Use these six proven ways to beat the soft market.
Those of you who are historians will recall one of the great political slogans, FDR's re-election plea during the Second World War (no, I wasn't alive then!). He said, “Don't change horses in midstream!” Today, we'd paraphrase it to say, “Dance with the one who brung ya!”
What does this have to do with Consultative Brokerage, you might ask? Well, it's the basis of riding out changes in the marketplace successfully. It's the key to keeping clients satisfied and maintaining your reputation with carriers. Remember this: The marketplace has a long memory. If you intend to stay in this business for longer than the next 12 months, you should heed another piece of sage advice: Don't throw the baby out with the bathwater.
Here's the situation: The marketplace is now changing monthly. As each month goes by, it will probably get softer and more competitive (insert the word “cheaper” here). As a professional, you can't get caught up in this deadly spiral. It will be impossible for you to always come up with the cheapest deal (insert the words “most competitive” here). There will always be somebody more competitive, depending on which day it is.
Brokers who chase the marketplace in this downward spiral will suffer dire consequences. They'll watch their income stream erode quickly, they'll destroy relationships with the carriers that supported them, and they'll lose all credibility with their clients. They'll constantly be looking for the next Shifting Sands Mutual so that that they can deliver the cheapest price.
In a softening market, seasoned Consultative Brokers display these characteristics:
- They know that they can't always be the cheapest. In fact, they tell clients and prospects this up front. They make certain the client knows that their Value Proposition depends on more than just the price of insurance.
- They avoid paranoia. They've exercised Broker Control throughout their service or prospecting cycle. They're highly aware of their competitors, but don't over-react to them.
- They concentrate on what they can control. They understand that they have no leverage over others in the marketplace. They can't control an overly aggressive underwriter who is running a month-end fire sale. So, they invest their valuable time managing client expectations.
- They manage client expectations effectively. They know that their current clients and prospects don't live in a vacuum. These people are hearing from other brokers who are pitching price, programs, and carriers. They make certain that their clients/prospects hear and understand the whole truth about their options.
- They don't change horses. As the marketplace continues to soften, they show loyalty to the carriers that supported them throughout the hard market carnage. They make certain that these carriers are treated fairly at renewal time. They understand that underwriters will soon have silver bullets in their hands and want to make certain that they get their share.
- They don't let the bidding process begin. Through the use of Stewardship Reports, underwriter meetings, and Total Cost of Risk (TCOR), these brokers make sure that the client sees their true value. By doing so, Consultative Brokers see renewals as just another tool to help the client.
Throughout the course of next year, if history repeats itself, the cycle of a softening market will continue. Successful Consultative Brokers will position themselves to be perceived as professionals who understand how to help clients reduce their costs. The insurance marketplace is only one facet of this Total Cost of Risk approach. Consultative Brokers won't become victims of the marketplace, but will remain masters of their own destiny.