Personal Lines competition continues to intensify, as more and more players enter the marketplace. However, independent agents can fight back — if they're willing to make some fundamental changes in the way they do business. In this two-part document, Peter van Aartrijk presents 17 ways to help you build your Personal Lines book. If implementing all of them seems impossible, try three or four. But make a commitment, and go for it.
[Note: Because this article was originally published in 1993, names, positions, and employers might not be current; but the information is as pertinent today as it was at the time of publication.]
1. SET UP A “
PROFIT
CENTER ” FOR PERSONAL LINES
This doesn't have to be a big deal. Organize yourself to know exactly what your agency makes in Personal Lines. For example, how much commission income do you need to break even?
Ted Eidson, chairman of a family-owned agency in
Orlando with $10 million in premium volume, says that the profit-center approach enables him to show each CSR what they bring to the bottom line. He adds up their actual expenses (salary, Social Security, and benefits) and such “soft” expenses as vacation time, and compares it with their actual commission income. When you first begin the process, he said, “You can get some real surprises when you see that they are losing money for the agency, and that isn't doing anyone any good.”
Michael P. Wilson, president of Sedgwick James of
Washington , says that Personal Lines comprises 7% of his revenue but 20% of profit. “It will never be a significant portion of our business, but it is a significant profit center,” he says.
Check with your insurance companies; many provide professional help in the profit-center approach.
2. CHOOSE YOUR COMPANIES
“It's just not efficient to place business with a large number of companies,” says Sharon Cunningham, president of Business Management Group, the agency-consulting subsidiary of The Hartford. Her advice: Choose four or five carriers that make it easy for the agency to do business, offer some added value, are competitive in price, and are committed to the Personal Lines marketplace.
There are more options for markets than you might think. As major agency companies withdraw, regional companies and big niche writers are filling the void.
Wilson figures that his agency can write 85% to 90% of its target wealthier Homeowners market via two companies. “But to go to 95% we'd probably have to add 20 more companies,” he says. “It's not worth it.”
If you maximize your effort with one company,
Wilson acknowledges, you're more exposed. But he likens it to an investment: “The more risk, the more reward.”
3. HIRE THE RIGHT PEOPLE
Producers ought to produce. Period. If an agency hires a full-time Personal Lines producer, they must be an aggressive salesperson with a strategy for producing at least $25,000 in new business commissions, Cunningham says.
Jack Kwicien, senior vice president, personal insurance marketing for The Maryland Insurance Group, asserts that in order to achieve a decent profit margin in Personal Lines, there must be $125,000 in commission revenue per employee.
Eidson adds, “When you want someone who does everything you have to have highly organized people.”
CSRs must be “adaptable, customer focused, career oriented, and willing to work in a completely automated environment,” says Cunningham.
4. WRITE IT DOWN
Put your sales strategies on paper. How will you assist your producers with warm leads? Where will the new sales come from? The plan should list the specific tactics you'll take to complete your mission: e.g., the number of new referrals and contacts needed on an average day.
Track results by month and by producer or CSR on a large chart for all to see, says agency consultant Virginia Bates. “This builds a good-natured rivalry and takes it out into the open so it becomes a non-secretive, pride-on-the-line issue,” she advises. Have monthly or weekly meetings, even if they involve only a couple of people, to build morale among the troops. Activity levels for producers and CSRs should be communicated clearly and monitored frequently.
5. THINK NEW BUSINESS
Don't hang out a shingle and wait for the business to come in the door. Why? Because the clients who come in will be those rejected elsewhere and might not be what your companies want to write. “That is what has killed the independent agent,” says David Platt of Platt-Leavitt in
Salt Lake City . “You get adversely selected against.”
John Timm, president of Timmco/Wagner Insurance,
Portland, OR , says that agents must continuously approach current customers and newcomers. The goal: 40 new accounts per month. “Our constant marketing puts us in a sales mode,” he says. “We think sales.”
“There's just as much profit to be made in Personal Lines as in Commercial Lines,” says Tom Crawford, former president and CEO of Southern Heritage, an Atlanta-based Personal Lines company for packaged Homeowners and Auto policies. “But agents have to start marketing again.”
"When was the last time you got a call from an independent agent?” he asks. “You get them all the time from direct writers.”
6. DUMP OUTDATED SALES TECHNIQUES
“You can't get by with selling product or price,” says Cunningham. “Consumers want you to focus on them. You must use relationship-selling techniques to make the sale and maintain ongoing contact after the sale.”
Think efficient. When Platt goes on a sales call he brings a laptop computer already loaded with his company's rates and prices all policies on the spot. This avoids the need to return to the office, get the information, and call the prospect back. “The consumer wants a response right away,” he says. “Otherwise you look disorganized.”
“The key is for agents to develop sales expertise,” Kwicien says, “because companies will always need a sales arm for their products.”
7. MAKE MARKETING CONSISTENT
“Agencies need to identify their profitable Personal Lines clients and develop strategies for selling to more of them,” Cunningham says. The agency's marketing techniques will vary depending on the type of clients, size of territory, sales force, etc. But marketing should be consistent. Sending a letter once or trying an ad campaign for a while won't deliver the message often enough.
Platt seeks Commercial accounts of less than $5,000 in premium and offers a package of Health, Life, Home, Auto, and other coverages, such as Snowmobile. “All of a sudden you have a $10,000 account,” he says. Platt says that larger agencies and brokers largely ignore these accounts. A typical client for him might be a plumber.
Platt uses the Yellow Pages to find those prospects. Two producers then cold-call, asking for x-dates on Commercial and Personal Lines. He also identifies neighborhoods matching his client base, and calls prospects in those areas to get x-dates.
While telemarketing is mind-numbing, it's less expensive than direct mail, Platt insists. His producers divide their day into one hour of cold-calling for x-dates, two hours making appointments for those dates, three hours on appointments, and one hour responding to paperwork.
Crawford recommends that agents go to fairs and trade shows (home, boat, etc.). Raffle a television set, and on the raffle card, ask for x-dates. One agent got 2,000 x-dates at a boat show — all for a $300 TV. Fifteen to 30 days before renewal, Crawford says, agents should call their x-dates and ask to quote the business.