Category Archives: agency

10.18.18
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Rate increases; the most debilitating piece of the personal insurance puzzle

Incomplete draft from March 15, 2015.  I could write this post, with very little variation, this week as well. That is a massive failure.  Adding any more to it would be a waste of time.

 

The setting; a longtime customer is hit with double-digit rate increases two years in a row.  First year can be absorbed but by the second they have had enough.  The end result; YOU keep the customer.  That is the goal right?  Find a group of people who trust you and keep their business with you as long as possible.  What happens?  His $5500 premium drops to $4200.  Yes, scary.  In that he decides to save some money and drops an umbrella.  We also move a child onto their own.  So where is the fail?

Well, he now is not a fan of the former company because he feels mistreated.   The former company loses him and also loses his sons household.  They lost the other son two years ago.  So now you are down three households.  Call it six policies but it is really nine.  Fortunately, you only cost me one household I managed to keep the other two.

But Billy, you lowered the premium they are paying didn’t you lose money?  You can make a case I did in the short term but did I really  I didn’t have to go find a new customer which is good.  I stood tall on the promise of taking care of the people who trust me which is good as well. With some technology that is not quite here yet the perceived loss will be even less.  But where does it start?

Thought 1; It starts with complete actuarial assessments.  Someone in their big home office made some mistakes.  Like the rest of the industry, they think most customers are dumb and lazy and treat them as such.  They are most certainly not and buying patterns have changed.  They think that customer needs them because their product is good.  It’s not, you are very close to being a commodity.  Most things you market are never used by a customer anyhow.  Remember, if they use that new add-on they don’t need they’ll likely be penalized. Maybe it is because they are so focused on the short-term and operate in a “silo”   I think this may be it.  See the underwriters and actuaries apparently are not in communication with the marketers.  They also are likely not likely listening to the actual people bringing them the business.  

10.17.18
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Time for an annual review

Cleaning out some drafts I apparently never published, the paragraphs below(italics) were from February 2015.  Updates and comments in regular type.

Reviewing your insurance could be the most critical piece of personal finance.  Until the process can be automated it is on you and me to do it.  In this case, since it is just my insurance it is all on me.  I first wrote about this over five years ago.  If you searched the word “review”‘ on this site you would get several different takes.  Mostly coming from a variety of things that happened.  Here is a fresher look since my policies just renewed.  Yes, it actually happened just shy of three weeks ago and yes the paperwork has been on my desk since late December.

Why?  Well, the first thing you and I do is look at rates.  The home rate was about even and the auto rate went down.  Immediately I lost all urgency.  I also know that between my wife and I there are a handful of tickets and accidents that, like it or not, are still currently relevant to the rate.  You have to look at your rates.  PERIOD.  No, this does not mean to only shop on price, it just means you have to look at your price.  This is normal human behavior. And, like it or not, you have been conditioned by the industry to this.  BUT,  behind the scenes underwriting is tougher now than at any point during my 15+ years doing this.  We have begun to advise not canceling a lot of new property policies until we know any unplanned inspections have been completed.  Oh, and remember,  auto and home insurance + the U.S. consumer = commodities colliding.

Moving along to some detail;

AUTO:

  • cover the basics; name, address, drivers, etc. So disappointing that so much of this can be automated and pre-filled yet common apps fill it in an insurance quoting sites do not. This is basic stuff and the compounding time is huge.
  • Check the discounts, everything there that you thought would be? Tricky, tricky thing.  Discounts are not what they once were.  You are being “rated” more ways than you or I can count. Remember, asking is often the surest way to getting but, sadly, even if you get it, you may be disappointed.
  • Has your use of the vehicle(s) changed?  Fewer miles typically means lower rates. Telematics will replace this….but not until companies understand how to apply telematics.  Either way, mileage questions border on irrelevant.
  • Remember, a multi-policy discount can be substantial.  likely need to move both plans if shopping.  This may be the biggest flaw in the entire price shopping landscape.  Not quite fraud but certainly some ethical implications.  Multi-policy discounts are potential ENORMOUS. Not disclosing this to a homeowner who is doing an auto quote is a mistake.

