Improving Your Close Ratio

Dear Dave:

Our agency has hired a full-time Life producer to handle Personal Lines only. We believe we have enough accounts to justify that move. She tested well for personality and potential, but she is fairly new in the Life business. She is closing about one out of four presentations, which sounds fine for a relative beginner, since the closing average for all agents is about one out of three. But since she deals with many Mortgage policies and writes reducing Term policies at fairly low premiums, the bottom-line dollars are low. We need to create more cash flow. What can you suggest?

P/C Agency Principal

Dear Principal:

I don't usually recommend having beginners address P/C insureds to write Life business, and your situation illustrates a few of the reasons. Consider whether the producer is leaving your clients vulnerable to competitors. If a competitor can legitimately make her work look bad-perhaps by pointing out an overlooked tax advantage, by quoting a type of overlooked policy, or by quoting a considerably lower premium for like quality-then her inexperience will be costly.

Although a beginner's closing ratio should improve with time, you should not delude yourselves by comparing her closing ratio -- 1:4 -- to the average of all other agents -- 1:3. Life producers in a P/C agency should have many advantages over typical non-P/C-affiliated agents. The Life affiliate gets leads from the agency and carries the agency's implied endorsement, if not outright recommendation. The confidence and trust that insureds feel toward their P/C agents is transferred to the affiliated Life agent to some degree. If the leads are prequalified, even slightly-and they should be in the Personal Lines Mortgage market-then nearly every kept appointment should result in a full presentation. Under these conditions, 10 presentations should result in eight sales for closing a ratio of 4:5.

A study of all the producer's lost sales might be revealing. With the help of an experienced Life producer or manager-perhaps from one of your Life companies-list the producer's reasons for each lost case, as she understands it. Then have someone else from your agency-the P/C agent, the customer service representative, or a telemarketer, perhaps-in a friendly, non-sales approach, call the lost prospect to ask why he or she did not buy. You might offer a little gift for the help, as some policy-takers do. Match the P/C agent's view with the lost prospect's view as to why the sale was not made. If they're too far apart too often, then the agent doesn't grasp where the sale was lost, making it even more difficult to improve the closing ratio.

But if the agent's answers match the lost prospects' answers on why the sale was lost, you have a handle on the problem. Was it because another agent got there first? If so, your agent should be able to review the other product(s) and offer something much better. Was it because the prospect stalled? Agents can develop motivations for people who are reluctant to make decisions. Was it because the prospect didn't understand the presentation? That problem can be identified during the presentation. Was it because the prospect wanted to comparison-shop? The agent can handle that objection, in part at least, by showing other quotations from other carriers, then following up to see what the prospect found elsewhere.

(Comparison-shopping should not be a big stumbling block, although many new agents fear it. A Life Insurance Marketing and Research Association [LIMRA] study showed that only one in four consumers discussed Life insurance with more than one agent, and fewer than one in five said they had compared costs before making their most recent purchase. "Perhaps," LIMRA surmised, "this is because a majority of consumers believe that there is little cost difference between Life insurance products." But the agent should take heart: A comparison shopper is a better prospect. LIMRA noted, "The fact is that prospects who compare policies from different companies are more likely to purchase a policy than are prospects who do not make such comparisons. Prospects who comparison-shop are probably serious about purchasing; therefore, since they are already inclined to purchase, the agent should persevere in the sales process.")

Was your producer's lost sale due to the fact that the prospect bought from the mortgage-lender's Life associate? Many folks do, often thinking that most Life rates are very close among companies. That's simply not so; vast differences exist among carriers' rates, and for the nonsmoking prospect in good health, the differences are even more startling. For example, one of the largest home-mortgage lenders in the country promotes a mail-order reducing Term policy with simplified underwriting. Here are annual premiums for three age bands for $120,000 initial amount on a 25-year reducing Term policy:

Age Band	30-34	40-44	50-54
Lender's affiliate	$396	$1,044	$2,628
Another company	$270	$461	$740

Note that "another company" calls for underwriting and its premiums are for nonsmokers in good health. The lender's affiliate's underwriting is presumably more liberal. But note the striking differences in premium! The point is that your producer should feel competent to handle any competition.

Any prospect represents more than one financial-needs problem and thus is a prospect for more than one kind of policy. Both the buyers and the lost prospects are probably carrying other Life policies for other needs, Disability Income policies, and other related coverages. If the new agent doesn't feel comfortable discussing coverages above her level of competence, then another agent should be brought in to address those coverages. The new agent can earn a finder's fee or split commission and, equally important, your client will not be left with big gaps in coverage. Even if the client doesn't buy those policies, your errors and omissions exposure will be reduced by the agency's offering them.

Keep good records on all the agent's sales activities so that you can work with firm facts instead of vague impressions. Review, in nontechnical terms, the strengths and weaknesses of your agent with the agent and with at least one other experienced Life person. Look for an improved closing ratio, a clear understanding of why each lost sale was lost, and a flow of leads for related products to be handled by a competent person. That should build the cash flow.

Your agent should also be raising her level of competence. Various insurers offer training materials and courses, as do general agents, managing general agents, insurance schools and colleges, and Life agents' associations.

In today's market conditions, no Life agent should be standing still in education, production, or earnings. All should be improving.