This four-part article offers a step-by-step, comprehensive plan for growing your agency’s business.
INTRODUCTION
The mission statement gives your agency its overall focus and direction. The business development plan determines what goals you need to meet in the coming year to attain the mission. Do not overcomplicate the process -- keep it as simple as possible.
The plan should address the following:
- Growth in terms of acquiring new and retaining old customers
- Profit from every product or service
- Productivity and cost effectiveness
- Personnel planning and development
Don’t look at any of these goals in isolation; keep their interrelationship in mind. For example, let’s say that the producers plan to increase new business 20%. This might indeed gain them more commission, but the support team might not be ready to process the increase. If service begins to lag as a result of increased work, processing errors might increase, and both old and new customers might become so irritated that they leave your agency.
Growth comes from two areas: An increase in new accounts and a decrease in lost accounts. Growth goals are usually stated in terms of commission income — which is fine — but the volatility of insurance pricing also is an important influence. Thus, growth should be stated in terms of accounts and commission income. If an agency develops growth goals at all, they usually correlate to a marketing plan that focuses on what producers are expected to attain in terms of new business. The agency looks at what has been done historically and, given their current situation, what the producers can do today. That’s often where the planning stops. Sustained growth requires planning the entire product-development life cycle, from the first time you contact the customer until the customer leaves you, for whatever reason.
Begin your planning by reassessing your customers’ wants and needs. Then develop a plan for Personal Lines, Commercial Lines, and Life and Health. Company (supplier) availability is crucial. Many organizations provide marketing plans, so we’ll leave that to them. What we want to address is how to make whatever marketing plan you select work.
Your entire team must envision themselves as essential to the agency’s growth!
RENEWAL RETENTION
With few exceptions, account retention should be the province of a professional, highly trained CSR (although everyone is responsible for retaining customers). As you develop the plan for growing your agency, it will seem that the CSRs are taking on so much work that they won’t be able to do it all. That’s possible, but you went through the process of determining what’s really going on to get rid of everything that doesn’t contribute to profitable growth. Delegate as much as possible to your agency management system and support staff; after that, the CSRs should do only what’s absolutely necessary to generate revenue. They should be sensitive to issues that require bringing the producer back into the game. But if that’s not necessary, let them focus on generating new business.
Building long-term relationships and retaining your customers is essential for sustaining growth, so it’s vital for every agency to know how many customers they have and what their lapse ratio is. Remember, you make money from renewals, not new business — so your No. 1 priority is to hang onto the current book of business.
Ask yourself: How many accounts are currently in force, and how many do we lose each month? Why do we lose them? Who is responsible for knowing this information and doing something about it? Many agency consultants advocate letting the producers generate new business and then turning the account over to a CSR. However, CSRs often lack the skills to retain accounts — and the sense of ownership that would inspire them to desire retention. That’s only natural, given their situation.
Are your CSRs trained to deal effectively with customer concerns and problems? Do they know what your current renewal-retention ratio is, what your goals are for improving it, and what the CSRs’ personal role should be for improving retention? Do they have a personal sense of commitment to the customer and to retaining each and every account?
Who knows more about your customers than the person who deals with them every day? Who is better prepared to hear what your customers say when they call, and whether they’re happy with your claims service, endorsement service, and payment processing? If they’re confused by something the company sent to them, who’s responsible for making a note of it and getting the information back to the company? If they begin calling for clarifications of something the company sent them, do your people just handle the call and forget it, or do you notify the company that the insureds aren’t understanding the message, endorsement, bill, or whatever it is?
Every time anyone in your agency talks to an insured, do they ask what has changed since the last policy update? (“Oh, you have a new boat!” or “You say your son is driving now?” or “By the way, we have a new Homeowners policy that you might be interested in; may I quote it for you when it comes up for renewal?”) Treat every contact with customers as an opportunity to sell your agency. This goal requires total commitment from the entire team. Producers can’t do it alone.
Consider the effect of policy changes. Every time anyone touches a risk, they should try to envision, “How can I service this account better?” Take the time to re-underwrite the entire exposure, looking for opportunities to reduce loss exposure or provide additional coverage when necessary. This doesn’t take as long as you might think, and it’s great protection against Errors & Omissions claims.
How does the change affect the overall risk? Did the exposure increase? Decrease? How will the underwriter view the change? How are these changes likely to influence the account at renewal? What about claims? Are there any unknown exposures or frequency of losses? Does an opportunity exist to sell a new or increased coverage or increase deductibles?
Make customer satisfaction and retention everyone’s responsibility, so that every customer always gets the red carpet treatment. Consider asking these questions for Personal Lines, Commercial Lines, and Life and Health:
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How many customers do you currently have?
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How many policies do you have?
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What’s your average number of policies per customer?
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How many customers did you lose last year?
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What’s your retention ratio?
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What’s the total premium for this line?
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What’s the average premium per policy?
Now you can set goals such as:
Goal: In the coming year, we will increase our customer retention ratio from _% to _%.
Do you know why you lose customers? If you do, chart the reasons for the most frequent causes. Unless the customers are all dying or moving, what can be done to remove whatever caused them to leave? If the cause can’t be removed, what can you do to overcome it with another, more meaningful benefit? This is the time to get the CSRs and producers together for brainstorming. Make certain that everyone understands how important renewal retention is to the success of the business and that it’s everyone’s responsibility to do whatever possible to improve customer retention.