HOME;

  • An escrow account is wonderfully convenient and very dangerous to your wallet.  Leaving just about any piece of your financial world unchecked is a bad idea
  • The compound effect is real and can have a profound impact on home insurance.  Sure, your coverage went up by a small percent this year but when it is 3-5 years later those percentage increases are magnified.  Pro-tip, many homeowners get a discount for something called “inflation guard” or similar.  Essentially, if you let us increase your coverage automatically we’ll “thank you” with a discount.  This often goes unnoticed but is important.
  • Where is your company flexible?  Some are with other structures.  Some with personal property.  Most aren’t with the main dwelling coverage.  Untapped but large opportunity for improvement here.  Not a full-on customization of a policy but certainly room here.
  • Fact is you are getting all sorts of coverage that look good on paper but really do not do much.  it is what it is.  Often said to older customers when comparing policies “Remember, there was likely nothing wrong with your home insurance from 20 years ago.  All these extras look nice but aren’t much….”  Google the insurance silos and this is another example of them not talking.  Lemonade did some funny writing on this as well.  This piece of coverage is overdue for an (r)evolution.

 

Your own diligence is huge.  Always has been likely always will be

Finding clever tools to help evaluate the replacement cost of your dwelling and your personal property is huge. This is a whole other topic and is a mess right now.  Lots of room here as well.  Don’t believe me?  Go look in your area at the price to BUY a brand new home.  Then realize that every property insurance company has a different version/idea of what that will cost to rebuild.  Many, or most of, will be laughed at by the builder.

 

 

10.16.18
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Just keep in touch

In the last week, a customer left, no news there, but I have donated to a fundraiser they did and do sort of know them. Yesterday, another customer came in with a gift for me and one of our team.  Actually very tasty olive oil.  The first one checks more “boxes” that most companies look for and spent at least twice as much with us.  The second spends half the amount of money and doesn’t “fit” common profiles of what a company wants.  Below was written May 2014 and has only been updated thanks to Grammarly.

Really, everything a company or a salesperson does seems to be geared towards a sale.  So many places online pitch social media success or “how to drive business  with social…”  Why must everything be about growing your business?  How about strengthening the business?  How about increasing profits?  How about simply using your strengths?  Use social to do all the things that your massive competitors cannot do?  How about realizing that before you spend money to advertise on social or run a contest or promote a post that there are a dozen or so free things that you can do that many of your larger counterparts cannot do.

So I come at this from the side of a developing insurance brokerage.  We tend to work with a pretty select clientele.  There is no advertising done.  So some thoughts;

  1. Before you spend any money, take some time and effort to get to know the people you already have in place.  Seriously, before you head out and get more customers or spend money solidify what you have in place.  Have you LinkedIn with everyone?  Have you shared a Facebook Page with them?  Looked for them on Twitter?
  2. How about recommendations?  Both LinkedIn and Facebook provide excellent opportunities for all these people you already know to say(type) nice things about you.  Just ask.  Start with the ones you think you know best.  While you are at it go and recommend the places you know and the people you have worked with.
  3. How about charity?  In my world, I doubt Geico will ever donate to a local charity and seriously why would your business simply donate to any charity or take out an advertisement in some sort of program just for the heck of it.  Support those that support you.
  4. We know large companies are very good at spamming.  In fairness, small companies can be as well.  Try and ignore the urge.  Seriously, double down on your efforts to keep up with existing customers.
  5. Do the things they do not or cannot; share the posts your friends and customers put up.
  6. Can your large counterparts refer their own customers to each other? Yes, Do they? NO, You can do this.  Connect the web of people you have around you and try and strengthen the weak ties.
  7. Instead of talking about rates be a resource.  Help make logical decisions,  Make an effort to bring them business instead of just taking their money
  8. Cracks me up when I see some sort of “canned” blog article appear on various sites.  I am also thoroughly amused by useless articles on Yahoo Finance and other sites.  Its like they have ten or so articles and simply make an effort to put out useless tips once a week.

Just embrace the fact that you are small and enjoy the heck out of it.  Why wouldn’t you?

