Marketing Plan: Module Ii

MARKETING PLAN: MODULE II

You have five basic options regarding the structure of your Life operation. Each offers distinct advantages and drawbacks-different time frames, costs, revenue potential, levels of involvement, and so on. But before you decide on the one that appeals most to you, it's vital to take a look at your agency's capabilities to determine the structure on which you can best follow through and from which you can profit most. That's what this 'Marketing Plan' module is for-to help you make this determination.

While at this point you may find yourself leaning strongly in favor of becoming very involved in the process-Option 4 or 5--or maintaining a distance from the operation-Option 1, 2, or 3--you don't need to make an irreversible, clearcut decision between options at this point. You may choose to use two methods at the same time, to start with one and work toward another, or to adopt any other method that suits your agency's needs. Keep an open mind toward all these methods of producing Life profit for your agency.

Some agencies will want to limit their involvement in the Life operation to simply setting appointments for an independent contractor or a carrier's field representative (Options 1, 2, and 3 in the 'Life Operation Options' section of this Agent's Guide).

If you can't invest the kind of time or money in this venture to warrant training your P/C staff to sell Life or establishing a separate Life department/profit center (Options 4 and 5), then the former methods can help get you involved in Life insurance and increase your revenues. But, as we've said, the investment made in Options 4 and 5 has proved to reap increased benefits-you have more control over the venture using these methods, and your profits are greater. And everyone can get involved in Options 4 and 5 to some extent.

How do you decide which course to take? The following pages will help you determine how many qualified leads your agency can generate per week and will tell you how to apply a rule, called the Rule of Fifty, used by Life insurance experts to determine whether you can support a full-blown Life insurance department in your agency. We'll then provide you with cost and revenue analyses that break down the costs and revenues for starting your own Life insurance department.

These cost and revenue analyses are essential to any marketing plan for your Life operation, whether you follow the plans we have outlined here or set your own. Keep in mind that a complete marketing plan will include the who, what, when, where, and how of your operation. Our objectives here in the 'Marketing Plan' section are to give you the cost and revenue analyses first so that you can intelligently decide which option may be for you, and so that you have a guide in developing your own personalized plan for your operation.

Behind the cost and revenue analyses for Life insurance that we've just discussed, you'll find a section on planning for Health and Disability sales in the agency. Note that we advocate making these sales only as an addition to Life insurance. Health insurance, in particular, is not likely to be profitable for the agency when sold by itself. Look to this section, which begins on page MP-31, for more information.

Finally, at the end of this 'Marketing Plan' section, you'll find an 'Agent's Guide Directory' that will help you in determining how to best use this Agent's Guide for the Life operation option you have chosen.

The Rule of Fifty says that if your agency has enough of a P/C base to be able to generate 50 qualified leads the first week and 25 qualified leads every week thereafter, you can put a full-time producer into the Life insurance department.

What's a qualified lead? It is a person who has certain need characteristics in common with the expertise of the agency, and who can be introduced by the independent agent to the Life producer via a letter or in person. For example, if one of the agency's P/C clients has Term insurance that should be converted, and if the agency has the appropriate conversion vehicle, then that person is a qualified lead. The P/C client would be introduced to the Life producer either in person or by letter, allowing the Life producer to work with the trust that the client holds in the agency and his or her present agent.

The Rule of Fifty is a valuable guideline, containing proven ratios that you can use to determine which way to go and measure your results. It is a benchmark that Life insurance experts depend upon to determine how much Life business an agency can bring in, and has been used for years in the Life insurance industry. This rule will work in a P/C agency, too! All you need is the guarantee of qualified leads and the management, training, and supervision to ensure continuity and sales. The first part, you'll have to take care of-and in a P/C agency with a good client base, this shouldn't be a problem. The second part will take some determination and effort, but the Life PLUS membership program is designed to give you direction and make the road easier.

You can adapt the Rule of Fifty to your agency's needs. For example, the Rule of Fifty tells you how much production you need to fund a full-time Life producer in your agency. Cut those targets in half, and you know how much you need for a parttime person; adapt the targets to whatever option you choose, and analyze the performance of your subsidized producer, field rep, independent broker, or present staff.

