The Small Stuff: Grooming Your Small Commercial Book

Scott Franklin, president & CEO of Lanier Upshaw in Lakeland, Florida, has a friend who likens a small business’s insurance needs to a runway.

The friend, a pilot and small business owner, recently told Franklin, “I can only put a few things in the plane right now to get this sucker off the ground. In time I’d like to come back to those things, but right now, we just have to get airborne or we’re not going anywhere.”

Perhaps disappointing words for some agents, but responding was easy for Franklin, who calls small commercial the “bread and butter” of his predominantly property-casualty agency. He was simply honest.

“What I said is, ‘Listen, I don’t want to overwhelm you and make you think I’m trying to sell you a bunch of things that you’re not in the market to buy—I just want you to be aware,’” Franklin recalls. “‘Shame on us if you ever have something happen to you and you weren’t aware of the risk, or the potential for treating that risk.’”

Advising small businesses is a common priority among independent agencies, according to the latest Future One Agency Universe Study, which reports that 80% of independent agencies actively target small businesses in their marketing and prospecting efforts.

What’s so appealing about small commercial lines? “It’s what we really do a great job with and what we really enjoy,” says Jennifer Ciesielski, vice president of Tetrault Insurance Agency, Inc. in New Bedford, Massachusetts. “Our slogan here is ‘We protect you like family.’ We’re a small business, and we love small businesses.”

Small businesses also provide an excellent opportunity to prove your quality, since many are “underserved and overlooked,” says Sean Dunham, vice president, sales and operations at The Reilly Company, a mostly generalist p-c agency headquartered in Leavenworth, Kansas. “Many are insured by captive agents who don’t have sufficient coverage, knowledge and resources to bring the necessary value to the client.”

As direct and captive writers seek new ways to attract small commercial accounts and more options start cropping up for small businesses to get at least their basic insurance needs met via online-only platforms, how can you make sure your agency holds tight to its market share in the small commercial space?

Pick Your Battles

The first step is carefully curating and managing your agency’s small commercial book to ensure it turns a steady profit. Just because an account isn’t very lucrative for your agency doesn’t mean it won’t cost you in terms of time and effort.

“Sometimes we stub our toe on that,” admits John Scirocco, Jr., president & CEO of Scirocco Insurance Group in Hasbrouck Heights, New Jersey. “Take a small construction account—we may issue dozens of certificates, process multiple claims and deal with premium non-payment issues, but only earn $900 in commission.”

“There’s a lot more hand holding and educating involved on smaller accounts,” Franklin agrees. “Sometimes the only difference between a small fleet and a big fleet is how many zeros you’ve got on the number of vehicles—a five-truck fleet can be just as difficult to insure as one that has 50. And if you screw something up, it only takes one situation to create an E&O claim.”

The main issue is that a small business owner tends to wear an assortment of rotating hats. “They’re doing the employment component pieces and the payroll and they’re hands-on involved with whatever product or service they have. Now you add trying to figure out the insurance program that best meets their needs—that takes time and education to walk that client through, give them that peace of mind and make it easy for them,” says Mark Berven, president of Nationwide Property & Casualty.

That’s exactly why Lanier Upshaw staffs its small commercial department with some of the agency’s most experienced salespeople. “That’s not where we put all the green, trainee account managers,” Franklin says. Small commercial staff must “work quickly and know the coverage issues, because oftentimes they’re dealing with people who don’t know insurance. They’ve got to be the experts.”

Before you commit to a small commercial account, make sure it’ll be worth your while—and at the very least, plan how much effort your employees will invest in it to make sure you’re not pouring valuable staff hours into a financial sinkhole.

Weatherby-Eisenrich, Inc., a mostly commercial lines agency headquartered in Andrews, Texas, notes when an account comes in whether it’s “BOP business,” then quotes it with four or five standard carriers. “Once it’s on the books, if it doesn’t generate $5,000 or more in premium, we don’t shop it for renewal,” explains Lloyd Eisenrich, president.

Then, the account “stays right where it’s parked” until it exceeds $5,000 in premium or the client wants to shop, Eisenrich explains. “It’s not cost-effective for us to go out and remarket a small book of business every year. If I lose it, fine. If I don’t, great, it sticks. But that stuff generally sticks pretty well as long as they stay in business.”