09.25.18
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4 updates in 1

Circa October 2010, none of these really need/deserve a full reboot and it looks like I made slight updates in May 2015

Post 1     Post 2   Post 3   Post 4

First, let us take a moment to thank Grammarly.  Like you, I’m busy and miss things.  Old posts had lots of silly, mostly lazy, mistakes.

Your updated disclaimer; I value time more than I did in October 2010 and, as my available time seems to diminish and priorities shift, even more than in May of 2015.  What does this mean?  Well, I am not sure that I held back then and the only stuff I hold back now is proprietary stuff.  Even that is shared with certain audiences.

So you have your “here we go” and a “disclaimer” but what about the “Why I write?”  Still for clarity.  Still to empty the brain that is even more full today than it was.  The ideas are better, The actions are more.  The industry is changing, slower than I thought but still in the right direction.  And, I intend to be at the center of change.

So the scary one for me, and here comes the enlightened self-interest post and the “good selfish” one as well, is post 4.  Yes, that one is still sadly true.  How is it possible that others are not catching up to what I have been doing and advocating for 8+ years?  What gets a bit worse is watching people, now all over social, use silly absolute type statements that cannot be true.

Seriously!!!  What the F is “right coverage”  or “properly insured” 

NONE OF US CAN SOLVE EVERYTHING AND ALL OF US ARE AT THE MERCY OF THE CORPORATIONS WE PAY FOR INSURANCE.  PERIOD.

Consider starting high and with rare exception walking a little backward.

You better have some non-negotiable coverage in there as well.

Remember, NONE OF US can predict the future let alone a customers. Might as well buy a lotto ticket….but when it comes to insurance, fill as many logical holes as you can and accept that the companies do not care.

DO NOT spend someone else’s money for them.  Seriously, do you honestly think you know what is best for everyone you work with?  Are you seriusly still using some sort of antiquated ideas based on “assets”?

Do better.  Always.  Save your filters for Instagram

09.20.18
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What you can do that they can’t

Apparently, I forgot to hit publish in September 2013

 

Enough already, so sad that industry publications continue to write articles about direct writers (state farm, allstate, geico, liberty mutual, etc.) and how the independent agents are competing against them.  Are you really?  Maybe it is time for a solid look in the mirror.  While you are at it maybe you look at your business plan as well.

Some things to consider;

1. Do you really want their customers?  I like leftovers but my wife is a great chef.  Her leftovers are the only one’s I eat, I’m not interested in anyone else’s.  The lesson, focus on what you want instead of what they do not want.

2. Let’s face it, most companies want the same preferred business; great credit, own a home, have a college degree, married.  Do you?  Funny thing, in my experience, I do not see this very often among the Geico policies I replace.  How about you?

3.  Do any of your carriers not have a top notch call center?  Don’t you have to have one if you want to be in business today?   Thing is just because you advertise it doesn’t mean it is any better than a company that does not advertise it.

4. If you have an agency management system you have all sorts of ways to automate your follow up with current customers and prospects.  Thing is you can time it up so you regularly reach them with VALUABLE information.  Please let me know the last time a valuable piece of direct mail came from a direct writer….Yup, me neither.  I think you might see a narwahl first 🙂

5. When was the last time you went shopping and the only thing on your mind was price?  Go look in your kitchen, let me know how many store brands there are versus big companies.  But that is not the real comparison see most of those store brands are made by the big companies.  Now look again, do you have any of the real cheap cans of vegetables?  Boxed goods?  Odds are the customers you want don’t have them either.  So why are you still worried about the price?

6. LOYALTY is most often reserved for PEOPLE, not brands or companies.  How many people know their call center rep?

7. Based on my results and likely yours, you can get competitive rates for 8 out of 10 people you talk to.  Let’s be conservative and drop that to 7 out of 10.  7 out of 10.  There is no mathematical way that if you only have one company you can duplicate that result.  So why spend the time on the 2-3 people that you cannot get a competitive rate for?    *See number 1 ” do you know who you want”

8. Back to loyalty for a moment.  You’ve built a business but have you built relationships?  We are in a long term business, the profit from any household/customer/client/business rarely comes in the first year.  How are you keeping them around?  This is differentiating yourself from those companies you are supposedly in competition against.  Heck it is also solidifying your position among any of the other local insurance options.