Time and time again, the numbers expressed in the Rule of Fifty have been proved to work as follows: Fifty calls (meaning fifty attempts to initiate a call about Life insurance) will result in 25 contacts-voice-to-voice or face-to-face conversations about Life insurance designed to secure an appointment. These contacts will result in 10 set appointments, and those who do not generate appointments will be suspended and called at a later date. Of the 10 set appointments, eight will keep the appointment (and those that cancel the appointment are not necessarily bad prospects-that's the national average on such cancellations). This renders eight fact-finding interviews a week, from which four will result in legitimate prospects and two will become paid cases with an average of $750 premium per case. The producer who is selling a sophisticated Life product will develop $1,500 in premium and $1,125 in gross general agent commission per week (assuming a 75% general agent contract, * excluding overrides). With the use of the LifePLUS membership benefits, we think you can achieve these premium levels. For a graphic illustration of this process, see the funnel graph at the end of this section of the 'Marketing Plan.'

*The general agent contract is the contract your agency has with the Life carrier, providing the agency a certain percentage of premium as commission. These contracts may vary in commission rate. We have used a 75% general agent contract, meaning 75% of the premium goes to the agency, throughout all our examples for consistency. For more information on commission contracts, see 'Compensation' in the 'Life Personnel' section of this Agent's Guide.

The above figures represent the ideal. When you are just starting your Life operation, final paid-case figures will be lower. If you hire an experienced producer, or as your new producer becomes experienced, paid-case figures will be higher. In the cost and revenue analyses that follow, we discuss these variances in terms of percentages of the Rule of Fifty. In other words, your experienced producer may produce 150% of the Rule of Fifty, meaning that instead of two paid cases a week resulting from the process, three (150% of two) paid cases will result, generating $2,250 in premium and $1,687 in commission per week. (These are first-year commissions and do not include renewals or overrides.) The inexperienced operation is expected at first to work at 40% of the Rule of Fifty, or .8 cases per week. This process is explained in more detail in the following pages.

When you add up the Rule of Fifty lead requirements, you'll find they add up to 1,300 qualified leads per year-that's what you need if you want to sustain one full-time Life producer. How do you know if your agency has that many qualified leads?

We recommend using the 'Test of 100' to find out approximately how many good Life leads your agency can provide to a producer in a year. This test involves a random selection of 100 existing customers. Your selection should be random, but the ratio of Personal Lines to Commercial Lines customers in that 100 should be approximately the same as the overall ratio in your agency. In other words, if your agency has 500 Commercial Lines accounts and 1,500 Personal Lines accounts, your selection should include 25 Commercial clients and 75 Personal clients.

Two tests are then applied to these 100 accounts. From these 100, you can figure the total number of Life prospects in your P/C database. We'll show you how later.

The first test is simple, and you can remember it with these four words:

pass, pay, see, need. Your CSRs, because of their close contact with your customers, should be able to determine the following for each of the 100 customers you've randomly selected:

1. Will the individual pass the necessary Life insurance requirements? Are there any obvious health problems that would preclude him or her from passing a Life insurance company's requirements?
2. Is there any reason to believe that the individual could not afford to pay the premium for Life insurance? For example: loss of job, bankruptcy, persistent trouble meeting P/C premiums, and so on.
3. Can the individual be seen? Does the person go out of town often, or does he or she reside far from the agency? In other words, will this person be able to come to the agency for an appointment?
4. Has the individual recently undergone an insurance update and therefore doesn't need an insurance review at this time?

A certain percentage of your customers will fail this pass, pay, see, need test. Those who make it through the test are put through a second test-they must fall into one of the categories outlined below for both Personal and Commercial Lines. If they fall into one of the categories, they make good Life insurance prospects. Because you've sold the P/C coverages to these people, you should already have the information to classify them in these categories.

Personal Lines

1. Age 18 to 65 and older. This age group is perfect for Life insurance. These are the years during which other people are likely to be dependent on your prospect. And these prospects are your prime targets for Long Term Care insurance.
2. Married. A married person has a dependent.
3. Parents. Those with minor children have many financial obligations, including the future education of their children.
4. Working spouse. Two incomes need double protection-this is a tremendous marketplace.
5. Mortgage obligation. This is usually a family's biggest liability. Ensuring that the mortgage is paid in the event of the death of either spouse is critical.
6. Over $25,000 salary. If a family's income is more than $25,000, an effective Life insurance fact-find (see 'Action Step 4: The Qualifying Interview' for a fact-find you can use) is in order.
7. Gainfully employed. When someone brings a significant income to the family, that person's loss could cause financial difficulty unless Life insurance has been provided in the proper amounts.