Scirocco uses a similar approach for accounts that generate $2,000-3,000 in commission. “We have to think in terms of commission dollars so we can put the right resources into an account,” he explains. If commission falls below that threshold, “they can move on. For the ones that are proverbial bad payers, we just let them go. Thank them for their loyalty, but unfortunately we can’t help them.”

“We’ve had to evolve to and reach a point where we realize there’s a very small percentage of accounts that are just bad pay,” Franklin agrees. “We finally just had to draw the line and say we’re willing to walk away.”

Moving On Up

Once you have a small commercial account in the door, how can you coax them into becoming more lucrative for your agency? The Agency Universe Study divides clients into three categories:

  • Clients who want comprehensive coverage and are willing to pay more to be covered for nearly anything that could happen
  • Clients who want standard, competitively priced insurance that provides coverage typical for an account like theirs
  • Clients who want basic, inexpensive insurance—the minimum necessary

The study reports that across both personal and commercial lines, regardless of account size, about half of all clients fall into the middle category. In small commercial specifically, that leaves about a quarter each in the first and third categories—which means there’s plenty of opportunity for upselling.

Most agents agree that prospects and clients who are only looking for basic, inexpensive insurance aren’t worth your time. “If they’re buying just on price this year, they’ll be gone on price next year,” Dunham says.

Just like in personal lines, where you probably don’t want to compete for the GEICO customer, a price shopper is “not really the customer I want to build a relationship with,” Eisenrich says. “I can’t make any money going after that piece of business. I’ll end up spending $500 to make $100.”

“We try to walk away from the guy who wants something inexpensive,” Scirocco agrees. “We go through this weekly—prospects will say ‘I don’t want,’ ‘I don’t need,’ and we say ‘Fine—go to the other guy.’ If we look at it that way, we may win less, but I’d rather win the right ones.”

Instead, focus on the prospects and clients in the middle category—those that are looking for standard, comprehensive insurance at a competitive price. “I get it—I wouldn’t want to pay any more for insurance than I have to, either,” Franklin says. “But there’s an opportunity to educate there.”

As Franklin’s pilot friend reminded him, gaining trust when a business is still small is vital if you plan to grow your agency’s revenue alongside theirs. “Sometimes it’s just a natural growth, where you start your business and you’re just looking for basic policies,” Ciesielski says. “But as you’re growing, it’s our job to say, ‘Hey, it’s really great that you’re growing so much and doing so well with your business, but you really need to protect your business by thinking about these other types of insurance now.’”

The most common coverages small commercial accounts will request off the bat will probably include a basic business owners policy, commercial auto and maybe some workers comp. Ciesielski and Eisenrich both recommend pushing a commercial umbrella to start—it’s usually not more than $400-500, Eiseinrich says, and “it’s something they may not even be asking about because they don’t know about it,” Ciesielski notes.

Or, try suggesting add-ons or endorsements to what they’re already paying for, which “aren’t going to break the bank, but can make a big difference in the event that there is a loss,” Ciesielski says. “We try to break it down like, ‘OK, for X dollars a month, we’re talking about all this other stuff that would be covered.’”

Dunham says coverages like employment practices liability, cyber liability and directors & officers “are some of the conversations where you see smaller businesses maybe trying to take a pass as a means to cut costs. They’re all entrepreneurs, they’re risk takers by nature, so you really have to dig a little deeper and share some solid examples about why they need it.”

When trying to upsell, Scirocco takes what he calls a conditions-based approach. “If the conditions are right where the client has pain, we want to help them,” he says. “If I can tell them, ‘You need to have a cyber policy for $1,200 because here’s what will happen potentially and here’s how you’re covered potentially’—those are real issues. If they listen, that’s the client we want. We don’t make sales—we provide value.”

Selling Yourself

It’s an important distinction in an age when many small businesses are beginning to look to the internet to fulfill their insurance needs. “I say to my clients, ‘Don’t buy fluff. I can tell you the difference between fluff and reality,’” Scirocco says. “That’s our job. If we don’t do that, what good are we?”

In order to not only earn a small commercial account’s business in the first place but hold on to it in the long run, you need to be able to clearly define your value proposition as an independent agent.

“If you were to ask someone who went on one of those online platforms, ‘Who helps you with your audit? When’s your pre-renewal meeting? Who’s going to go over the claim with you and be your advocate? The last time the agent was onsite, were there any risk management concerns they were able to point out?’ They’d have no answer,” Dunham says. “So you look at that and ask, where’s the value?”

