As with so many inventions, improvements, and business successes, the “keys to the kingdom” in sales offer basic common sense solutions to problems that have grown out of proportion for many agents.
PERSONAL LINES
When independent insurance agents were alone in the marketplace, their mere presence and their professionalism drove customers to their doors. Competent agents were asked to provide insurance by an ever-growing client base. The referral system worked.
State Farm, Allstate, GEICO, USAA, Farmers, and many other captive and direct writing companies broke the hold of the independent agent on new sales by providing adequate (or better) products and service and advertising heavily. Advertising works! Meanwhile, most independent agents’ advertising budget consists of their monthly fees to the Yellow Pages.
Now, Internet insurance providers are working on the customers of both the direct writers and independent agencies by offering to “cut out the middleman” and provide fast quotes, 24-hour service and, presumably, lower rates. This will work with Personal Lines commodity products because we’ve spent years convincing the public that all these policies are alike, without stressing the variables that need the expertise of an insurance professional to identify and help solve customers’ problems. Will customers lose something as they flock to the lower prices of the direct writers and Internet providers? Of course. Will they understand this before the uncovered or mishandled loss? Probably not. And because most insureds don’t have losses, the lack of proper coverage is always a hidden land mine to them. What they don’t know won’t hurt them — for the moment.
Does this mean that the Independent Agency System should capitulate and be grateful for the “stable” customer base (estimated at 50%) that won’t shop unless they have a bad experience with their current agent? Should they become “quote mills” for prospects to test the validity of the direct writer and Internet provider claims? Should they resign themselves to losing a percentage of their customers each year?
Successful Personal Lines independent agencies nationwide have proven that they can stand toe-to-toe with the direct writers and Internet providers — as long as they’re selling “Points of Differentiation” rather than price.
The best of these agencies have taught their Personal Lines staffs a mantra about quoting. Said in many different ways, the point that they stress is always the same:
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We provide something that neither the direct writers nor the Internet companies can deliver.
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The direct writers have a “one-size fits all” mentality — either you fit into their customer template or they can’t insure you. Some direct writers have even turned that weakness into a strength by offering to tell you which other company to access if they can’t give you the best rate. Of course most of the referrals are of less than perfect prospects. The company looks like a hero by turning away the prospects they would have rejected anyway.
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As independent agents, we have different companies with different products and different tiers to permit each customer access to the best product at the most competitive price.
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Our customers are human beings, not a series of answers to questions on an application. Yes, we take a commission for tailoring your insurance program to you, as an individual — something that your computer will never do for you. Without an agent’s expertise, you’ll only learn that the cut-rate policy you bought online wasn’t exactly right for you when you have a claim.
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Quoting is only done face-to-face when we can meet and find out about your insurance needs. There are plenty of places to call for price alone. Successful agents have determined that they’re far more successful if they achieve a 50% closing rate, and that the closing rate for prospects who come to the agency is often four to five times better than the telephone quotes.
The other common characteristic among the most successful Personal Lines agencies is their upgrading of Personal Lines sales positions. Yes, they dedicate people to Personal Lines sales. In some agencies, the Personal Lines salesperson is also responsible for the advertising and marketing campaigns that attract new customers from: (1) Active referrals from the existing customer base; and (2) aggressive local marketing. In larger agencies, marketing is handled outside the department and the Personal Lines sales force is purely dedicated to “wooing and winning” the prospect. As you can imagine, it takes a positive and outgoing personality whose compensation is directly tied to new business sales to be successful in this position. We’ve seen Personal Lines salespeople earning from $30,000 to $50,000+ on a base salary and incentive basis in urban, suburban, and rural areas. Their success is related directly to two factors: Their ability to learn the “mantra” and sell it to the prospects (make them feel comfortable, special, and impressed to have the professionalism of the agency working for them), and the agency owner’s commitment to the marketing program. If either is insufficient, the effort invariably fails.
This aggressive local marketing is surprisingly successful because most people still feel more comfortable and trusting with someone they can touch when the product that they’re buying is an intangible (i.e. insurance protection). The direct writers and Internet providers are doing good jobs steering customers’ concentration away from this nagging issue. The independent agent’s (your) job is to keep reminding them that they can get everything that these other providers are offering — plus a personal touch.
SMALL COMMERCIAL LINES
Some independent agents still believe that Commercial Lines are more insulated than Personal Lines from attack by the alternative marketers. Yet our own companies are supporting efforts to market niches and associations both directly and through agents. This is only a hop, skip, and jump away from direct-written association programs offering BOP policies through their association’s Web sites at rates far below what’s currently offered.
Small Commercial Lines business is actually in greater danger than Personal Lines. It is, in many ways, a virgin market for the direct writers and Internet providers that Personal Lines was in the 1950s and 1960s. They’re simply seeking the homogeneous groupings that will permit them to mass market the products in the same way they do in Personal Lines.
