Three R’s Provide Success Strategy

No one wants to leave money on the table. So what if a few simple questions could determine—within minutes—whether your agency is maximizing every opportunity?

In the past, an independent agent could easily survive as an order taker and service provider. Business came in the door routinely, premiums rose on a regular basis and customers needed attention only when a claim was filed. But just like the corner store that has to figure out new ways to attract customers when a big box retailer moves into the neighborhood, independent agents have to move beyond taking orders and handling claims paperwork.

Today’s market requires an entirely different skill set. An agency needs to become a top-notch sales organization, reaching out to secure new customers and digging from within to leverage existing accounts. These tactics require a deep understanding of an agency’s current business—and a systematic approach for securing the type of business the agency wants to acquire.

The first step is to think about the philosophy behind the agency. Is the goal rapid, expansive growth or accepting whatever the status quo brings? Is the focus on a single familiar line of coverage or is it expanding to a full portfolio of products that turn the agency into a full-service provider? Concentrating on rounding, retention and referrals—the three R’s—plays a key role in understanding and growing the business agents already have.

Retaining customers already in an agency’s book of business is critical to any growth strategy. If existing customers leave as quickly as new ones come in, it will be difficult for an agency to get ahead. For example, perhaps your agency boasts a 90% retention rate. Sounds good until you consider that a 90% retention rate over a four-year cycle results in losing one third of your customers. Your agency begins with100 customers, renews 90, then 81, then 73 then 66. Now think about agencies that run a solid 85% retention rate. They begin with 100 customers, renew 85, then 72, then 61, then 52—losing almost half their customer base.

An agency that tracks its renewal rate can determine if it is falling short of the national average. Agencies that go further by surveying customers to find out why they are leaving are in a good position to take action that will stop future erosion of the customer base. Sending a letter or phoning a customer four or five times a year outside of the billing cycle builds a connection and makes customers feel that they are receiving individual attention. It also enables an agent to learn about a customer’s frustrations or concerns early in the cycle.

The fastest way to grow a business is to sell more products to the current customer base. That’s true whether the product is candy, shirts or jewelry—and it is true for insurance.

When an agency turns to its own customer base to increase sales, there’s no major expense for identifying new potential purchasers. In addition, there is an established, existing relationship to build on. Yet national statistics indicate only 40 to 50% of customers buy both their home and auto insurance from the same agency.

In fact, anecdotal evidence from those who work with agents to improve sales shows that the number is a much more discouraging—20or 30% at many agencies. When agencies begin to measure the number of policies per customer on an agency-wide basis, the number often hovers around 1.3. Clearly, a ratio much closer to two would indicate the majority of customers are buying multiple policies.

Even if an agency were not interested in growth, ignoring the potential additional dollars from selling more than one type of coverage to each existing customer is not the best business decision. Why? If a customer is buying other insurance products from someone else, the other agency has an edge and could ultimately take away all of the business.

Referrals are the No. 1 source of new business for an agency, yet few agents do anything proactive or systematic to encourage referrals. Many fail to track how a new customer came into contact with them, and therefore are unaware if an existing customer has given a positive referral.

One of the simplest techniques for increasing referrals is to simply ask customers at the end of a satisfactory contact to think about referring their family and friends. Another way is to provide easy-to-distribute items, such as refrigerator magnets, that will make the agency’s phone number handy to find.

Using a combination of the three R’s and measuring results over time can help your agency achieve steady business growth year after year. Of course, no business strategy can guarantee success every time, but in today’s competitive insurance environment, not having a strategy is no way to win the game.

Dan King (dking@travelers.com) is a director of agency development for Travelers Personal Insurance.