Are you proud that your agency represents so many companies? If so, you’re not alone. I’m amazed at the number of carriers the average agency has. But what’s even more amazing is when they figure out how many they have. In reviewing their “insurance company accounts payable,” most agencies are shocked to see how many carriers are listed. Sometimes, when looking at all companies and E&S brokers, it’s in excess of 75.
Often, agencies will take a contract with one company or one E&S lines broker for one piece of business.
We always talk about the 80/20 Rule, but were you aware that it applies to your carriers also? Basically, 80% of your premium volume is written with 20% of the carriers that you represent. Take a look at your own book if you don’t believe me.
Today, more than ever, you need relationships and clout with your carriers. That way, you’re more likely to get their cooperation when you need help with a client who is high-risk or hard to place. Chances are you won’t enjoy that benefit if you’re trying to “spread the wealth.”
First, you’ve got to know your numbers. You may not agree with the 80/20 Rule, but find out if it applies to you. Just look at all the carriers that make up the bottom 80% and ask yourself: “Why do we have this carrier? Who else could take this premium volume? Who could we take this premium volume to, continue to do a great job for the client but, more important, be negotiating better deals because we have the clout to do so,” etc. Currently, there are a few major companies that allow the business that you place with E&S facilities to count towards your premium volume requirements on your contingency income contract because they own the E&S facilities also.
Everyone thinks this is such a great business because 90% of your customers stay with you. As wonderful as that sounds, here’s another area where you have to know your numbers. For example, let’s say that you have 1,000 customers and a 90% retention. Here’s how that would play out over a five-year period.
Basically, in four renewal cycles, you’ve lost one-third of your business! And when you look at it that way, if you’re not growing by 33% every four years, you’re going backwards. So the fact is, 90% retention is terrible.
There are several keys to retaining clients, starting with taking a hard look at writing full-time clients only (for the 10 millionth time). Also, you should have formal relationship management programs in place for your A and B customers and do stewardship reports for them, as well.
GEICO and Progressive each spend $1 billion a year on advertising. When was the last time you watched TV and didn’t see a gecko or Flo?
GEICO’s gimmick has been that customers who spend 15 minutes can save 15% on their insurance. Now Esurance is saying that 15 minutes is too long. They claim they can save you just as much on your insurance in half the time—just 7.5 minutes. You really can’t compete with that (and I hope that you don’t want to) because it’s strictly a commodity-based business. However, you can compete—and you will win—if you decide that you want a relationship-based business and everybody is a VIP.
A couple of questions to ponder:Have you ever been the lowest price and not won the account? Have you ever been a higher price on a renewal but you still kept the account? That should tell you that relationships are important, and it’s not always about price.
Granted, some buyers care only about price. But again, those are the commodity buyers that will leave you for $100 a year. Since you can’t build a career or an agency around them, let them go—you’re not making money on them anyway.
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