Focus On Client Service

FOCUS ON CLIENT SERVICE

by Carol Hammes

It always seems as though there’s good news and bad news in this industry. For agencies dealing with insurance company financial problems and the reinsurance fallout, the prospect of losing company representation looms near. The loss of clients to bankruptcy or of premiums and commissions to lower payroll numbers or less surety activity is also not very attractive. Carol Hammes offers suggestions for attracting and retaining customers in this environment.

The global economy has clearly entered into its first real recession in almost two decades. The Federal Reserve cut short-term interest rates 11 times in 2001 (five times since September 11) in order to jump start the economy. The current short-term interest rate is now well below 2% and could fluctuate more in the near term. There are signs, however, that some economic recovery might lie around the bend. With lower inflation expectations and a weaker demand for capital, lower long-term interest rates will help businesses and consumers borrow at better rates, thus helping them to recover their willingness to spend. On the other hand, corporate lay-offs and bankruptcies are being announced almost every day, making the economic outlook for the average person and small or large business entity anything but stable and comfortable for the next year or two.

One of the most important things to focus on now is retaining your current customers and adding as many new accounts as your producers, staff, and contract companies can accommodate. For the next several years there undoubtedly will be a harder market for Commercial Lines. It might also be tough to place certain Personal Lines risks at reasonable prices. Life in the agency for producers and CSRs might not be pleasant during this period and the agency team might not be as effective in selling new business or as efficient in servicing existing accounts as it could and should be.

Agency principals must recognize this potential and deal with the management challenges. The only way the agency can retain and increase its value is to make sure that everyone in the firm focuses on providing stellar customer service. Losing clients who are financially viable and insurable isn’t a situation that you can afford during these troubling times.

Even during the soft Commercial Lines market less than one-fourth of the companies that needed certain lines of coverage were driven to buy solely by price. Now, they’re looking for an agent who can give them the insurance or risk transfer protection that they need at almost any price. But along with the availability they want their insurance agent to provide 'value-added' service in return for the extra premiums that they’re now paying. The key to meeting their needs is to find out what those needs are.

How do your clients define value-added? Don’t assume that your definition is the same as theirs. Contact accounts regularly and make sure to ask prospects what they want their insurance agent to do for them. This should be one of the first questions that the producer asks, before even starting to gather the information on the account. If their expectations are higher than what the agency can provide you either need to back away from the account or change the organization to meet this level of need. To promise something and not be able to fulfill it will have you spending a lot of money putting an account on the books only to lose it the next year.

Past studies by McKinsey & Co. have found that although customers would like to have more contact from representatives of the agency during the year — particularly regarding any possible changes in coverage needs — three-fourths of them are relatively satisfied with the service that they’re receiving from their present agent.

In a survey conducted by IIAA several years ago Commercial insurance buyers identified the things that they’d like to see from their agents. They wanted the agent to understand their business thoroughly so that they’re better able to help them decide which coverages and limits they need. They also wanted quick service, a good price, and a discount for multiple policies. Personal Lines insureds wanted agents who are highly professional, provide good value, make sure that policies are accurate, are aware of new products and offer them, review policies at renewal, shop around for the best coverages, and then explain those coverages. They also wanted an agent to be friendly and caring.

Many successful agencies have developed a customer feedback program to find out what their clients need and want. This list presents some of the things that they’re doing to get the information that will help them provide the best level of service that’s reasonably possible. You should also recognize, however, that sometimes you can’t meet all expectations. Agency management personnel must decide what’s cost effective and what’s not for each type of client in each particular situation.

