter. Then, with the competitive proposal in hand, the second sale is to the client. By pinpointing those classes of business that are easiest and hardest to sell, you can target your sales efforts. The easier it is for you to complete the two-sale process, the more business you will write in less time.
Sources of New Business
Now you need to determine which sources of business you have the most success with in commercial lines and in personal lines. The following list should help you identify the best sources for you and the strategy to use:
1. Existing Accounts
Have you adequately developed your existing accounts? If not, what can your firm do, on an ongoing basis, to expand the coverages written for existing clients to meet their needs and to improve your retention?
2. Dead Files or Quotes
Have you x-dated those accounts that left the firm because of price? Did you also x-date those prospects that did not accept your quote due to price, so you can quote again at their next expiration? These are excellent sources of new business, since these customers already know who you are and you have already gathered a wealth of information to quote again. Suspense all of these x-dates for timely follow-up.
3. Referrals
The best time to ask for referrals is at the time of sale. Although most producers tell us that they get the majority of their new business from referrals, most producers do not have a defined procedure for obtaining those referrals.
In Commercial Lines, we believe you are an expert when you have written at least three of the same type of account. You should find out who the account’s major competitors are and go after those competitors. You have already learned what type of information needs to be gathered, what coverages are needed, and how to market that particular type of risk to obtain a competitive quote.
In Personal Lines, ask for the names of the account’s neighbors and/or best friends at close of sale. You can approach these referrals using your client’s name as the referral source. Thank-you letters to referral sources, enclosing a few more business cards, are also quite effective.
4. Centers of Influence
Which organizations, clubs or community events should your producers be involved in to generate new business? Make an effort to have producers participate in a variety of centers of influence to tap a number of these sources, depending on each producer’s areas of interest.
5. Specialties
Do your producers have special areas of expertise in certain classes of business or types of coverages? If there are carriers readily available to write those accounts, these specialties should become the firm’s target markets.
6. New Business Center/Telemarketing
Some firms have established new business centers to prospect certain target markets. If they are implemented, sales assistants should call a list of identified prospects within a selected target market. Using a telephone script, they should qualify the prospects, obtain expiration dates of existing policies, and then set appointments for producers to visit these prospects.
If the firm has the right individual employed as a telemarketer, the new business center can be an excellent source of new business for producers. The telemarketer of sales assistant can also be used to obtain expiration dates of other policies of existing clients, to assist with account development, and to follow up on lost accounts or lost quotes. Some firms use outside telemarketing services.
7. Prospecting
If the firm does not have a new business center, producers may prospect on their own. Most often, this is cold calling. Producers should drop in on identified prospects to trigger interest and to qualify the prospect. The producers will succeed more often when they call those prospects where they have developed an expertise.
8. Call-In Business
Many agents and brokers today won’t quote the business that calls in over the telephone. Even in personal lines, most agents will require an MVR before an auto phone quote can be bound and may also ask the prospect to stop in. In commercial lines, agents and brokers need to visit the new risk they are insuring to identify the coverages needed by the prospect properly. Often call-in commercial business is distressed, hard-to-place, or “shopping.” During the hard market, it was more common for commercial prospects to call around for quotes often to keep their existing agent honest.
Management should not assume that producers or CSRs who get call-ins know how to screen these prospects properly. For both personal and commercial lines, a set of underwriting questions should be developed for these call-in risks, so that employees can screen the good from the bad.
Much time and money can be wasted in the marketing and quoting process when proper screening and qualifying the risk is not done from the start. Agents and brokers need to work hard to improve their hit ratio (defined as the number of prospects written to quoted), which improves the firm’s profitability.
9. Walk-In Business
Depending on your firm’s location, foot traffic may be common. Prospects may actually walk in the door. The advantage of walk-in versus call-in business is that at least you get to see and assess the prospective client face-to-face.
Walk-in business is much more common in personal lines. Walk-ins can work to the firm’s advantage, since the prospect can meet your employees and a good relationship can be established from the start. Often, additional coverages can be sold to the prospect that comes in, such as umbrellas or life insurance. You have the client’s attention and can also move the person around the firm to the appropriate in-house “experts.”
10. Yellow Pages
Most agents and brokers have at least a one-line listing in the insurance section of the Yellow Pages. Advertising through the Yellow Pages can be expensive when larger ads are purchased. Appropriate time should be spent to target the bigger Yellow Pages ads to the following prospects: where you have a specialty, where risks are easiest to sell, and where carriers are available to write the business. If you have a specialty (contractors) or preferred program (high-valued homes), try to target the ads to these specific markets to improve your hit ratio on business generated from Yellow Pages advertising.
11. Trade Journal Advertising
Trade journals published by associations of your specialty classes of business can be a very effective advertising source. Since most trade journals are targeted to professionals of a particular industry, they can be excellent prospects for your special programs. An association endorsement also carries a lot of clout and “free” advertising.
12. Direct Mail Campaigns
This business tool is most effective for new accounts in target markets. Preapproach brochures or letters and unique policy coverages can be custom-designed to meet their specific needs. Insurance companies are often willing to provide the marketing materials or to share the costs of a direct mail campaign if the targeted class is of particular interest to them.
