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Agency-Insurer Productivity Success is price-less Pricing is not the most important variable By Scott M. Primiano Over the past few months I have posed the following question to my audiences: “What market are we in—hard, soft, spotty, or disciplined?” As you might imagine, the answer varies depending on who is being asked, the line of business, and the agency’s geographic location. Those with heavy workers comp and GL books believe that we are giving away the store—especially in the Midwest. Those with a property and habitational focus find pricing to be firmer, most notably in the urban and coastal regions. Everyone with a heavy contractor book is having difficulty finding a competitive market for artisans, especially the beleaguered roofers. So … what market are we in? The answer depends on who you are and, most often, what others tell you it is. Your answer might also be a reflection of your most recent experience—the account you lost on price because a competitor undercut you by 30% while agreeing to baby-sit the client’s kids every other weekend. The fact of the matter is … there is no fact in the matter. The market cycles—up and down, round and round, as it always has been and always will be—are driven by the best and worst thinking of actuaries, economists, state regulators, and weather pundits. Combine their often contradictory assertions with the heavy hand of a cocky CEO who sees and hears only that which is agreeable while shunning or shooting any bearer of contrarian data or point of view; and you get what we have—a confusing and convulsing market lacking both rhyme and reason. The uncontrollable, ever-changing pricing landscape … does it really matter? Does your success depend on it? Thankfully, the answer I get when I ask these follow-up questions is “no.” And the response is unanimous. Agents around the country recognize that, although bothersome, market cycles and carrier appetite shifts are not obstacles to success and growth—merely challenges. They also know that betting the farm on any pricing advantage they may currently enjoy—or, conversely, abandoning a line of business or market segment because of current pricing adversity— is a reckless gamble with no payoff. What, then, does success depend on? Before you answer, let me define what success means in terms of growing your book of business. True success equals sustainable growth in new business production, client retention, sales and service efficiency, and agency profitability. This definition is not intended to diminish the importance of other, non-monetary success factors like charity work, community service, healthy employment practices, honor, integrity, self-actualization, and so on. These P.R.E.P (Production, Retention, Efficiency, and Profitability) objectives are the four financial cornerstones of success that hold together the foundation of any agency or producer’s book of business. If this is true, then the actions we take to achieve these objectives, equally and “sustainably,” will be our success drivers. So what are these actions? You can probably make your own list in the time it will take you to finish this article; however, here are some traits that I find to be most common among our industry’s most successful agents: An unwavering loyalty to our primary purpose Our most important responsibility in this industry is to save lives, prevent injuries and help our clients avoid financial hardship. This is what we all do for a living, regardless of our position or location. Successful agencies, producers, CSRs, underwriters, and all other industry professionals relinquish any self-serving motive and abide by this industry mantra, as hard is it may be at times and as tempting as it may be to wander. The long-term effect of doing the right thing, in the right way, for the right reason, with the right people is, no surprise, the right result: financial stability. Those who put short-term gain and “deal-making” ahead of this primary purpose ultimately fall victim to their lapses in integrity, ethics, and judgment. Read what the press is reporting about our industry and you’ll quickly see why your clients and prospects may have a “buyer beware” attitude. It’s because they should. The strength and sincerity of a value proposition Successful agency owners and producers have figured out how to “de-commoditize” insurance products and services. Rather than being reduced to policy and price peddlers, these agencies and their staffs present a completely different and often unexpected proposal to their prospective clients: “We’ll manage your insurance premiums the right way—by reducing the frequency and severity of your claims. We’ll do so by gaining a complete understanding of who you are, where you are as an individual and/or company, and your expectations and unique needs. Rather than quote a cookie-cutter policy, we’ll provide you with a custom-developed program and the most value for your premium dollar.” Then they do it, and they keep doing it. Their proposals focus on educating clients, not selling them, and their goal is to provide their clients with enough information to make educated decisions about their insurance program. Over time, these agencies attract and retain the big fish (quality buyers) and leave the chum (pure price shoppers) for the sharks to fight over. The ability to