Telemarketing: One Step Toward Sales Efficiency

As the agency system strides to be competitive, some agencies find telemarketing pays off.

The efficiency of the independent agency system is more under fire today than ever before, and not just from within the industry itself, as has been the case before. The ongoing jockeying for marketshare, position among independent agents, direct writing companies and captive agent companies has dominated the trade press for more than two decades. But the issue has always been an internal one.

The questions raised were: How could independent companies assist their agency forces to become competitive with the less costly distribution systems of the direct writers and the captive agent carriers? What could agents offer the companies they sign with in terms of attractive and stable types of business?

Today, the calls for a more efficient insurance industry distribution system are coming from outside sources. Consumer activists such as Ralph Nader and Robert Hunter, president of the National Insurance Consumer Organization (NICO), are accusing the industry of being horrendously inefficient at the expense of the public. They have said that if the industry does not cut distribution costs, then it will have to deal with the wrath of the public.

 Whether or not one agrees with their premise, the validity of their argument regarding the public demands on the industry came home with some force with the passage of Proposition 103 in California.  In that vote the public said, in effect, that insurance costs have to be curtailed and that is up to the industry to find ways to trim the fat or that fat will be cut away arbitrarily by public mandate.

But it's not only the consumer activists. The Congress and the judicial system have gotten into the act as well. The Supreme Court of California, although it softened the blow to the industry somewhat in saying that insurers are entitled to a 'fair return' on sales, upheld the right of the populace to demand efficiency on the part of the industry.

As for legislators, Congress has looked into the question of industry operations before. But never has it seemed more plausible that legislators might rescind the industry's McCarran-Ferguson antitrust exemption, or alter it to such a degree that the game would be changed forever.

The ones most likely to feel the brunt of all these changes are the independent agents. The future of the agency system depends more than ever on improving the efficiency of its operations. And the answer, like it or not, lies in computerization.

In the weeks to come, we will look at the independent agent's plight in this brave new world. We will examine the many problems associated with 'interface' and examine the technological equipment available to the agent. We will look also at how independent agents are at present using technology to provide better services to consumers.

But for this column, we are considering how technology, available from both within and without the industry, can assist the agent in attracting new business.  It goes without saying that the days of agents calling individuals prospects on a one-to-one basis are gone. With direct writers and other forms of mass marketers, the agent who relies upon this technique is using a slingshot to challenge a Goliath who has gone past the point of being tamed, let alone slain.

The agent of the future must be able to reach out beyond the phone call, the house visit or the cozy contact.

The agent of the future will have to depend on computerization and telemarketing to attract both the prospect and company loyalty. The problem is whether this can be done on a cost-efficient basis to satisfy all three needs-the needs of the company that wants an agency that is efficient and productive, the needs of the prospects who is just a phone call away from a direct writer, and the needs of the agency itself which must, to survive, turn a profit despite the increased costs of new technology.

The good news is that the technology is out there for agents to generate new business. The bad news is that there is no pat formula. What works for one agency might not work for another. And so the agent must read, listen, and learn about the various approaches that other agencies are experimenting with today.

The use of computer technology as a means of 'lead generation' for the independent insurance agent may just mean the survival of the independent agency system. Consider the following message being delivered by Mitchell Glass of the National Association of Professional Insurance Agents to that association's members:

"Today, there are essentially three distribution channels for the insurance product, and you're one of them. The other two are direct writers and direct marketing companies. It's been recently estimated that almost 40% of the insurance consumers in your home town are not covered through the agency system. In a recent response analysis survey of households earning $20,000 a year or more (it is estimated that there are over 50 million such households), it was found that 20% have no agent for auto insurance, 28% have no agent for homeowners and 42% have no agent for life insurance."

"Using the estimated 50 million households, 10 million households are buying auto insurance without an insurance agent, 14 million households are buying homeowners insurance without an insurance agent and 21 million households are buying life insurance with an insurance agent."

The statistics are staggering, and Glass offers the reason: "Your competition asked them to buy insurance and you didn't."

Glass is saying that the independent agent can only survive and prosper by joining the direct marketers - by changing the traditional approach of agent visiting potential client to one in which the buyer approaches the agent.  "The agent has to go out to a large audiences, to play the game of large numbers," says Glass.

One way for the agent to tackle this new approach is through telemarketing. Telemarketing, if used properly, can uncover large numbers of promising leads that an agency can quickly turn into profitable sales.

David Carlson, of the Carlson Agency in Cedar Rapids, Iowa, speaks of his firm's success with telemarketing. 'In two months, telemarketing generated 200 leads for my agency, and we quoted 55 prospects. Thirteen of those prospects generated $400,000 in premium volume.

Agents should hire a full-time telemarketing firm to conduct the campaign instead of attempting it themselves. Telemarketing is a specialized science, and a firm can offer phone experts who are trained to handle prospecting calls professionally.  Carlson said that farming out calls to a telemarketing service can also prevent producer 'burnout' and frees producers to follow up the leads and close the sale face-to-face.

The Carlson Agency began telemarketing about four years ago with a local firm.  "We generated the leads through local members of the Chamber of Commerce and through a local trade union of contractors," said Carlson. "We gave the telemarketing firm the names, and the firm's people made the initial phone calls. Those prospects that demonstrated an interest were contacted by mail by our agency. In some cases, the telemarketing firm made appointments for us."

The important aspect of the approach, however, is to reduce the list to the most likely prospects and to save the agent time and increase the potential for a sale, according to Carlson.  But Carlson adds that his firm's experience with telemarketing is not necessarily the one for all agencies, although the worth of the concept is one he stands by.

For example, Larry Nielson of Automation Management Corp., discusses a different approach to telemarketing.  Nielson maintains that some agencies may benefit by approaching a telemarketing firm that already has compiled a large list of potential clients.

He mentions a recent effort of Citicorp as an example. In this approach, the agent defines for the telemarketing firm the audience his or her agency would most like to target, geographically or by line.  "In this way, the agency can have the telemarketing firm narrow its parameters and find prospects that were unavailable before," says Nielson.

The general consensus is that agents should not attempt to telemarket on their own. Direct marketing is a whole new field, and for an agency to endeavor to set up a telemarketing approach in-house would not only be costly but could detract from the agency's time in selling its products.

Once the agency has determined, through the use of a telemarketing program - whether they be independent firms or insurance company units - the most salable audience, then that agency can utilize its own in-house computer capabilities to capitalize on direct mail, phone calls, and visits.

The worlds of computers and telemarketing may be frightening ones for the traditional agent. But today, with Congressional attention focused on improving efficiency within the insurance industry, and with consumer activists hammering away at the role the expense factor plays in pricing the insurance product, computer technology may not just be an alternative; it may be the only means of survival.