MEETING CUSTOMER EXPECTATIONS
by Carol Hammes
Loyalty used to be a mainstay of the independent agency system. Having a long-term relationship with an insurance carrier actually meant something when asking for underwriting flexibility on an account. Employees who came to work for an agency at an early age stayed for years without too many complaints. And customers seemed to accept the inevitable cycles, remaining with the same insurance agent in good times who had been able to find coverage for them in tough times. Keeping insureds happy meant giving them a calendar at the end of the year, buying the agency cars or supplies from them, or meeting them at the country club or the corner cafe. Times have changed, and agents who are still relying on these old tricks to attract and retain business have had a rude awakening.
After losing a major commercial account or two and watching the personal lines attrition rate go up, many agency principals are prone to write it all off to price competition. When the direct writers or the rogue American Agency company decide they want the business, nothing will stand in their way. If the traditional level of service that the agency was built on cannot overcome the lure of the lower premiums, what choice do we have other than to join the pricing frenzy? Life in the agency becomes defensive and crisis oriented. Producers work on getting the 'last look' and then have to respond quickly to that information. When the CSR or marketing person cannot get a better price or when the agency is beaten by one of its own companies, personality clashes arise. Meanwhile, agency management is scrambling around trying to get a contract with the latest company to come out with the lowest prices and is not paying attention to morale issues that are getting out of control. And an out-of-synch agency team is not as effective in selling new business or as efficient in servicing existing accounts as it should be.
Rather than continue to react to the marketplace, many of the more successful agencies have begun to develop marketing programs that are geared to meeting the current needs and expectations of the insurance consumer. The new generation clearly wants instant gratification, and some of that has rubbed off on us old folks. We are demanding high-quality, appropriately-priced products. We want to take care of our business with as small amount of effort as is possible at a time that is convenient to us. All things being equal, we'd also like to have the customization and personalized service that an independent agent can offer and many of us are willing to pay a little more for our commercial and personal lines insurance to get it. But if we have to sacrifice timeliness, accuracy, convenience, responsiveness, and/or enthusiasm to place our coverage through a particular agency, we will be much more receptive to other opportunities, particularly those that come with a lower price tag.
In setting up a consumer-driven marketing plan, the first thing to keep in mind is that the agency probably cannot effectively meet the needs of all consumers. It is far better to pick certain groups to target 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 will be able to maximize advertising/public relations dollars, company relationships, personnel selection and training, and utilization of automation to produce the greatest benefits. The producers will be more in touch with what is happening in that market, and less time will be wasted on trying to place risks that the agency has little chance of landing or keeping.
Picking broad market segments for the agency to serve is a little like niche or target marketing, but is generally more strategic than tactical. It is a long-term decision that should set the course for other major strategies over a three- to five-year period of time, whereas a niche marketing program is often something that has no more than a one-year life span. What you are looking for is a market segment where the agency can do something important for the clients that they cannot for themselves and where the agency can efficiently provide the products, services, and qualities that are really valued by that particular kind of buyer. The property-casualty insurance industry does not 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 those homogeneous products? Recognizing that most people still have the need to be touched, where can you most skillfully combine the advantages of high-tech delivery with the personal dimension?
Although the agency may use the same people and markets to sell new business and service existing accounts, the marketing plan should differentiate between the two. What you do to attract new accounts is not necessarily the same approach that you must use to keep them. Price has been and will continue to be a major factor in the new business arena, both in commercial and in personal lines. The agency may provide the best service in the world, but that is of little value in selling a new account. A quick response and a spiffy proposal made by a very professional sales team is no doubt important if the quotes are comparable, but in new business, the bottom line is the bottom line. Insurance company executives and other industry leaders keep telling agents that selling on price is suicidal (live by the quote, die by the quote). But except under extraordinary circumstances, you will simply not get the account unless the price is right. It is only after the sale is made that you will get the opportunity to demonstrate the agency's special 'value added' service.