Bottom line, BUILD YOUR BUSINESS.  It will build faster if you focus on what  you can control.

05.05.16
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Insurance and Time math…again

So I get a call from someone at a fairly large, established agency.  Had a few questions, was trying to “help” someone out.  Nice enough, but not necessary.  I appreciate the effort, I really do.

About two hours later I was on the phone with a new friend(some say client/customer) and was binding their policies.  Could be coincidence that this person was with the same agency that the other agent worked at…or maybe it isn’t.  Lets dive a little deeper;

I am all for helping people and sharing information and ideas.  Honestly not sure that I ever declined the opportunity to help and tend to be proactive with ideas and information.  But in this case, the deal was dead on arrival and likely represented zero revenue.  It also cost the ultimate and only equalizer, time.

Now the other one.  I was actually helping a friend out with this one as well, see I help.  In this case there were five or so policies and my help was needed with two so the other person can do the other three.  No problem.  Everyone wins, especially the new friend who now has two professionals working with them and a disgustingly large savings and better policies.

So if you are keeping score; another agent needed help and now we are both taking a nice package from a much larger agency.  The new friend(customer) was cool as can be but couldn’t understand why his agency of 10+ years hadn’t done this.  He didn’t need the full explanation but here goes;

Flight Control: ” Maverick you’re at 3/4 of a mile. Call the ball”   

Maverick: “Roger, Maverick has the ball.”

Great movie, great scene and for some reason it came to mind when writing this.  Why does it matter?  Because Maverick saw the ball; he saw the light which showed the clearest path to land the plane.   Most agents/agencies are distracted by so much nonsense and therefore overlook the obvious, easy paths to a “sale.”  They also seem to overlook how awesome retaining a customer is for the bottom line.

The agency that gave me this business, let’s be clear they let it go, has at least as many markets for this business as I do and likely has 50% more.  But they let it go.  Clean records, pay in full, seems nice, clean buildings, etc.  Everything you want.  Baffled.

Now some math, rounding the numbers to semi protect things;

Agent A had this package at $5000 and was earning 15%(conservative) commission so; $750.  Nice.

Agent B +C now have the package with more appropriate and improved coverage for $3500. 15% is now; $525

Now lets dive deeper; this “lead” cost neither of us anything.  Based on his past behavior he’ll likely stick around for a while.  Also, had Agent A simply been a bit proactive this person would have likely been thrilled to have a new premium of say $4500.  So you would have “lost” $75.  Not really.  You would have made a human being/paying customer happy and likely kept his revenue for several more years.   Also, if you had any sort of process in place to manage data the transaction can be done in less than 30 minutes.

To make it worse, I put my piece with a market you also have access to.  Sad.

But hey, I see your advertising all around.  You’ve been in business a long time, you have some sort of referral program, you “use” social media, etc.

But you lost sight of the ball……thank you.

P.S. The American public needs you to do better.

 

02.03.16
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When the system breaks

I lose some sleep and wake up thinking about yesterday’s “loss.”  Not really a loss more like a time where everything seems to match up but it just doesn’t.  Everything is there;

  • was referred by a trusted person(is there any better way)
  • has been with me a few years(yup, 98+% stay)
  • had actually met in person(shocking but happens)
  • helped with a non-insurance thing(helped get one a job)

So you go into the renewal time ready to follow the plan and this time it doesn’t work.  Factually the overall plan always works.  But, within that plan, sometimes the sub-plan doesn’t get the expected result.  Take the other set of circumstances;

  • two people in a relationship(fortunately insurance is ahead of the rest of the country)
  • above average credit(yup, like it or not insurance scores work)
  • home owner(they better rethink this one soon)
  • college degree(not as valuable as you think)

Feeling good at this point but then the bad side of the Insurance industry steps in.  One driver gets a ticket for using his cellphone.  No big deal right?  WRONG  Fortunately the current rate is still competitive in the market.

Quick aside; the sooner we stop punishing people for things that are more driven by profit the  better.  Some companies have wised up and in many cases look at DWI/DUI differently.  Cell phone use is in a similar category.  Good people make mistakes.  We have an imperfect “justice” system. Act accordingly.