• Sell service. Establish a quality control team that meets regularly to determine how to improve the agency’s service to its insureds — while also reducing E&O exposure along the way. Promote this team prominently in advertising materials and other communications with prospects, clients, and insurance company personnel.
• Listen carefully to the complete concern. Thank the person who’s voicing the complaint for their input and don’t interrupt them or become defensive. Promise immediate action only if you’re in a position to give it. It’s better to take your time to come up with the right response than to rush to a less than appropriate resolution.
• Document complaints in writing. Review them on a quarterly basis to isolate trends that indicate how well the agency is performing and where to make improvements in the future. Do complaints focus on a certain department, one employee in particular, one insurance company, one line of business, or one type of client? Do they relate to overall agency policies or procedures that might not be working well?
• Assure accountability. Establish complaint handling performance standards for CSRs and producers and formalize procedures that direct employees on how to deal with angry or overly concerned customers. Reward those who respond to and solve clients’ problems skillfully.
• Track reasons for canceled or lost business. Ask why they’re canceling. Send a postage paid card to non-pay cancellations. If they sold the house, car, or business, did they buy another one and where did they get the new insurance? Why didn’t they come back to your agency?
• Solicit comments. Routinely send short response cards to all clients with questions revolving around whether they’d recommend the agency to others, if they plan to renew, or if they have any concerns. You might want to send some clients a longer customer survey form asking for more detailed feedback. And have the producers, managers, or CSRs call a specified number of customers regularly to find out how well the agency is serving them. Make it as easy as possible for insureds to give you feedback.
• Follow up after resoling a problem. Try to get the insured’s or claimant’s reaction to the situation. This reinforces your agency’s presence with the insured and shows your concern for both parties. Find out whether your system is working as designed. 'Were you happy with the treatment that you received from our agency personnel?' 'What would have made it better?'

As a result of their own observations from the customer feedback program, many agency principals and sales managers have begun to develop marketing programs geared to meeting the current needs and expectations of the insurance consumer. Clients are demanding a high level of quality in coverages and service in addition to appropriately priced products. They want to take care of their insurance-related business with the least effort possible, and at a time that’s convenient to them.

All things being equal, they’d also like to have the customization and personalized service that an independent agent can offer. Many clients are willing to pay somewhat higher premiums to get it. But, if they have to sacrifice timeliness, accuracy, convenience, responsiveness, and/or enthusiasm to place their coverage through a particular agency, they’ll be much more receptive to other opportunities.

When setting up a client-driven marketing plan, keep in mind that you probably can’t meet the needs of all customers effectively. It’s far better to target certain groups and to concentrate on exceeding their expectations, rather than to do a mediocre job trying to serve everyone. By focusing on more narrowly defined segments of the market you’ll maximize your advertising/public relations dollars, company relationships, personnel selection and training, and utilization of automation to produce the greatest benefits. Your producers will be more in touch with what’s happening in that marketing arena and waste less time trying to place risks that they have little chance of landing or keeping.

Serving broad market segments is a little like niche or target marketing, but is generally more strategic than tactical. It’s a long-term decision that should set the course for other major strategies over a three to five-year period. A niche-marketing program is often built around an insurance company program and might have no more than a one-year lifespan. From a strategic perspective, look for a market segment where you can do something important for clients that they couldn’t do for themselves, and provide the products, services, and qualities that this particular kind of buyer really values. The Property/Casualty insurance industry doesn’t promote product differentiation or innovation, even in Commercial Lines; the core coverages are effectively the same. How and to whom can your agency be unique in providing these homogeneous products? Where can you most skillfully combine the advantages of high tech delivery with the personal dimension?

Although you might use the same people and markets to sell new business and to service existing accounts, the marketing plans should differentiate the different types of focus. What you do to attract new accounts won’t necessarily help you to keep them. Price has been and will continue to be a major factor in the new business arena (availability is now also critical and could become more so for the next year or two). You might provide the best service in the world but that’s of little value to a prospect who hasn’t yet experienced it. A quick response, an ability to solve problems, and a professional proposal by an impressive sales team are very important if the quotes are relatively comparable. With new business the bottom line is generally the bottom line and the producer just won’t get the account unless the price is right. Only after the initial sale will your team get the opportunity to demonstrate your value-added service.

