Is Your Independent Agency At Risk?

Risk management begins at home

One of the main things we teach at The Sitkins Producer Training Camp is risk assessment. When you are working with prospects or clients, you should help them assess their risk and develop specific Risk Reduction Plans. It’s all part of our “set offense,” known as The Risk Reduction Approach(TM).

Recently, it struck me that the majority of independent insurance agencies are at risk in their own business because they’re not dealing with-or are unaware of the need for-their own risk reduction plans. We’re not just talking about the normal property and casualty risks inherent in business; we’re talking about strategic and tactical risks.

I’m sure many of you are fans of comedianJeff Foxworthyand his “You Might Bea Redneck If…” jokes. In fact, a few years ago, he inspired me to write, “You might be an average agency if…” for Rough Notes. In this issue, I’m applying the Foxworthy approach to help you assess the risks facing your agency. How many of the following “ifs” do you identify with?

Your agency might be at risk if…

* You are not proactively innovating. If you aren’t proactively innovating /changing the way you do business, you are stagnating. Once you’ve stagnated and your business is based on price-only selling, you’re going backwards but you just don’t know it. Innovation is about getting better all the time, constantly upgrading your business model, and no longer being a traditional insurance agency.

* You still provide quotations to unqualified prospects and have a very low closing ratio (less than 50%). Unqualified prospects are the ones who ask you to give them an apples-toapples quote because they “just want to keep their agent honest.” If that’s the case, you’re wasting your time and your agency’s resources chasing business you have no chance of getting.

* You don’t know your closing ratio. If you’re not tracking the number of quotes you’re giving and the number of sales you’re making, and comparing them among your producers, you’re at risk. There may be a lot of activity going on, but you really don’t know the results unless you know your closing ratio.

* Your prospect pipelines are not overflowing and your producers don’t have walk-away power. If your pipelines aren’t filled to capacity (and beyond), you’re at risk. You’re working on accounts you shouldn’t be working on and your producers aren’t walking away because they don’t have anything else better to do. You simply don’t have enough opportunities.

* Your culture is lacking or nonexistent. You’re at risk if you don’t have a defined culture that spells out the expected, normal behaviors of your organization. You’re even further at risk if your culture isn’t focused on retaining and obtaining ideal clients.

* You are not earning or generating referrals from at least 50% of your clients. This is a serious risk. What does it say about your agency when clients will renew but not refer? It means you’re doing a good enough job to keep them, but not a great enough job that they’re referring prospective clients on a regular basis. If fewer than half of your clients are providing referrals, that is a major red flag that you’re at risk.

* You are not earning and generating introductions from at least 20% of your clients. Although they’re similar to referrals, introductions are even more significant. You’re at risk if you’re not getting at least 20% of your clients to introduce you to potential new clients. The top 20% of your clients should be such raving fans that they are eager to personally introduce you to your next great client, either in person or in writing. If they don’t, you face problems with retention.

* You are not positioned as a trusted advisor. Do your clients consider you part of their inner circle or do they see you as a vendor? If they view you as nothing more than a seller of a price-based commodity, you’re at risk with those clients.

* You are not a favorite among carriers. If your carriers don’t constantly tell you that your submissions are better than those they receive from any other agency, you’re at risk. If your submissions look like everyone else’s, you’re not going to get the best attention from the underwriters and they aren’t going to do the best job for you.

* Your organization does not have a Relentless Preparation attitude. This centers on the belief that every event deserves your very best. When you’re working with a new prospect or giving a presentation for a renewal, are you relentlessly prepared? If so, you have practiced your presentation internally, thoroughly researched the client or prospect and done everything else in your power to be in top form. It’s always a risk to compete against someone who is more prepared than you.

* You don’t have a laser focus on the needs of the top 20% of your clients. Because we know these clients generate 80% of your revenue, losing one of them could be a gamechanging event. By the same token, keeping them and replicating them can also be a game changer. Accordingly, it’s critical to pay close attention to the needs and wants of that top 20%.

* Your producers have fewer than 10 appointments each week with clients, prospects and centers of influence. You’re at risk if your producers have substantially fewer than that (and most of them usually have half that number, at best). It means they’re simply not in the game enough.

