BREAKING FREE FROM UNNECESSARY
REMARKETING—CHAPTER ONE: PERSONAL LINES
Remarketing judiciously rather than automatically
[E]xperiencing the first hard
market in decades … the number one drain on agency personal lines profits … has shifted from
billing-related issues to that of automatically remarketing renewals.
By Cheryl Koch, CPCU, ARM, AAI, ACSR, AFIS, and Mary Belka, CPCU, ARM, ARe, RPLU, CIC
We have long recognized the benefits of learning to remarket renewals judiciously rather than automatically, and encouraged agencies with which we work to monitor and control these activities for the best result. Over nearly two generations, download has become and has remained the norm, incorporating and reinforcing a reactive approach that has essentially replaced proactive, intentional relationship-based renewal handling.
Many agencies typically set increased premium parameters in their agency management systems, creating “tasks” for account managers to review renewals where premiums have increased a particular across-the-board percentage or amount. By the time this exercise begins, the client has already received the “bad” news—a renewal policy with increased premium—usually devoid of advance contact from the agency. This workflow is designed for reactive price-shopping to appease disgruntled clients.
Personal lines in particular is experiencing the first hard market in decades which shows no signs of abating as inflation, losses, supply chain issues, and more create pressure on carriers to increase premiums for the foreseeable future. As a result, the number one drain on agency personal lines profits we are observing in the face of these factors has shifted from billing-related issues to that of automatically remarketing renewals.
There are agencies where virtually every renewal is being remarketed—an unsustainable model. The lost opportunity cost of treating every renewal as new business means these accounts never reach their full profitability potential—they remain in the red in perpetuity. This is especially true for those agencies writing monoline, low revenue volume accounts. Account managers’ size of book handled and quality of service, as well as morale, are adversely affected as well.
Reimagining a world without remarketing personal lines renewals seems impossible in the average agency, where account managers are mired in the remarketing game instead of educating clients about current trends as an alternative strategy to requoting accounts. It begins with seeing download simply as a method of delivering the policy data to the agency—it should be the result of the renewal process, not the beginning.
There are agencies leveraging premium increases and placing more coverage, and experiencing a significant jump in profitability when they work proactively and creatively on their clients’ behalf. This is validating our approach of handling renewals in advance of download; it is less work, cements client relationships, and increases profitability. It’s also more fun and rewarding for your account managers. Hard to believe? Let’s examine how your agency might make that happen. (Warning: Long-established processes can be hard to reverse, but the results are worth it!)
Leadership commitment. This is the top predictor for success of any initiative for change. Agency leaders must be ready to establish parameters and help staff develop skill sets to hold overall remarketing efforts to a dull roar.
Know your book—inside and out. Becoming intentional instead of reactive requires an understanding of your current baseline. You must know where you are to determine where you are going. A relatively simple, objective analysis of your personal lines book of business is the starting point for developing appropriate goals.
- Run a book-of-business report by commission (not premium) of all accounts, from largest to smallest.
- Pull report into Excel into tiers, by commission (e.g., under $250, between $250 and $500, etc.), totaling the amount and number of accounts in each. Tiers can be adjusted up or down, depending upon your book. The goal is to establish a baseline and increase revenue per relationship over time.
- Determine the percentage of total personal lines revenue and number of clients for each tier.
Now you are ready to study the results, make some assumptions, and perhaps continue to drill down by running additional reports to create an accurate understanding of your book.
- Profile of your best clients. The goal is to write more of these and to shift others into higher tiers by up-selling and cross-selling through exposure-based conversations in advance of renewal. This can also become the prototype for your target client, providing producers with specific parameters for writing new business only in the higher tiers.
- Policies per relationship. How many monoline policies do you have? These accounts are largely in the lower tiers and create more work than mid- to high-level accounts, especially if they are non-standard. Can they be rounded or brought closer to target client parameters? If not, can they be sold or non-renewed to create more time to service and develop accounts with the highest potential? Addition by subtraction strategies may need to be employed to clean up your book.
- Limits of liability, deductibles, etc. If auto and/or homeowners limits are too low, it is not possible to round accounts by writing umbrellas. Determine the scope of the project to increase limits in order to write them. Run a report to show low deductibles that could be increased to offset higher premiums. Increasing deductibles is easier than remarketing.