NEW CLIENT MARKETING PLAN

A New Client Marketing Plan should strive to meet these consumer needs:

• Availability of financially sound insurance markets at competitive prices
• Demonstration of expertise showing that you can solve a current or future problem for them
• Enthusiasm that you really want them as a client
• Timeliness of the presentation of the quote/proposal
• A sense of security by emphasizing the professional risk management abilities of agency personnel
• Financial stability and appropriate experience of the markets selected.

In Personal Lines and small Commercial business the producer or CSR can, with automated rating, word processing, and a limited number of markets, qualify a prospect, provide a written quote and proposal, complete an application, collect the money, and provide the insured with a binder within a half hour after the initial contact. If agency personnel are bogged down with servicing work or have an attitude problem and can’t provide a quote for several days, can’t rate, underwrite, and process it automatically, or couldn’t care less whether the account is written, you’re not meeting your customers’ needs. It’s a waste of the agency’s valuable resources to try to write new business in these lines.

Do something about it. Modify job descriptions and workflow, change compensation arrangements, shift personnel, find new companies, get a new computer system. Or revise your marketing plan to de-emphasize new business for clients whose needs you can’t meet.

With medium or large Commercial prospects the producer or CSR usually can’t meet all the needs alone. To get the right price from the right companies in a timely manner, a team approach is critical. Prepare the written proposal to make the presentation at the convenience of the prospect. The marketing plan must provide clear direction to the producers so that they’ll bring in only those prospects that the agency has a reasonable chance of writing. It’s much smarter to target five accounts that you can prepare and market for in time for the expiration date than to use the shotgun approach on 10 accounts and rush the deadline on all of them. You have finite resources. Use them wisely. If the producer has followed the marketing plan’s account selection guidelines and your team still can’t provide a competitive price in a timely manner, reevaluate the strategy before you waste more time on similar accounts. Management must change the organizational structure, procedures, personnel, or access to competitive markets to support the plan. Or you might need to rework the marketing plan and target different kinds of accounts.

EXISTING CLIENT SERVICE PLAN

Although obtaining new business is important for the overall financial health and future success of an agency, the Existing Client Service Plan can be even more critical. Statistics from numerous industry studies make it very clear that it’s absolutely crucial for an agency to focus a substantial amount of resources on retention:

• New clients will generate 2.5 times more in expenses than in revenues the first year.
• An agency generally needs to keep a client for almost three years to break even.
• It costs eight times more to attract a new customer than it does to keep an old one.
• Less than 10% of clients who leave an agency will ever come back.
• Agencies that increase retention rates by 5% see profits go up by more than 15%.

What do existing insureds expect from their agent on an ongoing basis? They want endorsements and other routine servicing to be handled promptly and accurately, with little or no effort on their part. They want the renewal to cover their current exposures properly and to be delivered correctly well in advance of the due date. They want claims to be handled fairly and in a timely manner. They want their problems to be resolved quickly and efficiently. And they want to know that they matter to your agency and employees. Most people will be patient if problems are the exception, but if crisis and confusion seem to be a way of life in the agency your insureds might begin to wonder if their coverage is going to be there when they need it.

The Existing Client Service Plan should have three major strategies for meeting these needs and improving the agency’s retention rate: 1) rounding out accounts; 2) staying in touch; 3) obtaining feedback. If agency service personnel focus on these three retention objectives you should be able to keep most of the existing business. Price isn’t the only reason people switch. Unless something else causes them to move inertia will keep them where they are.

We’ve heard it for many years and the statistics prove it: The more policies an insurance agency writes for an insured, the longer it’ll keep the business. One study shows that the chances of keeping a Personal Lines account for three years are:

• 45% if you just have the Auto
• 50% with Auto and Homeowners
• 60% with Auto, Homeowners, Life
• 97% with Auto, Homeowners, Life, Health

Most Personal Lines customers have at least four policies; yet the average independent agency still only has 1.4 policies per insured! Total account selling is also critical in Commercial Lines. And this includes the employee benefits area as well as Property/Casualty and surety business. To effectively service a client you must sell them every insurance product they need.

The late Carol Hammes, principal of The Middleton Group, was one of the Independent Agency System’s most widely respected management consultants. She will be sorely missed.