Selling Customer Service

by Carol Hammes

When losing a major Commercial account or watching the Personal Lines attrition rate go up, many agency principals are tempted to write it off to price competition. If the traditional level of service that the agency has provided can't overcome the lure of lower premiums, what choice do we have other than to join the price war?

Life in the agency then becomes defensive and crisis oriented. Producers work on getting the 'last look' and have to respond quickly to that information. When the CSR or marketing person can't get a better price or when the agency is beaten by one of its own companies, personality clashes can arise. Meanwhile agency management is scrambling to get a contract with the latest company offering the lowest prices-and might not be paying enough attention to internal morale and procedural issues. As a result, the agency team isn't as effective in selling new business or as efficient in servicing existing accounts as it could be.

Several recent studies by industry observers indicate that fewer than one-fourth of Personal and Commercial lines insureds are driven solely by price. One-third of those polled in a 1998 McKinsey & Co. survey feel comfortable enough with the service that they're receiving from their current agent that they wouldn't switch no matter how large the price differential was. More than three-fourths valued the assistance and advice they get from their agent-although most would also like to have more ongoing contact during the year.

In an IIAA study conducted several years ago, insurance buyers said they wanted the following from their agents, listed in descending order of importance:

Commercial Lines insureds want agents who:

• Understand their business
• Provide quick service
• Shop for the best price
• Provide discounts for buying multiple policies

Personal Lines insureds want agents who:

• Are highly professional
• Provide good value
• Make sure policies are accurate
• Watch out for new products
• Review policies at renewal
• Shop around for the best coverage
• Explain coverage
• Are friendly and caring

As a result of their own observations and in response to surveys such as these, many of the more successful agency principals have decided not to continue reacting to the price-oriented frenzy. They have instead begun to develop marketing programs that are 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 convenient time. All things being equal, they'd also like to have the customization and personalized service that an independent agent can offer-and many are willing to pay somewhat higher premiums to get it. But if they have to sacrifice timeliness, accuracy, convenience, responsiveness or enthusiasm to place their coverage through a particular agency, they'll be much more receptive to other opportunities, particularly those that come with a lower price tag.

In setting up a client-driven marketing plan, the first thing to keep in mind is that the agency probably can't effectively meet the needs of all customers. It's 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'll be able to maximize advertising/public relations dollars, company relationships, personnel selection and training, and use of technology to produce the greatest benefits. The producers will be more in touch with what's happening in that marketing arena, and less time will be wasted on trying to place risks that the agency has little chance of either 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's a long-term decision that should set the course for other major strategies over a three- to five-year period, whereas a niche-marketing program is often built around an insurance company program and may have a life span of no more than one year. What you should look for from a strategic perspective is a market segment where the agency can do something important for the clients that they can't do 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 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 those homogeneous products? 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 to service existing accounts, the marketing plans should differentiate between these two areas. What you do to attract new accounts is not necessarily what you must do to keep them. Price has been and will continue to be a major factor in the new business arena. The agency may provide the best service in the world, but that's of little value in selling a new account, since the account has yet to experience that service. A quick response, a demonstration of an ability to solve their problems, and a professional proposal made by an impressive sales team is no doubt important if the quotes are relatively comparable. But with new business, the bottom line is generally the bottom line, and the producer will simply not get the account unless the price is right. It's only after the initial sale is made that your team will get the opportunity to demonstrate the agency's special value-added service.

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

• Competitive price
• Demonstration of expertise, showing that the agency personnel can solve a current or future problem for them
• Enthusiasm-the feeling that you really want them to be a client
• Timeliness of the presentation of the quote or proposal
• Sense of security, achieved 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 who uses automated rating and word processing and who targets 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 and can't get to the quote for several days; or if they can't rate, underwrite, and process it automatically; or if they have an attitude problem and clearly couldn't care less whether the account is written-then the needs of the customer aren't being met. It's therefore a waste of the agency's valuable resources to be trying to write new business in these lines.

Do something about it. 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 for clients whose needs you can't meet profitably.

With medium-size or large Commercial new business prospects, the producer or CSR usually can't meet all the needs alone. A team approach is crucial to get the right price from the right companies in a timely manner and to have the professionally written proposal finished so that the presentation can be made at the prospect's convenience. 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 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. The agency has a finite amount of resources and it only makes sense to use them wisely.

If the producer follows the account-selection guidelines laid out in the marketing plan and the agency team still can't provide the prospect with a competitive price in a timely manner, it's important to reevaluate the strategy before more time is wasted on similar accounts. Management must change the organizational structure, procedures, personnel, or access to competitive markets to support the plan. Or the marketing plan itself must be reworked and the agency's producers directed toward targeting different kinds of accounts.

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

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

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 minimal 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 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 its 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, the insureds may begin to wonder if their coverage will be there when they need it.

The 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 the agency's service personnel focus on these three retention objectives, you should be able to keep most of your existing business. Price is not the only reason people switch agents. Unless something else causes them to consider moving, inertia will keep them where they are.

Rounding Accounts. We've heard it for years, and the statistics prove it: The more an insurance 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

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

Staying in Touch. Direct bill and automated policy issuance are good things from a productivity point of view. But they've had a major impact on the number of opportunities 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. A recent survey of customers indicated that 61% of the people and businesses 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.

The insureds that your agency has designated as 'A' clients should have face-to-face meetings with the producer, account executive or account manager at least five times a year, with one meeting specifically designed to gather renewal information. But thanks to word processing, it isn't difficult or expensive to contact every insured at least once during the year and ideally at least twice. 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 flood, you can send a solicitation to every Property insured in the agency. Even if there's no special reason to contact them, Commercial and Personal Lines insureds should always receive an annual review before the renewal is issued.

A one-page checklist or questionnaire for Auto and another for Homeowners or BOPs can be sent by clerical personnel with little manual intervention. The questions should ask whether there have been any changes in drivers, cars, property, or other exposures. There should be a place for them to indicate where their other coverage is placed if it isn't with this agency. Wording in the accompanying letter should explicitly indicate that the agency will assume that nothing has changed if the checklist isn't returned. When updated information is returned, clerical personnel can handle the entry of nonessential data and refer the rest to the CSR. This doesn't have to be a time-consuming or expensive process, but is extremely important in retaining accounts and reducing E&O exposure.

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 he or she is. 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. Establishing a customer-feedback mechanism will put the agency in a position to manage the customer relationship in a proactive manner, and such a program must be a key objective in the Client Service Plan.

CUSTOMER FEEDBACK PROGRAM

• 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). Play up the existence of this team prominently in your advertising and in other communications with clients and company personnel.
• Listen carefully to the complete concern. Thank the person for the input and don't interrupt or get 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 quarterly to isolate trends that indicate how well the agency is performing and where to make improvements 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?
• Assure accountability. Establish complaint-handling performance standards for CSRs and producers, and formalize the procedures that direct employees on how to deal with angry or concerned customers. Reward those who do well in responding to and solving the clients' problems.
• 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 insureds with several questions revolving around whether they would recommend the agency to others, if they plan to renew, if they have any concerns, and so forth. 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 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?'