Small Commercial Lines carry a burden that Personal Lines no longer bears. Most agents still over-handle and over-service Small Commercial Lines to the point that they’re not profitable. I know that this is sacrilege to the agents who believe that service is all they have to sell — but it’s time for a reality check. Every agent who hasn’t concentrated on providing service for Small Commercial Lines business commensurate with the income it generates is losing money in that part of their agency.
That does not mean that you should disregard Small Commercial Lines and leave them to the direct writers and Internet providers (who, by the way, run their Small Commercial Lines at a profit). It means that you have to learn to both sell and to service Small Commercial Lines differently than Large Commercial Lines. By the way, there appears to be no common definition of “small” Commercial Lines; size groupings vary by territory and by agency. Some agencies might consider account premiums less than $10,000 as small. Others might describe accounts less than $5,000 as small, and still others consider accounts less than $25,000 as small. It all depends on where you live and how you sell.
The sales technique that seems to work best in the agencies with growing and profitable Small Commercial Lines is to mimic the direct writers. Individual Small Commercial customers, like Personal Lines customers, are invited into the agency to discuss their account with a new business specialist. These agencies concentrate more on their closing rate than on the new business itself because they know if they can achieve a 50% closing rate, the only question is how to market to drive more prospects in the door.
As with Personal Lines, the mantra is learned and sold to every prospect. If all they’re looking for is a low quote, they probably aren’t going to buy from you, and if they do buy from you this year, they’ll be looking around again next year. If you can establish a relationship and make the small business-owner feel like they have your staff working for them, you will diffuse the urge to shop (as long as you follow through on your promises).
A commitment to sales is the primary characteristic of successful Commercial Lines agencies. They market hard and constantly through professional marketers (not CSRs or producers cold calling and sending letters). They track and gauge the success of every marketing campaign on a monthly basis and change them often to make them more successful. Although you can never outmarket the direct writers on a national level, it’s easy to outmarket them within your local territory.
The other significant difference between successful and unsuccessful Small Commercial Lines agents is their dedication to niche and program marketing. They set objectives each year to develop a new niche that can be marketed through their carriers — who are supporting those efforts enthusiastically.
LARGE COMMERCIAL LINES
The competition for Large Commercial Lines (however you define it) comes from a different direction. The large corporate agencies are concentrating their marketing efforts on the marquee accounts in every territory. The agencies created or bought by the financial institutions are also targeting these accounts. The most successful independent agents in Large Commercial Lines have professional sales management, professional dedicated producers, and constant professional marketing to bring them to the same marquee accounts targeted by their competitors.
The field of play is even for the independent agent who maintains strong, close relationships with its carriers through a professional marketer, and hires and maintains only the kind of producers that the agency owners would be proud to have representing them. The failure of most agents is that they simply do not know how to hire and manage producers. The incentives are insufficient and the owners’ support (management and financial) isn’t strong enough.
This is a realm that should be entered only by agents who have the staying power to do it right. Many agents that try (and fail) repeatedly to break into Large Commercial Lines just don’t have the background or skill to do so and would be better served concentrating on the medium and small commercial marketplace.
SERVICE
The nation’s most successful agents are converting their service staff compensation program to an incentive basis (while still maintaining the integrity of salaries) to reward service departments for retention and book of business growth.
Service managers are professional managers responsible for training, coaching, and counsel, and monitor their staff to assure that service is provided in an excellent (and standard) fashion and that every CSR is not a kingdom unto themselves. Managers are also second levels problem-solvers. Managers should never service books of business themselves.
Successful agencies evolve service standards and strategic plans, to form common service cultures that permit them to manage service relationships in a way that never even tempts customers to shop. These agencies are almost religious in their fervor to:
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Do it right.
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Do it right the first time.
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Tell everyone how good we are.
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If we make a mistake, catch it, admit it, and make it right before the customer gets upset.
FINANCIAL MANAGEMENT
Successful agencies no longer run as “seat of the pants” operations. Whether large or small, these agencies have financial managers and rely on the budgeting process to guide their spending habits.
On a year-by-year basis they allocate a specific percentage of revenues to the key expenses (staffing and marketing) and carefully track the success of their tactical plans before spending outside their budgets.
The key to successful agencies’ financial success is the focus that agency owners place on the operating statements and balance sheets. Not surprisingly, every successful agency knows its operating results and balance sheet liquidity ratios on a monthly basis. The first is the measure of operating success and the latter gauges the health of the agency.
Any agency, large or small, can become successful if the principals have the desire, commitment, and intestinal fortitude to do the right things. Whether those things mean upgrading staff, enhancing management or spending money ahead of results, only those truly committed can succeed.
“Flash-in-the-pan” agents who hook onto an “idea of the month,” pursuing it until they encounter too many roadblocks or identify the next “idea of the month,” would be far better off simply maintaining their book of business (replacing lost business) and earning a living until it comes time to perpetuate.
“Status quo” agents earn good livings and avoid the stress of change.
However, there are a number of agencies headed by “Young Turks” who are seeking the path to success. If they follow the trails already blazed by successful agencies, they too can build successful and profitable organization. The demise of the Independent Agency System has been grossly exaggerated as long as creative agents are willing to change to meet the challenges of the future.