* You haven’t formally installed exit barriers with your key clients. How hard would it be for your best clients to jump ship? You’re at risk if you haven’t cultivated deep relationships with your clients and provided the kinds of services that make it extremely difficult for them to leave.

* You renew accounts instead of building relationships. You’re at risk if there is a big event every year known as The Renewal vs. an ongoing focus on continuing relationships. Rather than view accounts in terms of an annual renewal, you should have a multiyear risk reduction plan in place that you can update and reacquaint clients with periodically.

* You don’t have employee retention and attraction systems in place. We all know it’s hard to find great employees, so what are you doing to keep the ones you have? What systems, procedures and incentives do you offer to attract new ones? A study I read recently said that 85% of the employees that had been with the same company for more than five years were directly referred by an existing employee. Therefore, if you’re relying solely on professional headhunters and talent scouts to recruit the best new people, you’re at risk.

* The majority of your clients are part-time. You’re at risk if most of your clients have only some of their coverages with your agency. Our studies continue to show that fewer than 50% of small to mid-sized commercial accounts and 30% of personal lines accounts are full-time. If they have coverages with someone else, there’s a good chance someone will eventually ask to write all of their insurance. Shouldn’t that someone be you?

* You do not purposely manage your brand. We define “brand” as the clear, powerful thoughts you want people to have about your agency. What do people think about your agency, staff and producers? In today’s world, a random brand won’t get your agency very far. Decide exactly what you want your agency’s brand to say about you and your business, or risk the chance that someone else will decide what your brand should be.

* Your producers still sell the “old way.” If your producers are still using the Look, Copy, Quote and Pray approach to sales, they’re in trouble- and so are you. Reviewing a prospect’s policies and coming back with multiple quotes is not only a terribly inefficient way to sell insurance, it does nothing to differentiate your agency from the pack. Being inefficient and coming across like everyone else puts you at risk.

* Everyone is too busy to practice. You’re at risk if you never practice because everyone is always “too busy.” For example, the service reps don’t have time to really study the automation system or gather the ex dates of personal lines accounts, even though both could enhance the agency’s bottom line. Similarly, too-busy producers never take the time to develop a differentiating type of discussion to have with clients and prospects, even at the cost of retaining or obtaining their business. How could it be that the entire team is too busy to get better? Remember, if you don’t get better, you’re at risk.

* You don’t take advantage of natural pipelines. These are the pipelines that an agency’s owners and senior producers naturally develop over the years. They’ve been in business for a long time and they know a lot of people, but typically they don’t want to handle the account! These people represent potential clients who would gladly take a phone call if someone would just make it. The senior producers need to make rain and get some “buckets” (a.k.a. younger producers) underneath them! You’re at risk if you don’t.

* The first question you ask a prospect is, “Tell me about your business. What do you do?” That tells me immediately that you didn’t care enough to do some research about me or my company. You haven’t even looked at my Web site or learned what business we’re in! You’re at risk of losing face-and business- if you don’t make at least a minimal effort to do some background work before contacting a prospect.

* You constantly over-promise and under-deliver. Most producers make far more promises than they can possibly keep. Promise-making and promise-keeping systems must be in place to prevent producers from promising more than they can deliver.

* You have no financial or leadership perpetuation plan in place. This puts your agency at serious risk, in the short term as well as over the long term. Although it’s difficult to address both the financial and leadership sides of perpetuation, you MUST. Unfortunately, most people don’t. As a result, their agency either ceases to exist when they leave or is significantly devalued when it is sold.

The bottom line

The truth is, you are in the risk management business. However, if too many of the examples I’ve cited hit home with you, you are the one at risk! That’s why it’s imperative to start developing a business risk management plan for your own agency. Feel free to use this article’s bullet points as a risk assessment outline for your agency.

Of course, you can choose to do nothing. Just remember that the cost of doing nothing could be millions of dollars in lost value for you and your agency.

As always, it’s your choice!

It’s imperative to start developing a business risk management plan for your own agency

By Sitkins, Roger
    Proquest LLC
    Copyright:     (c) 2012 Rough Notes Co., Inc.
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