Before deciding how much you’re going to grow during 2011, take a few minutes to determine how you’re going to stop shrinking. Most agencies I’ve worked with have a “plan” with the companies they represent to grow the new business for the year to come. The problem is they sign that same agreement with EVERY company they represent. The one thing they seem to overlook is the fact that, in order to start growing, you have to stop shrinking.
When most agents are asked why client leave them, the most common response is for “price”. They blame the lizard, caveman, mayhem or Flo as the reason for losing those clients. “How can you compete against millions of dollars of advertising for lower prices?” seems to be the soundtrack of the “what can you do?” shoulder shrug. The truth of the matter is that they are leaving you for value and not price. If you don’t believe me, look at your own lost business.
Take a piece of paper and a ruler and draw some lines - 5 vertical and 21 horizontal. On the top of the paper, make the headings of Client, Pay Type, Limits, Deductible and Mono Line. In the first column, list the last 20 clients that have left your agency. For each client, list either “Y”es of “N”o if they pay by EFT, what the Limits are on their policy, what the Deductible is and whether or not it was the ONLY policy you wrote for that client. Once you’ve completed that, let’s talk about “price”.
When you’ve completed the list, you’ll notice is that there are a number of similarities for each client that’s left your agency. Most don’t pay by EFT, have State minimum Limits with low Deductibles and most, if not all, are Mono-line clients. Each of these elements affects price and therefore, retention. Even worse than seeing those clients having left you is the fact that you probably have either just written or are in the process of writing new clients with the same attributes. Welcome to the revolving door of retention.
Having spent some time looking in the rearview mirror, let’s take a few minutes focusing on the road ahead and take some proactive steps to minimize lost clients. Each time you interact with a client, you can systematically and positively affect your agency’s retention by paying attention to the four common characteristics found in clients that have left you
Pay Type – in an economy where everyone is closely watching every monthly expense, if your clients are not paying by EFT or “in full”, you are sending them a monthly reminder of how much they are paying for a “service” they rarely understand and honestly wish they could do without. Picture them sitting at the kitchen table, going through today’s stack of bills with the TV providing background noise and “Flo” comes on sharing how they can “name their own price” for insurance. It just became, “all about price”
State Minimum Limits – when most clients are asked what coverage they have, they respond with one of two disturbing answers. Some will say they have the “minimum requirements” their State allows while others will respond they have “full coverage” (any E&O lawyers out there?). Both of these responses highlight the fact that your single greatest competitor is your clients’ ignorance as to what you sold them. They view insurance protection as a commodity and whoever can sell them the cheapest product to keep the DMV and / or the bank satisfied will get their insurance dollar
Low Deductibles – did you ever wonder how a company can save someone hundreds of dollars in just a few minutes? Think of the affect that lowering Limits while, at the same time, raising Deductibles would have on the “price” of the policy. If you haven’t done your due diligence when it comes to educating your clients as to what affect changes to these important components of their policy will mean in the case of an accident, they will be guided by saving a few dollars each month and not the catastrophic affect these changes could have on their financial future
Mono-line Accounts – if a client only has a portion of their insurance needs with your agency, you are NOT their agent, just someone who sold them a cheap policy. Most agencies I’ve worked with have less than 40% of their clients with more than one line of business in their agency – and that’s the “glass half full” perspective. If you think about it, more than half of all your customers do business with your competitors! And we still refer to this as a “relationship” business?
How can we be serious about “growing” our agencies when we haven’t taken a systematic approach to the “shrinking” effect that we are promoting – or at least ignoring – everyday? Keep in mind that an agency with 1000 clients and an 85% retention that wants to grow 10% in 2011, first has to replace the 150 clients that they will lose in the next 12 months. What if you could have a system in place to reduce the number of lost clients so the 1100 clients you want to have next December was from a “net new” versus a “shrinkage swap”?
Rather than just having an “agency management system” that just counts revenue earned and lost, invest in a “system to manage your agency” and make a resolution to grow your agency in 2011.
2011 Planning - Growth Starts With Improved Retention
Moderators: Josh, independent guy
Re: 2011 Planning - Growth Starts With Improved Retention
I agree completely. If you can increase your retention, your income grows. An agency with $500K in commissions coming in will increase their income by $50K if they improve their retention by 10 points. People are generally looking for a reason to stay with you, not leave. So, give them service. Make it a point to have your office contact your clients on a regular basis. Everyone wants to feel wanted. Sell service and give it to them. The average retention of a one policy household is 7 months. If you add a second line, it goes up to 18 months. If you add Life, it goes to 5 years. If somebody bought from you once, odds are they will buy from you again if you give them value. Look at your agency, make a plan and stick to it. If your staff will not go along with your plan, get rid of them and get new staff. We let go 2 people last year who had been with us 14 years because they would not go along with the program. Our retention numbers skyrocketed. No only did I lower payroll, I increased income and lowered the tension in my office. I was able to get rid of the recession one year earlier than I expected. I just wish I had done it sooner.