The New Business Marketing Plan should therefore focus on meeting the following consumer needs: competitive price; demonstration of enthusiasm that the agency really wants them to be a customer; timeliness of the presentation of the quote/proposal; a sense of security by emphasizing the professional risk management abilities of agency personnel and the financial stability and appropriate experience of the markets selected. In personal and small commercial lines, the producer or CSR with automated rating, word processing, and an agency mandate of using a limited number of markets can 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 the people whose responsibility it is to sell these coverages are bogged down with servicing work or have an attitude problem and cannot get to the quote for several days, cannot rate, underwrite and process it automatically, or clearly could care less whether the account is written, the needs of the customer are not being met. It is therefore a waste of the agency's valuable resources to be trying to write new business in these lines. Do something. Change job descriptions and workflow, change personnel, get new companies, get a new computer system-or change the marketing plan to de-emphasize new business in unprofitable lines.
With medium-sized to large commercial lines prospects, the producer cannot usually meet all the needs alone. A team approach is critical to get the right price from the right companies in a timely manner and to have the professional written proposal done so that the presentation can be made at the convenience of the prospect. The marketing plan must provide clear direction to the producers so that they will bring in only those prospects that the agency has a reasonable chance of writing. It is much smarter to target five accounts that can be prepared and marketed well in time for the expiration date than to use the shotgun approach on 10 accounts and rush the deadline on all of them. Again, the agency has a finite amount of resources, and it only makes sense to use them wisely. If the producer has followed the account-selection guidelines laid out in the marketing plan and the team cannot provide the prospect with a competitive price in a timely manner, agency management must change the organizational structure, procedures, personnel, or markets to support the plan. Or the plan itself must be re-worked and the agency should be targeting different kind of accounts.
New business is important but for the overall financial health and future success of a property-casualty oriented insurance agency the Account Retention Marketing Plan can be more critical. The statistics gathered from numerous industry studies are staggering:
- It costs 7-9 times more to attract a new customer than it does to keep an old one
- You need to keep a client 2-3 years to break even
- It costs $2.60 to get $1 of revenue the first year
- Agencies that increase retention rates by 5% see profits go up by at least 10%
What do existing insureds expect from their insurance agent on an ongoing basis? They want endorsements and other routine servicing to be handled promptly and accurately with a minimum amount of time and effort on their part. They want the renewal to cover their current exposures properly and to be delivered correctly and in advance of the due date. They want claims to be handled fairly, 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 its employees. To meet these needs effectively, such routine excuses as 'we had to send it back to the company to be corrected,' 'I'll have to find your file and call you back,' and 'you'll get it eventually but, don't worry, you're covered' simply will not cut it today. At least not for the long haul. 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, the insureds may begin to wonder if their coverage is going to be there when they need it.
The Account Retention Marketing Plan
It should have three major strategies for meeting these needs and improving the agency's retention rate: rounding out accounts; staying in touch; obtaining feedback. Because of the high level of competition for larger accounts, price will still be a major factor in this segment of the business, but in the smaller commercial and personal lines areas, if the agency focuses on these three retention objectives, it should be able to keep most of its existing business. Price is generally not the only reason people switch agents. Unless something else comes into play, inertia will keep them where they are.
Account Rounding
We have heard it for years and the statistics prove it: the more the agency writes for an insured, the longer it will 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
And yet the average independent agency only has 1.4 policies per personal lines insured! Remember, to service a client effectively, you must sell them everything they need. The agent of the future will insure the entire account, or none of it. Enough said.
Stay in Touch
From a productivity point of view, direct bill and automated policy issuance are good things. But they have had a major impact on the number of opportunities that an agency has to prove its worth to its small commercial and personal lines insureds. Apparently only 5% of the independent agencies in the country proactively contact their direct bill customers. And yet in a recent survey of customers on the move, 61% of the people who switched to another agent cited as a major reason the feeling that no one at their previous agency cared if they stayed or went.