13. Other Industries
Some firms have found it very beneficial to link up with other types of businesses to provide personal lines insurance for the clients of that business. Examples are real estate firms, financial institutions, car dealers, etc.
It may also be worthwhile to approach a few of your larger commercial clients to offer personal lines insurance to their employees, especially hospitals, manufacturing firms, etc. The agent could arrange time on-site to gather employee information for quotation. Some carriers today are offering payroll-deduction plans for personal lines coverages for employees of large firms.
14. Cross-Selling Existing Clients
To prevent other agents or brokers from getting their foot in the door, offer all clients you insure both personal and commercial insurance coverages. Also include the sale of life and group insurance products to existing p/c clients. This will further cement your relationship with that client and helps retention.
If your firm is commercially oriented, you may be afraid to sell personal lines to your VIP commercial accounts because a mistake could cost you a major account. Producers have to be comfortable with the expertise of those employed in the respective departments before they will be willing to cross-sell accounts.
Once you’ve identified which of the previous sources of business have worked best for you, you need to develop a business development strategy, as outlined, to expand that source of new business further. If you have exhausted a good source, a new source should be identified and a strategy established.
Business-Development Tools
Next, you need to determine which business-development tools should be used in your strategy to develop the sources of business that work the best for your firm. These tools can include:
• Letters
• Word of mouth
• Community involvement
• Phone calls
• Advertising
• Automation utilization
The strategy should include the specific procedures to carry out the plan. Which of the tools will be use, when, and by whom? Responsibilities need to be assigned so the process is smooth, direct, and cost-effective.
Critique Those Who Produce
Once you have determined the characteristics your firm has that set you apart from the competition, as well as the new business sources and tools that work for you, then you will need to critique your people. The marketing plan can only be as good as those employed to carry out the plan. You should critique those who produce in the firm, both CSRs and producers, to determine who is best equipped to develop new business from both existing and new clients.
One of the biggest weaknesses in almost any firm is the lack of performance standards to measure the efforts of those who produce and service. Standards will give employees goals to shoot for. The performance standards also help determine when and how many new staff members need to be hired over time as the firm grows. You cannot manage in a vacuum. You need to set standards based on similar sized firms with similar sized accounts to judge performance properly.
Standards should be set based on commissions and/or accounts to be handled for each of the following:
• Producers
• Customer Service Reps
• Support Personnel
You also need to determine how to free up each producer’s time for new sales.
Each producer should specifically identify what is bogging him or her down. Once identified, management can work on improving the operations and the technical expertise of the staff and better support producers.
Most often, the reasons producers get bogged down in service work is because the producer does not know how to delegate or the service staff is not trained to service the producer’s accounts properly. Management needs to do a good job of screening and hiring technically qualified service personnel.
Analyze Producer Books
We have found that producers can free up their time to write new larger accounts if a producer book of business analysis is done. Make a list of the number of accounts that each producer writes that fall within various size ranges. Most often when this analysis is done, we find that there are a number of small accounts the producer handles that should be delegated to a small commercial accounts CSR or a new producer for expansion of that account. This analysis will be extremely beneficial for experienced producers that have significant books of business written, especially if they would like to continue to produce new business.
The 80/20 rule usually holds true with this analysis (i.e., 80% of their volume comes from 20% of their accounts). Management should develop a compensation plan that encourages experienced producers to delegate smaller accounts so these experienced producers have the time needed to produce larger accounts for the firm. Their productivity will improve and there should then be time for new sales.
Producer Compensation
What motivates your producers to produce? The answers will usually vary for each individual. Monetary awards are not the only answer. Management needs to find out what motivates those who produce: Is it perks? Equity? Pension or profit sharing? Higher commissions? A salary? Most often, older producers are concerned with security when they retire. Not all producers make good perpetuation candidates. Alternatives to equity in the firm are available, such as vesting in the producer’s book of business, retirement plans, etc.
People have to be self-motivated to sell. It must be a key characteristic of any good producer. Don’t hire anyone into production (or into the firm in any position for that matter) who does not have a sales personality and sales skills already developed. The firm can only create an atmosphere that is motivating to both producers and CSRs. CSRs should also receive incentives for their production efforts.
The key to the producer compensation issues is to base pay on who is doing the work. When experienced commercial producers receive renewal commissions on direct bill personal lines accounts or small commercial accounts, profitability can suffer. This is true if the CSRs actually handle the majority of the work.
When you determine what the firm can afford to pay producers, you need to take into account: who is doing the work; is marketing/placement assistance provided; is service support adequate; what is the local competition paying; what benefits and perks are paid to producers; and most important, what amount of profit is budgeted (before owner bonuses) for both new and renewal business. Some firms forgo some profits for new versus renewal business to encourage producers to write new business to reach the firm’s new business growth objectives.
Your marketing strategy plan is essential to your firm’s ability to grow and prosper. The steps outlined in this article are the starting point for the development of an effective marketing plan. Your marketing resources need to be assessed before you can plan for the future. In this time of increased legislative activity and carrier pressure to meet volume commitments and obtain “preferred” status, you can’t afford not to plan your firm’s marketing strategy.
Reprinted with permission from Oak & Associates, Glen Ellen, CA.