by Lynn Thomas
I recently read an article which stated that by 2020 almost all auto insurance will not be sold by independent insurance agents. This statement became more believable when I heard GEICO has entered the Massachusetts regulated automobile market. Massachusetts is one of the least financially attractive auto insurance markets in the country. If GEICO can make money in Massachusetts today, then in the future, auto and homeowners insurance could become true commodities. What does this mean for the future of Personal Lines and the independent insurance industry? What can your agency do today to possibly keep some of the Personal Lines business and expand into other services to remain profitable and sustainable?
Based on my experience and knowledge of the insurance market, approximately less than 12% of independent insurance agencies deliver true value-added services to their high-end Personal Lines Clients. This is a foreseeable outcome since few agents can distinguish the value-added that they bring to the application and renewal processes. GEICO has already proven that human interaction is not required for automobiles to be properly insured. I will state that with the technology advancements, most homeowners insurance will follow the automobile insurance exit trajectory unless you decide to radically change course.
You can stop this exodus if you are willing to do three things. First, focus on your top 20% of your Clients that generate 80% of your revenue. Second, conduct thorough annual reviews demonstrating your knowledge and analysis. Third, consistently add additional valuable services.
First, focus on the 20% of its Clients that generate 80% of your revenue. You want and can keep these Clients; they are the engine of growth for your agency. You need to add value which cannot be replicated with technology. Mostly, that involves you having two to three meaningful interactions annually with your top Clients over the telephone, email, or in-person.
Second, the annual review stands out as the most obvious area that you can create an important value-added service. If annually is too frequent, than I propose you offer to conduct one review at least every three years. The housing market has not stabilized and thus as insurance experts, you need to make sure your Clients are not under or over insured. The amount of coverage that any homeowner needed three years ago is less than they need today. You may lose some commission but you will gain a lifetime of fiercely loyal Clients.
In the late 1980’s in Massachusetts, one agency visited its top Clients in their home for their annual review. Client after Client after Client told us that they were fierce loyal since they recognized the agency lost money each year, but their repeated annual reviews showed them that they had the interests of the Clients foremost in their mind. These Clients said many strong statements about their loyalty but the one that best summarizes it is that “it would take an Act of Congress” for them to leave this agency.
Third, you need to broaden the range of the services that your agency offers. Some agencies have added services like payroll processing or others through strategic relationships with vendors. Either model can work but you must continually seek to add value and offer new valued services.
Implement this strategy systematically, and you will never be replaced by technology. Why? Because like doctors, dentists, attorneys and accountants you provide valuable advice on managing you top Clients’ insurance risks. Your advice is based on your detailed understanding of your Clients’ needs. The winning equation for compelling insurance advice is: human understanding of Clients’ needs + your expert probing questions + knowledge of the insurance companies’ offerings, + your caring about your Clients = a compelling, detailed and personalized insurance analysis of their needs and your recommendations.
This type of detailed analysis and follow-through is what is your Clients always have wanted. Give it to them joyfully and you will create a base of raving fans that will supply you with referrals and keep your business filled with top Clients.