Thanks to word processing, it is not difficult or expensive to contact every insured at least once during the year and hopefully at least two times. Certainly if new coverages become available you should send a letter out to all clients who have that type of policy. Or if something happens in the community such as a major flood, you can send a solicitation to every property insured in the agency. But even if there is no special reason, small commercial and personal lines insureds should receive a renewal check-up either before or after the automated renewal is issued or along with the policy if it is sent out by the agency.
A one-page checklist or questionnaire for auto and another for homeowners/BOPs can be sent by clerical personnel with little manual intervention. The questions should ask whether there have been any births or changes in drivers, cars, possessions, and exposures and should also verify that there have been no changes in marital status during the year. There should be a place for them to indicate where their other coverage is placed if it is not with the agency. (If it's feasible, there should be several different checklists so that you do not solicit X-dates from insureds whose accounts have been rounded.) Wording in the accompanying letter should be explicit in indicating that the agency will assume that nothing has changed if the checklist is not returned. Only VIP accounts should be called as a follow-up. When updated information is returned, clerical personnel can handle the entry of non-critical data and refer the rest to the CSR. This does not have to be a time-consuming or expensive process but is extremely important in retaining accounts and reducing E&O exposure. Note: an account that pays $200 in commissions each year will have paid $2,000 in commissions if the agency keeps it for 10 years.
Feedback and Problem Resolution. Another recent survey showed that a business never hears from 96% of its dissatisfied customers. Each of these people, however, are busy telling nine other people (but not you) how unhappy they are. Of the customers who do register a complaint, two-thirds will continue to do business with the agency if their problem is eventually resolved to their satisfaction, and 95% will do so if their complaint is taken care of quickly. Finding out if insureds are dissatisfied with their existing relationship with your agency is critical if you want to solve their problems. Establishing a customer feedback program must be a key objective in the Account Retention Marketing Plan. It puts the agency in a position to manage the customer relationship in a proactive manner. When problems are out on the surface and the agency personnel can heroically solve them before they become major concerns, insureds will know that you care and will think twice about taking their business elsewhere.
What constitutes a customer feedback program? How can the agency capitalize on the dissatisfaction of insureds to retain business?
- Listen carefully to the complete complaint/concern. Thank the person for the input and do not interrupt or get defensive. Promise immediate action only if you are in a position to give immediate action. It is better to take your time to come up with the right solution than simply rush to put a Band-Aid on a serious gaping wound.
- Document complaints in writing. Review them all on a quarterly basis to isolate trends that will indicate how well the agency is performing and where to place the emphasis for improvement in the future. Is it a certain department, one employee in particular, one insurance company, one line of business, one type of client? Does it relate to overall agency policies or procedures that might not be working well?
- Track all reasons for canceled or lost business. Ask them when they call to cancel or send a postage-paid card to non-pay cancellations. If they sold the house or car, did they buy another one and did they get the new insurance through the bank or auto dealer or another agent? Why didn't they come to you?
- Assure accountability. Establish complaint-handling performance standards for CSRs and formalize the procedures directing employees on how to respond to angry or concerned customers. Reward those who do well in responding to and solving clients' problems.
- 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). Use the existence of this team prominently in your advertising and in other communications with insureds and company personnel.
- Solicit comments and complaints. Routinely send short response cards to all insureds with several questions revolving around whether they would recommend the agency to others, if they plan to renew, if they have any concerns, etc. With some clients, you might want to send a longer customer survey form asking for more detailed feedback. And have the producers, managers, or CSRs regularly phone a specified number of customers 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 the resolution of a problem. Try to get the insured's or claimant's reaction to the situation. This reinforces your 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?'
An effective Account Retention Marketing Plan will help prevent existing clients from disappearing even if the agency is unable to obtain the absolute 'best' price. People will tend to stay where there is differentiated service and where they perceive that their needs are being met. And they often do not mind paying a little more in return for this special attention.
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. Reproduced, with permission, from The Middleton Letter.