Commercial Lines

1. Business has identifiable individual owners. These people are prospects for buy-sell agreements involving Life insurance.
2. Business has key employees. Key-Person insurance is vital.
3. More than three employees. Any firm with more than three employees is generally a prospect for Group insurance and/or a payroll deduction program.
4. Business has/does not have a pension plan. If the firm doesn't have a pension plan in place, it's your opportunity to discuss one. If it does, you can review it and suggest ways to maximize the individual pensions of owners.
5. Business has/does not have a Disability Income plan in place. This is an excellent employee benefit your prospect can offer.
6. Major stockholders are 55 years of age and over. These individuals are thinking about retirement and may want to defer some of the present compensation for their later years.
7. In business five years or more. This indicates financial stability. Most businesses that start fail within the first 15 to 24 months if they're going to fail.

Once you have determined that a candidate fits into one of the above categories for Personal and Commercial Lines, you know you have a potential Life prospect.

Once you've taken your 100 random leads and put them through the two tests explained above, you can determine your total agency customer base for Life insurance prospects. The Lead Assessment Formula sheet on page MP-6b shows you how to do this. If, by following this formula, you yield 1,300 qualified prospects, yours is the kind of agency that has the prospect base to sustain and profit from your own Life operation by taking advantage of Option 5--

'Establishing a Separate Life Profit Center/Department.' Using the Rule of Fifty, 1,300 leads allows you to hire on a profitable basis one full-time Life producer. This number assumes an appointment/fact-find with each lead only once a year, which has proven most effective in our studies.

Maybe these tests have shown that you can't fulfill the Rule of Fifty. This does not mean that your agency cannot profit from Life insurance sales. It merely means that you need to look at options other than number five, which involves establishing your own Life department with a full-time producer.

If you determine that you are able to fulfill the Rule of Fifty, yours is the kind of agency that has the prospect base to sustain and profit from your own Life operation by taking advantage of Option 5--establishing a separate Life profit center/department.

Another choice to consider is Option 4--training your existing P/C staff to sell Life insurance. Just using your CSRs to perform Term conversions, which average approximately $425 premium per year, can bring a lot of revenue into your agency. (In the subsequent Rule of Fifty example for P/C CSRs, the $425 premium figure is used as opposed to the $750 average premium that we assume for a subsidized or commission-only Life producer, because people who are also selling P/C coverages cannot initially be expected to make the more complicated types of sales that generate higher premiums.)

Obviously, no formula can be developed that will be adaptable to every agent. The activity requirement necessary for success varies according to the nature of your previous experience, your background, selling skills, and your markets. And, as you will see, this requirement changes as you gain knowledge, competence, and confidence.

You should review the cost and revenue analyses on the following pages. These are detailed studies that will help you break down the anticipated costs and revenues for Options 4 and 5 and form a complete analysis of your particular situation. (Because costs are minimal in Options 1,2, and 3, and level of agency control is minimal in Options 2 and 3, a cost and revenue analysis of these options wouldn't apply.)

RULE OF FIFTY FUNNEL

Numbers Per Week

50 QUALIFIED LEADS

LEAD ASSESSMENT FORMULA

Now that you've taken 100 random leads and put them through two tests, you can determine your total agency customer base for both Personal and Commercial Lines Life prospects by using the following formula.

Here's an example of this formula at work. Assume that your agency customerbase comprises 1,500 Personal Lines and 500 Commercial Lines accounts. You tested 75 Personal Lines and 25 Commercial Lines names. Fifty-three, or approximately 75%, of the Personal leads passed. Seventeen, or approximately 70%, of the Commercial leads passed. Here's how this Lead Assessment Formula would work:

We will assume here a reasonable objective for every agency owner: to be profitable in Life production, either by utilizing existing staff (Option 4) or hiring a new producer (Option 5), in 18 months.

As with any new