A 'legendary' agency is one that loses customers only when the customer dies, moves, or sells the business. It has a regular, measurable flow of referrals generated voluntarily by customers and by the agency requesting them. It's easily identified by the positive, proud attitude of employees and owners alike. Each commends the other as the source of the agency's strength.
Does this sound like your agency?
Most agents tell me that they rarely lose clients. In their opinion, their revenue slippage is undoubtedly due to the continuing soft market. However, when I ask them to prove it, they can't! It's much more comforting to blame revenue loss on the market than on the attitude of the agency.
The first element of a legendary agency is the information trail. These agencies know how well they're performing and where any gaps in service occur. There are two important pieces of this information trail: the Retention Report and the Lost Business Report.
RETENTION REPORT
The retention formula (below) is performed in four separate areas, Premium, Commission, Customers, and Policies. Retention is the measure of the amount (or number) retained from one year to the next in each of the four key categories, each pair of which is important, in themselves, to an agency.
The common retention formula is: (Total Year-to-Date minus New Business) divided by Prior Year-to-Date Total.
The relationship between premium and commission retention can send up red flags, as can the relationship between customer and policy retention. For instance, if premium retention is 90% and commission retention is 80%, the agency should be alert to the reasons for the variance. Is the agency routinely negotiating away commissions to keep accounts at a lower premium level? Or are the commission rates decreasing? If customer retention is 95% but policy retention is 85%, are you converting mono-line policies to packages, or are you losing the profitable side of your customer accounts to competition while maintaining lower-premium (or lower-profit) policies?
A legendary agency's key measure of retention is customer retention. How many 1998 customers will you have left at the end of this year in Personal Lines and in Commercial Lines? Any percentage above 95% is excellent. Any percentage below 90% should alarm you.
LOST BUSINESS REPORT
As an owner, the most important piece of information you need is why a line or customer was lost. The Lost Business Report is a weekly or monthly report from the operating departments to management identifying each line of business (and each customer) lost, with a section for new losses and a consolidation of year-to-date lost business. This detailed report should tell you what and who was lost, how much revenue the lost business represented, and why they were lost. Be wary of 'price' or 'no reason' as answers in the Why category.
Legendary agencies rarely lose customers or lines of business to price competition. They realize that most customers who value the association with their agents won't move for a small percentage change. If the percentage change is large, either the agency hasn't done its marketing job properly or the competitor has accessed markets that the incumbent has missed.
If price is listed as a reason for the move, your staff should be prepared to identify what the price differential was and why it caused the client to move. If business is lost for 'price' or 'no reason,' the staff has not done the post-mortem that's common in legendary agencies.
THE POST-MORTEM
In addition to having an information system that keeps the employees and owners aware of retained and lost business, legendary agencies are not shy of conducting detailed post-mortems on lost business (existing clients or prospects who got away). The post-mortem is a gut-wrenching experience in which the agency analyzes what happened -- but not to assign blame. After the fact, blame never matters. The legendary agency learns from its mistakes to avoid them in the future. After all, insurance is not brain surgery. It's not simple, but it is repetitive, with limited types of clients and problems repeated every year. Understanding what was done wrong will lead to vigilance against its happening again.
REFERRALS
Do you want to know how close you are to being legendary? Measure the number of unsolicited referrals that are provided to you by your own customers. Legendary agencies maintain a 'hall of fame' list of customers who refer others to the agency. It's appropriate to send a thank-you gift or note for each referral (regardless of whether you end up writing the insurance) because those are your truly loyal clients. Wouldn't it be nice to know who they are and treat them accordingly? Every agency gets some internal referrals. Some agencies get many referrals from the same few loyal customers. These customers are worth their weight in gold. One difference between most agencies and legendary agencies is that the latter get referrals (single or multiple) from many more clients. Their hall of fame list is large because so many more of their clients boast about them to friends.
The other significant difference between the normal agency and legendary agencies is the ability to ask clients for referrals. When we recommend a proactive referral program in most agencies, the owners refuse, saying that they feel that asking for referrals pressures clients. Legendary agencies are so proud and aware of their services that they freely ask for the names of clients' friends to provide them similar services.
LEGENDARY ATTITUDES
I've accused many agents and their staffs of 'stinkin' thinkin'.' Clients seem to be problems and interruptions to these agents, who seem to be spending all their time providing competitive quotes to customers and prospects. They also see carriers as purposely undermining them. Agency principals feel that their employees may be capable, but don't live up to their potential and must be closely managed. The owners sometimes accept mediocre performance because 'All employees are the same.'
Compare these attitudes with those found in a legendary agency. To great agencies, the customer is the reason they exist, not an interruption. The agency's primary purpose and value to customers is its ability to provide competitive quotes, as opposed to the direct writers who can only quote one product (their own). Carriers lose as much as agencies when the flow of business is interrupted. When this occurs, the legendary agency knows that there's a people problem in the pipeline-either in the agency or at the company. The agency owner will always work on identifying and fixing the people problems to regain the partnership relationship between agency and company, to their mutual benefit.
Legendary agencies' principals work as hard as the employees to build and cement client and carrier relationships. They hire the best employees available and treat them as equals, giving the employees responsibility and authority levels commensurate with their experience and skills. Understanding that mistakes are made (by owners as well as by employees), the owners will support employees who put forth extra efforts on behalf of the clients and will openly and frequently praise employees for their performance. As the owners are proud, so to are their staffs. Attitude is so important that it may well be the first indicator of a legendary agency.
If you're in a legendary agency, you know it already. If you aren't and would like to create a legendary agency, be prepared to change your and your employees' attitudes-or change employees. Attitude precedes reality. If you believe that you are the best and the most customer-oriented agency possible-and if you act that way on every phone call and customer contact every day-you'll develop the agency you want to have.
THE 10 COMMANDMENTS OF CUSTOMER SERVICE
The final indicator of legendary agencies is that they follow the 10 Commandments of Customer Service:
- Do things right every time.
- Customer problems are opportunities to provide the highest grade of service possible and to create customers for life.
- Create service legends.
- No one ever complained about being treated too nicely.
- Continuous improvement is more a function of the questions we ask than the answers we provide.
- Customers' perceptions are reality. If they think we blew it, we blew it!
- Guarantee your service-unconditionally.
- Work should be fun.
- Be proud of your agency-but never satisfied.
- To your customers, you are the agency, and the agency is the company.