 So you look at putting the home and auto with the same company, this has not been possible yet,  and you think;

Life might be slightly easier if you couldn’t give a multi-policy discount

But that is not the case so we trudge forward and the news gets worse.  You are in a pretty good spot but then you remember the small claim last year.  By small I mean a payout of $429.  And in steps the flawed, old, non customer-centric philosophy of throwing away every other rating variable because somebody used their insurance.  Flag on the play, I am calling a foul or honestly just saying BullS*&$ .   You wonder why so many new “tech” companies are coming into “your” space.  You wonder why you have to(really choose to) spend so much money on advertising to get new customers.

It is because you are not treating your current ones very good!!!!

Enough already.  I am moving forward, my model works and soon enough this model will solve this nonsense as well.  Honestly, waiting for Insurance companies to do it is a colossal waste of time.

Moving forward.

01.08.16
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Things for Insurance agents to consider this year….or any year

1. If you work as part of a larger agency; Are you builiding your business or someone elses?
2. What is really a “fair” split on commissions?
3. Why am I more focused on buying leads instead of cultivating referrals?
4. What is the household and PIF growth I am looking for this year?
5. Would you settle for only one option anywhere else in your life?  Than why are you only working with one company?
6. What is the last marketing book I read?
7. Am I regularly reading about marketing concepts or insurance marketing concepts?
8. Are you a part of someone else’s perpetuation plan or do you have your own?
9. How are you dealing with the changing consumer?
10.  The agent/broker has lots of control they are not using.  What about you?
11. Do you still believe in rate increases?  Are they really “a necessary evil”  or part of the business….
12.Are you taking advice and listening to people who have done things before or just people who write/talk about it?
13. If you are paying for some sort of label/qualfication is it really valid?  Was it earned?
14. Why are you not averaging at least half if not one referral from every household you work with?
15. Issuing an insurance policy(ies) is not enough.  What else are you doing for your customer?
Will you be surfing the wave of change that has started or being washed away by it?
12.28.15
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Maybe the insurance industry is just a reflection of society

Reality is this; insurance companies are run by other members of our human species.  They are also influenced by their surroundings both human and inanimate.  They are influenced by many of the same ideals, both positive and negative as the rest of us.  There is a lot of talk about “disruption,” #insurtech, #fintech, and #bigdata.  The industry is “ripe” for change, blah, blah, blah.

Yes I have many of my own thoughts, heck it’s my blog so of course they are my thoughts.  This dawned on me the other day;

Maybe the insurance industry is just a reflection of society.  But how?  In what way(s)?

So it came to me right in the midst of the holiday season.  Many of us buy new gifts for loved ones.  Many households, especially those of us with children, are likely experiencing an overload of toys.  Some of us now have items we don’t need, didn’t ask for and likely don’t want. BUT, I am hopeful we appreciate the effort.

I’m hopeful that many of us still appreciate what we have and don’t simply throw away what we have to replace it with the new and shiny.  

Than again, we will still have building after building of storage units for all the “stuff” we cannot bring ourselves to throw away or sell.  *Not sure where this fits in, are we all, on some level ,hoarders?  Are we so appreciative of “things” that we cannot throw them away?

But how does this fit the industry?

The average retention rate of a company and even brokerages/agencies is not talked about often enough.  When it is talked about, it seems like a “white flag” has already been waived and that they simply accept the fact that they will let customers go

**This is important, whether you are a company, agent or broker you let people leave more than they actually leave you****

WHY?

No idea really, the math and every basic human as well as business idea/philosophy tends to go against this.  But this is where I am beginning to think that the cause is much deeper than business and math.  Maybe it is deeply rooted in the subconscious.  Maybe it is tied deeply with your personal characteristics and how you are influenced by society.

Let’s face it, most of us ignore the ideas of repurpose, recycling, repairing etc.  Many of these people also simply buy new since it is convenient.  Maybe it is a lack of appreciation for what they have already(think profitable, blindly loyal customers).  But when it comes to insurance this attitude is very, very expensive.  Think SIX BILLION + in advertising expenses instead of less than a billion(my guesstimate) in retention expenses.

