Hanging On to Market Share (Sell ‘Em More Stuff)

As a distribution channel, independent agents are doing a fairly good job of holding down the fort.

The Independent Insurance Agents of America recently examined market share among the three channels: direct response, captive agent and independent agent. 1

Independent agents and brokers increased their market share in personal lines consistently in the last few years, the study says. This was driven by gains in personal auto: up 0.8% in 1999, 0.3% in 1998, and 0.4% in 1997. These share gains amount to more than $5 billion in new premium written through the independent agency system.

But some direct-response companies also showed good growth in auto over this same period, the Best data shows, resulting in market share gains of 0.6% in 1999, 0.3% in 1998, and 0.2% in 1997. Direct-response companies grew their auto premium by $2.23 billion in the three-year span.

The gains for both the direct-response writers and the independent agents and brokers came at the expense of the captive agent companies, which lost 2.2% in auto market share over this three-year period.

Feeding off relentless advertising, GEICO, AIG, and Progressive’s direct operations are in high gear. GEICO booked 19% premium growth in 1999; AIG, 30%; and Progressive, 17% (direct and agency business combined). “They have taken this share, however, primarily from the captive agent companies and other direct-response writers,” IIAA emphsized.

In my view, what is important to independent agents looking to grow share isn’t chasing elusive customers. It’s retaining those you have, and selling them more stuff.

Duh, you say. But why don’t independent agents sell more stuff per customer? Who is a more profitable customer—a one-policy customer or a multiple-policy customer? Would you rather have 5,000 customers who buy one policy each, or 1,000 customers who buy five policies each?

By and large, your customers are not aware of all the policies or services you have. They want to be educated about risks they face; they trust you to help them understand what they need. The more policies you sell, the higher your retention—and a 5% increase in customer retention translates into a 50% increase in future profits. E&O exposure is lower as well.

If you’re writing personal lines as an accommodation to your commercial lines customers, convert from an “accommodation” to “profit center.” Consultant Chris Amrhein, the insurance industry’s foremost humorist, actually got serious on this point. “Don’t ignore the obvious,” he said, and that is “50% of your personal lines customers are involved in a position of purchase influence in a business, so you have leads there. But 100% of your commercial lines customers are personal lines leads.”

If rounding accounts isn’t for you, and you’d still like to grow personal lines, consider Option B. Here you understand that some customers just want to buy direct without agent involvement, and you’re going to create a way to get to them—or not lose them if you have ’em already.

I asked a marketing executive at a direct-response company what he would do if he were an independent agent. He replied: “I’d adopt some of the same marketing techniques in my own shop. And I’d quit my [whining].”

Sure, national direct writers have sizable leverage over local agents. They can invest more money in advertising tools, and can buy media more cheaply through plain old clout. “But agents are certainly not helpless in this battle and can employ marketing tactics at a local level effectively,” the marketing executive said. “Direct mail, radio, print and even local cable TV are all tools available to agents who want to grow and are willing to take some risk.”

Independent agents also could set up a separate subsidiary that emulates a direct-response company, marketing to high-risk drivers or those who want to buy direct. I know an agency in Ohio that got up to $500,000 in nonstandard auto premium within two years with a dedicated CSR, combined with a company name not associated with the agency, a toll-free number, and a couple of markets.

Another approach is targeting a specific clientele online, which doesn’t take much effort and can be woven into the agency operation. The YouZoom agent network, where independent agents sell and service personal lines online, is an example.

In its “pump-you-up” research piece, IIAA acknowledges that to be successful over the long haul, independent agents and brokers must mount a “disciplined sales effort at the grassroots level across a broad spectrum of independent agents and brokers.”

The word “discipline” comes from “disciple,” which roughly translates to “teach.” Teaching your customers that you can provide much more for them than one stinkin’ policy is a sure way to grow your agency quicker. Follow the money.

Topics Auto Agencies