Someone must take specific responsibility (and accountability) for carrying out each action step the team develops. Collectively, these ideas become the action plan, with the goal of increased customer retention.
One agency developed what they called their “monthly renewal retention plan” for Commercial accounts. Three months before renewal, the Commercial team would meet to review the renewal list. Each account on the list would be reviewed for action. Accounts the group felt required little or no action were assigned to a CSR for review by phone or letter.
On more complex or active accounts, the team would share information and an action plan developed for the account. The action plan would be carried out by the person most capable of doing the work, regardless of position.
If this required a producer, fine; if an underwriter or placer, fine; if a principal, fine. The team focused on what needed to be done, and then who was in the best position to get it done. The goal was to bring the right resource into play to improve customer service (and thereby retention) at the least cost.
Since everyone was involved, the entire team knew the game plan. Over the next few months, they checked off each account as it renewed. They actively supported and backed each other up so no accounts slipped through the cracks. This takes too much time, you say? To the contrary! A well-planned approach to renewal retention and sharing the knowledge and work actually reduced the total amount of time the agency had spent on renewals in the old ad hoc fashion.
MULTIPLE-LINE SELLING
Goal: In the coming year, we will increase our multiple line accounts from _% to _%.
Every study on renewal retention clearly shows that the more lines of business written per account, the higher the account retention. Who is responsible for account development? Once again, everyone! Remember, every contact with the customer provides an opportunity to sell your agency’s service. Get together to generate as many ideas as possible. Then determine who will be responsible for carrying out every actionable item. If you want to feature a coverage or a new product, it should be on everyone’s lips.
The CSRs might need to call a given number of insureds every day to make a sales pitch, get X-dates, and so on. If that’s what you want them to do, they should be trained in basic selling skills as well as product knowledge. Then, part of their job should be to make those calls every day-no exceptions, no excuses.
If your renewals increase by X%, and your account development increases your average premium per policy by Y%, what will the increase in premium be? How much will this increase your annual commission? Hold onto this figure — you’ll need it later.
NEW BUSINESS
There are many programs and plans for developing new business, so I won’t try to duplicate them here. Consider who you want to target, where they are, how to get your product in front of them, and how to make the sale. You should also consider what your market share is and what you’d like it to be. Don’t think you’re too small to be concerned about market share.
Once you determine your geographic territory, it’s relatively easy to determine the number of prospects in the territory and the number of agents and direct writers serving that market. While working with one agent, we discovered that it took 46 pages in the telephone directory to list all the agents in his primary marketing territory — a big county with big competition! What this agent had to do was determine how he could stand out from the competition and write his share of the market. Whether you choose to use a telemarketing approach, send direct mail, attend boat and home shows, or whatever, once you’ve made the contact and taken the order, don’t think the job is done.
New Business Processing
Consider every step in the new business process, who will be involved, and performance expectations for each one. Walk through the entire process from start to finish: contact, sale, correct and efficient gathering of policy writing and rating data, submission to the company, company processing, underwriting, and payment. Then do some planning for production and processing.
New Business Production Planning
One method that works quite well is for the principals to estimate how much they believe can be generated in new commission income. Then each producer estimates what they believe is possible to produce for the year. Compare the estimates. If they’re far apart, determine why. As a team, the producers and principals should work through how to reach satisfactory production levels until reaching a consensus.
Don’t stop now: Ask the next question. Does the increase reflect a willingness to stretch and do better? If not, it should. Go back over it one more time and put a little stretch in the plan. On the other hand, are the estimates too optimistic? Can they really be attained? If not, then scale them back a bit. The easiest way to see their impact is to break new business production down into manageable goals, for instance: What is the anticipated average commission per policy?
To attain the total anticipated commission growth, how many policies must be sold per year? Per month? Per week? Are these goals realistic? If so, tell your team that the agency goals are to write ___ policies for the year. That will require X policies per month — and everybody is responsible for attaining those goals.
Your CSRs need to do:
This is-house generated business.
The producers must generate _____ in new business from leads and with the support of the CSRs.
Once the order is taken, it’s often the CSR’s responsibility to see that the order is processed and submitted to the company. It’s amazing how complex some agents make this relatively simple process — increasing expense, slowing service, and reducing quality.
For example, studies show that up to 60% of Personal Lines policies submitted to insurance carriers have to be returned for errors or omissions on the application. Whenever we mention this before a group of agents, I always get the feeling that everyone thinks, “It just can’t be my agency.” When I pointed out to one agency that more than 44% of its new business was returned, its people were shocked. But once they became aware of it and decided to correct the situation, the returns dropped to fewer than 10%.
When planning new business production, think through the entire production cycle. Do only what you have to do to write the account, do it only once, and do it right the first time — then get rid of everything else. Use the time you save to service old accounts, generate new ones, and train your people to expand their contribution.
Now you’ve established your total production goals:
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Gross renewals minus lapses equals net renewals.
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Net renewals plus new business equals total policies written.
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Current average premium plus anticipated rate and coverage increases equal new average premium.
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Total policies written times average premium equals total planned premium
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Total planned premium times average commission equals estimated commission income.
But we’re not yet done with our planning. We still need to attain efficiency in everything we do.
To be continued.