differentiate and communicate Successful agencies look different, sound different, and act differently than their competition. In fact, these agencies are often so profoundly different that they have no real competition. Rather than approach their prospects during the hunting season (30 to 90 days in advance of the ex-date), they make contact mid-term or earlier when they have the prospect all to themselves. Most often, even the incumbent agent is unaware. This leaves them plenty of time to research and develop the client, prove their integrity, and build and offer a unique and value-driven program. They retain their clients by creating a post-sale communication and education strategy that doesn’t require them to “win” the client back at each renewal but instead removes the client from the field of competition. They shun traditional and invasive marketing initiatives such as mass mailing, telemarketing, and short-term gimmicks. Instead, they build market awareness that rises far above the din, gets noticed, and attracts the right clients for the right reasons. The willingness to truly partner with carriers and underwriters I’ve written a lot about this trait, and I do so because it is critically important. Everyone talks about the importance of relationships and partnerships; however, few carriers and agents are fully satisfied with the commitment and accountability that their “partner” is demonstrating. Most joint business plans are shallow, and the undercurrent of too many carrier-agency relationships is still adversarial. Even the best of relationships and agreements seem to be fair-weather in nature and intact only during the best of times. Winning agents, producers, CSRs, and underwriters are able to sort through this fray, find each other, and work together in partnership. Here we find unshakable levels of trust, mutual respect, and candor that are the hallmarks of any successful relationship—personal or professional. The natural result is a universal win for the client, carrier, and agency. Integrity and reputation Having best practices formally defined and rigidly adhered to is a calling card of the most successful agencies. Mediocre agencies have mediocre practices, and agencies in decline have declining and often unethical practices. Desperation and deception are sinister traits of our industry’s most ruthless members and often begin with fudging an industry code, under-reporting payroll and sales figures, or selling high-deductible/low-limit plans just to get the cheapest price. Knowing that these and other misdeeds eventually get discovered and reconciled, winning agents fiercely protect their integrity and reputation against all temptations. They know what you know: Your most powerful marketing tool is your honor. The network and the referral base I really, really, really, wish that cold-calling would stop. There is a reason that 100 million people are on the government’s do-not-call list. Cold calls are intrusive, annoying, and garner little but fruitless follow-up and nonproductive activity. Winning agents long ago recognized that cold-calling, direct mail, and generic marketing practices yield a dismal hit ratio and are woefully inefficient. They also know that those who do respond are usually pure price buyers, traumatized accounts, and non-payers. Winning agents rely on their network, centers of influence, and referral base to meet new pre-qualified prospects. Like any effective prospecting method these agencies use, their approach to referral harvesting and networking is strategic and structured, not random and haphazard. Visibility and viability In successful agencies, service plans and stewardship programs that target agreed-upon expectations are created and implemented for every client at the time of sale. These service initiatives are more comprehensive than a simple contact schedule that is used by many to “stay in front of the client.” While they recognize the importance of visibility, winning agents realize that viability is even more important. Rather than just visiting, dining, golfing, or gaming with the client, winning agents create a proactive service schedule designed to educate and positively influence the client. Knowing that risk management and loss control require proactive client education, these agents do not limit their initiatives to their large commercial clients but also reach out and touch their smallest personal lines accounts. These agents recognize that the easiest claim to manage is the one that never happens, and that an ounce of prevention is worth a pound of cure. I could write more about the traits found in successful agencies and add others to the list, but I think you get the point. Price is certainly a factor; however, it is only one of many variables that clients and prospects consider. In our industry, as in others, you still get what you pay for; and you, the agent, will be only as successful as your clients allow you to be. If you focus on price alone, you will attract those who buy on price alone. If you sell value, you will attract clients who will value you and stay with you. Keep doing the best you can with what you have to offer and stay focused on continuous improvement. That is how the very best agencies got where they are and stay where they are, in spite of the ever-changing market. * The author |
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