Here are three differentiators you should never fail to highlight:

1) Time. At the very start of any small commercial relationship, “we make sure we relay how much experience we have in the insurance field, and that by working with an independent agent, they gain access to a variety of different carriers that we’re going to review the options with,” Ciesielski says. “Maybe they’re calling two or three companies to get quotes, but with us, they don’t even have to bother going anywhere else because they know we’re doing the job for them.”

“For a small business owner, the most valuable commodity they have is their time,” Berven agrees. “They’re constantly busy with things hitting them from every angle. It’s critical for them to be able to trust that their needs are being taken care of through a relationship-oriented dynamic with someone they know is an expert in their field.”

2) Expertise. Although debate continues to swirl about whether personal lines insurance is on its way to becoming a commodity, “in commercial lines, it’s just not that easy,” Scirocco says. “At our organization, we use the phrase ‘There’s no simple candy store.’ There’s always a story. Maybe it’s a simple pharmacy shop and you think, ‘Nothing to it.’ But did you know the tenants upstairs are cooking? What does that mean? With X insurance company, maybe that makes it ineligible for coverage.”

3) Advocacy. “We make a real diligent effort to intercede for our clients when necessary,” Eisenrich says. “We have a specific process from the time the claim is turned up to following up on it at three different intervals. We insist on clear communication from the carrier, and we proactively reach out to our insureds to make sure that process is moving forward smoothly.”

In the years ahead, Franklin cautions against promoting what you consider a value if it doesn’t actually matter to the customer. “I don’t mind an ATM, something with no person-to-person value, when all I want is money in a hurry,” he points out. “If someone can go online and, with just a handful of questions, be able to provide enough underwriting information for rating platforms to spit out bindable quotes on the spot—people might decide they’re OK with that. It’s a changing world.”

But “one thing an independent agent can do that an online capability can’t is listen,” Berven says. “An agent can understand the needs of that business owner, their specific worries and interests, and then be able to pivot and provide solutions that align with their best interests.”

Jacquelyn Connelly is IA senior editor.

3 Ways to Prospect

1) Target specific industries. Over the course of several decades, Scirocco Insurance Group in Hasbrouck Heights, New Jersey migrated from being a generalist to being “a generalist with focus,” says John Scirocco, Jr., president & CEO. The agency’s producers specialize in industries ranging from medical professionals to landscapers.

“One of our producers developed a unique vertical four years ago because of his passion for camping,” Scirocco says. “Next thing you know, he’s probably the single biggest writer of campgrounds of any agent in the state.”

Similarly, Weatherby-Eisenrich, Inc., headquartered in Andrews, Texas, launches small business marketing campaigns aimed at niche markets. “We’ll give producers an assignment to go work on health and fitness clubs, or go work on small medical,” says Lloyd Eisenrich, president. “We recently went after 60-some church camps in a two-state area.”

2) Get involved locally. Strong community roots are the quickest path to a strong referral base of small businesses that are happy to sing your praises. “We rely very heavily on referral for small business,” Eisenrich says. “They come from all over the place—existing clients, reputation, other agents.”

“It’s a natural connection,” says Mark Berven, president of Nationwide Property & Casualty. “Whether it’s in the local communities through chambers or other business gatherings and community events, there’s a large opportunity to connect locally and to do so through a trusted relationship based upon mutual interests.”

3) Build a strong digital presence. “There’s a whole new age out there that’s so much more technology-savvy than many of us,” says Kellie Kallhoff, vice president, property-casualty at Lanier Upshaw in Lakeland, Florida. “They’re used to going online and getting what they need.”

And if you’re not there, prospects may not be able to find you—especially entrepreneurs in the millennial generation. Tetrault Insurance Agency, Inc. in New Bedford, Massachusetts gets a lot of new business by showing up for insurance-related Google searches, says Jennifer Ciesielski, vice president.

“More and more, digital is a bigger piece of prospecting,” says Scott Franklin, president & CEO of Lanier Upshaw. “You’ve got to be there and be relevant just to have credibility. We’re in that transition right now where OK, we’ve got a presence, we put the information out there, people can look us up and find that we’re viable. But how do we really start conducting e-commerce? Right now, we’re not there yet. But we know we have to be.” —J.C.