- Additional coverage opportunities. Think flood, earthquake, boat, jewelry, etc. Discussing exposures and options with clients in advance often results in putting more coverage into place, neutralizing the need for remarketing; client expects an increase with increased coverage they receive. Proposing new coverage is a better investment than remarketing existing policies at a lower price.
- Determine your retention rate for the agency and by account manager. A proactive approach increases overall retention. Be sure to account for intentional, short-term downturns in retention, if revamping your book will include intentional attrition.
Carrier pricing. If all carriers are increasing premiums, remarketing is pointless, much like rearranging deck chairs on the Titanic. Hold meaningful discussions with your carriers to determine pricing and coverage trends to prepare your clients for the increases that are predicted to continue for some time.
Most reinsurance treaties renew either January 1 or July 1; if reinsurance premiums increase, client policy increases will follow. The goal is to know as much as possible to educate agency staff and prepare clients for what is to come, not just react when premiums increase.
Proactive messaging to your clients. Get ahead of the increase; once you know what changes are likely to occur, find ways to communicate them to your clients on an ongoing basis. People hate surprises; helping them plan for inevitable price increases after so many years of relatively flat pricing is a critical service you can provide.
If our industry is changing, shouldn’t you be the one to let clients know ahead of their renewal? Becoming a source of information and true partner in advance puts your agency in a more positive light. It opens the door for discussion of options and in some cases increased coverage, rather than just lower pricing.
There are many ways to reach out to clients, including newsletters or periodic notices sent via email, social media, website links, webinars and more.
Revamped renewal process. Begin a proactive approach for renewal where coverage is reviewed and clients are contacted well ahead of download and policy receipt. Best practices include:
- Work proactively from expiration lists 90 to 120 days out instead of waiting to react when download occurs. Initiate frank, exposure-based conversations about market conditions and necessary coverage; providing options is time well-spent. Initiating the process early puts you in better control of the process in case remarketing is needed.
- Personal lines risk management questionnaires sent out by account managers should be built into the process and serve as the basis for discussion regarding exposures. Time spent early to discuss client needs is a more worthy investment than time spent remarketing later.
Scripting and role-playing. Identifying the most common requests and preparing responses that can help your account managers (and producers) to deflect remarketing attempts are crucial. Especially at first, this can be difficult, and you may not see results. Don’t give up! Keep your eye on the prize; even reducing remarketing by 20% to 35% at first will make a huge difference. As account managers see time open up for real servicing, the less shy they will be about deflecting unnecessary remarketing requests. Develop topics for role-play; for instance, responding to those clients who insist it is “your job” to provide lower premium quotes each year. It’s not!
When remarketing makes sense
There always will be accounts that need to be remarketed due to carrier appetite, coverage needs or loss experience, to name a few reasons. However, keeping the number below 10% of all accounts is a good goal. Starting with the mindset that remarketing will be the exception and not the rule helps to turn the tide. Sometimes an agency has written very price-conscious clients over time; this is a book that may not be easy to shift. Determine which accounts are no longer a match—and how you will address them.
The best agencies welcome tough times, and this is their time to shine. This is when clients need you most. Have you prepared for the challenge? If you can shift focus from price and remarketing, you will be able to identify opportunities to improve your overall book of business. We have seen exponential increases in the size of book each account manager can handle effectively, which increases profits, all while improving client experience. There is no downside!
Mary M. Belka is owner and CEO of Eisenhart Consulting Group, Inc., providing management and operations consulting to the insurance industry. She also is an endorsed agency E&O auditor for Swiss Re/Westport. A graduate of the University of Nebraska, Mary holds the CPCU, ARM, ARe, RPLU, CIC, and CPIW designations.
Cheryl Koch is the owner of Agency Management Resource Group, a California firm providing training, education and consulting to producers, account managers and owners of independent agencies. She has a BA in Economics from UCLA and an MBA from Sacramento State University. She has also earned several insurance professional designations: CPCU, CIC, ARM, AAI, AAI-M, API, AIS, AAM, AIM, ARP, AINS, ACSR, AFIS, MLIS.