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Beyond Insurance
The best type of agency growth
Seven-year study examines the role of organic growth in agency viability
By Scott Addis, CPCU
Organic Growth. These two words have become the most cherished in the language of insurance agents and brokers. Everyone understands why organic growth is so important. Yet, few have mastered how to drive it. The purpose of this article is to reveal the Best Practices that consistently and powerfully maximize growth, profitability and agency value.
What is organic growth?
Organic growth is best described as the process of business expansion achieved through increased output, sales or a combination of both. Organic growth does not recognize profits or growth resulting from takeovers, acquisitions or mergers. Rather, it represents “pure growth from within.” An agency’s organic growth rate is a good indicator of how well management is utilizing its internal resources to achieve high performance.
In simple terms, organic growth represents an agency’s ability to:
• Attract new customers
• Retain customers
• Expand relationships
• Effectively utilize customers as members of its sales team
Our research
In 2002, Addis Intellectual Capital, LLC, began researching the performance of agents and brokers with particular emphasis on organic growth. This seven-year study consisted of:
• The administration of the Organic Growth Agency Survey™ to 2,630 agents and brokers.
• One-on-one interviews with more than 500 agency principals, sales managers, account executives, customer service representatives and producers.
• More than 100 interactive presentations and/or workshops to industry trade groups, next generation agents, agents & brokers, insurance carriers and Beyond Insurance® coaching sessions.
• Participation in board-level discussions with The Council of Agents & Brokers (Washington, D.C.), CPCU Institute (Malvern, Pennsylvania), The National Alliance for Insurance Education & Research (Austin, Texas) and Rough Notes Editorial Advisory Board (Indianapolis, Indiana)
20 characteristics of high-performing organic growth agencies
While agents and brokers come in all shapes and sizes, the following represent the 20 characteristics of high-performing organic agencies:
1. They have a consultative and diagnostic sales and sales management process focused on uncovering the “issues” of their customers.
2. They have mechanisms in place to screen out “commodity shoppers.”
3. They share a culture of creativity and innovation. They “think outside the box.”
4. They benchmark customer appreciation, loyalty and intimacy.
5. They have a disciplined and strategic prospect research and qualification system.
6. They view insurance carriers as valued business partners.
7. They know how to create value.
8. They utilize a disciplined, results-oriented, cross-sell system.
9. They give back to their community and industry.
10. They continually strive to enhance their brand.
11. They benefit from an active network of engaged, enthusiastic clients and centers of influence who create a steady flow of qualified referrals.
12. They understand the “lifetime value” of a customer.
13. They have a Stakeholder Intimacy System that touches clients, carriers, prospects, staff, centers of influence and community throughout the year.
14. They are able to attract and retain top-notch talent.
15. They deliver differentiated, value creation initiatives to enhance the customer’s experience with their agency.
16. They have a management team whose leadership style supports and nurtures rather than directs and dictates.
17. They understand and support work/life balance.
18. They encourage producers to be consultative and diagnostic, not product-oriented or transactional.
19. They have a mentoring system in place.
20. They are having fun!
Organic growth performance indicators
The 20 characteristics of high-performing organic growth agencies translate into “performance indicators” that differ greatly from the typical agency, including:
• New business “hit ratios” of 80% or more
• Book of business “loss ratios” under 40%
• Retention of 98% or more
• Referral-based new business opportunities of 80% or more
• “Per Employee Revenue” in excess of $225,000
”Best Practices” for organic growth
The 20 characteristics of high-performing organic growth agencies suggest that there are six Best Practice areas of concentration that, if achieved, will maximize growth, profitability and agency value.
Stakeholder Intimacy and Relationship Management—An insurance agency’s stakeholders consist of clients, carriers, staff, centers of influence, prospects and community. High-performing agencies understand the importance of getting and staying close to each category stakeholder. Stakeholder Intimacy and Relationship Management produces positive organic growth results in numerous agency indicators as a result of employee enthusiasm, prospect research, referrals, retention, outside competition on key accounts, cross-sell results and new business “hit ratios.”
Diagnostic Sales & Sales Management System—Many industry consultants believe that the formula for enhancing consultative sales and sales management lies in the development of value-added services. Although value-added services is an ingredient, it is not the special blend to accelerate sales performance and organic growth. Rather, high-performance Best Practices organic growth agencies utilize a value creation process to uncover previously unidentified risk issues and deliver solutions to improve the risk profiles of their clients.
The vast majority of agencies are fighting an uphill battle against commoditization. Commoditization occurs when the consumer perceives little or no distinguishable differences among products, services and resources. When this happens, price becomes the primary differentiator. Picture commoditization as a disease that eats away at the knowledge, wisdom and professionalism of even the most skilled agent or broker. A diagnostic sales process is the best means to win the battle against commoditization.
Cross-sell Strategies—High-performance organic growth agencies utilize disciplined, strategic and results-oriented cross-selling strategies focused on maximizing the lifetime value of their clients. Often, the cross-selling initiatives begin with the identification of enthusiastic and engaged clients who are primed to expand upon their existing relationships.
Prospect Research and Qualification—Most insurance agencies utilize a “hit and run” approach to prospect research and qualification. The process, driven by the producer or telemarketer, lacks creativity, differentiation and impact. Most concerning is the fact that the producers are getting caught in the “commodity trap” as evidenced by new business “hit ratios” well under 40%.
High-performance Best Practices organic growth agencies are disciplined and strategic regarding prospect research. They utilize a referral-based system supported by clients and centers of influence.
Customer Intimacy, Appreciation, Loyalty Benchmarking—My most surprising research finding was that few agencies benchmark customer intimacy, appreciation or loyalty. Business logic suggests that agents and brokers should have a “quality assurance” process (i.e., customer service report card) to measure and benchmark their services. Yet, the vast majority does not.
High-performance Best Practices organic growth agencies have a process in place to benchmark their service and product offerings.
Brand and Brand Management—In simplest terms, an agency’s brand is what others say about it. Brand is another term for the agency’s reputation. High-performance organic growth agencies have a clear understanding of their strengths and unique value proposition. They are valued in the marketplace and distinguished from their competition.
Conclusions
My seven-year research project indicates that organic growth, profitability, and agency value are maximized in an environment of enlightened leaders who create a culture of creativity and innovation. They inspire their staff to “think outside the box” to develop value propositions that differ from their competitors.
The high-performance Best Practices agencies are winning the battle against commoditization as a result of their ability to uncover client issues and deliver cutting edge solutions. They go about their business with a sense of confidence, simplicity, purpose and passion.
Most important, high-performance Best Practices agencies are continually improving their organic growth formula. They effectively utilize the six Best Practices organic growth areas outlined in this article to maximize growth, profitability and agency value.
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