How do you/we break the cycle?  At what point will a company “stop the madness” so to speak and start appreciating what they have?  The practical examples are readily available; the older couch goes from the main living room to the play room.  The used car goes from you to the teenager.  We re-use some paint from one room in another.  Leftovers should still taste good the next day or beyond.

Back to the customer; you are hired this year and if you are lean enough you turn a profit this year.  If it takes longer than that, all the more incentive to keep them longer.  But how do we keep them?  If you have a system that automates most task, this could be fairly easy but;

It starts with your underlying principals and philosophy

If you appreciate what you have and show it appreciation it will appreciate you back(stay longer!)

If you own a car and want it to last you’ll change the oil.  It doesn’t mean the car has any less value.  If anything, changing the oil(investing a little into an asset) makes the asset worth more since you can keep it longer and hopefully avoid costly repairs.  Pardon comparing a human to a car but the analogy fits.  Keeping a customer longer does not ensure that they’ll be profitable but you’ll have no chance at profitability if you let them leave.

The big wave is already happening in insurance.  But maybe, actually definitely, those that can profit most from it will likely need to be accepting of a bit of an attitude adjustment.  I’ve written on it before, let’s look at companies like Terracycle.  Let’s look at Zappos.  Heck look at any of your local businesses who you are loyal to.  Now look at your insurance company/broker.  Same feelings?

As much as new technology is needed, technology will not solve the underlying societal problems that have infiltrated insurance thinking.

12.28.15
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Insurance Agency Math

Let’s say it costs less than $20 to acquire a customer(it should)  and most times can just be measured as a fraction of fixed operating costs since there is no official advertising expense?  Is this really possible?  Yes,yes and yes!!!

Even if we broke down all your fixed costs, which are hopefully almost ” to the bone” and put some slight variables in you are hopefully at a very, very manageable daily cost.

Is being hired by one new household per day unreasonable?  NO NO NO.  If it is, time to change business.

But what about retention?  I think the industry accepted amount of the high 80’s, maybe topping out at 92% is PATHETIC.  Think about it, in any sales/business article I have ever read on the topic the prevailing wisdom is that it costs more to acquire new customers.  Sure someone could disagree but I don’t.  There is also the overriding human piece of it that does not seem to have a big role in the life of an insurance agent.  So let’s do some math;

The average gross commission is 15% with the average premium, lets be conservative and say $2000 per year.  So the gross revenue per account is $300.

Why can we lower rates? **This could be a post by itself but here is the short answer.   Well because $300  is better than $0.  $285 is way better as well.  Lets say we reduced the rate by $100 annual.  Is that really a marketing expense of $15?  Who cares.  We really have two years with them and lots of unmeasurable potential so why wouldn’t you want to keep them.

I HAVE NO IDEA.  Every other industry seems to be focused on getting and keeping customers.  Not as much in insurance.

Let’s put another way, I had heard and then read about what an agency should expect as far as referrals.  This was from one seemingly reputable place and the other was from an “iffy” consultant.  None could really show where their numbers came from except by saying they did surveys of agencies.  Many of them were talking about the amount of referrals you should be receiving per household.  It was said that the very best of them were receiving 1 referral per 50 households.

I THINK THIS IS ABSOLUTELY INSANE!!!!!

How is it possible that everyone you work with does not want to refer you business?  Now wanting to refer other people to you and actually referring them are two different things.  That being said, I am still baffled.  You provide a good service, follow a process, create some rapport, etc and yet you still only see one referral per fifty households?  Some, most actually, were even worse.

**Much bigger issues surrounding advertising, marketing expenses, lean agency, etc.  Save this for some other posts**

Take this as an alternate scenario;  You have 100 households.  Hopefully you are striving to keep 98 of them, not some week effort of 92 or less that the industry seems to think is acceptable.  Now, let’s say you average a 1/2 of a referral per household.  So you get 50 referrals from them which is WONDERFUL.  Now, with the right mix of companies, and being conservative,  7 out of 10 should be what you  are able to “close” as new business.  so net 35 new household.  Minus the two that left for whatever reason and you increased your households by 33.   This is wonderful!!!  Oh and it is also extremely realistic.

**start of what could be a much bigger post