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The PIPELINE

A national monthly newsletter for agency principals dedicated to agency management topic

The Changing Insurance Agency

“I would like to meet you and provide you a quote for your insurance.”

“No, thanks, I have plenty of insurance already.”

“But I may be able to save you money!”

“Well,... O.K. come on in and give me a quote.”

That’s the routine, repeated countless times, using a wide variety of words and phrases, but always with the same result – either rejection or condescending acceptance with the prospect saying (to himself), “Well, as long as it doesn’t cost me a lot of time, what do I have to lose?”

Believe it or not, most prospects have no idea (nor do they care) how much time, effort and cost is associated with you generating a quote. And the closing rates are continuing to decline as more agencies and direct writers enter the fray and seek to draw on the same client base. So producers are spinning their wheels, agencies are spending time and money quoting accounts that are not cemented by strong relationships while carriers are trying to automate the quoting process so that they can control their own underwriting costs.

IF YOU DON’T DEVELOP RELATIONSHIPS BEFORE ACCEPTING A NEW CLIENT YOU WILL LOSE MONEY -- EVEN ON ACCOUNTS YOU WRITE!

I would love to eliminate the words “SALE” and “selling” from the lexicon of insurance agents. If we don’t stop “selling” people insurance we will “sell” ourselves into oblivion. All of our prospects KNOW they need insurance but most buy it begrudgingly, knowing that the only way the insurance company makes money is if the client DOESN’T USE the insurance policy that year. Most clients assume they will be incident-free but buy insurance because they are forced to or because of the dire consequences if an insurable incident does occur.

So we don’t have to SELL them insurance – you needn’t sell something that is required – you just need to SELL them on using you as their agent. Yes, there are some companies and programs that are “different” from others – but, frankly, most generic personal and commercial insurance products are just that – generic – generally alike. And most companies will actually pay claims against them in a reasonable way and time. But in order to get more clients to deal with you as an agent, you must have SOMETHING unique and different about you that influence them to use you as their trusted advisor. That something is TRUST and that trust is reliant on your building a RELATIONSHIP with the client during your time together.

The GREAT insurance businesses of the 21st Century will convert relationships into clients. They will never quote policies for clients or prospects, acknowledging that most good insurance professionals will be able to construct relatively similar insurance programs – the difference will be in the evaluation process and the ‘after-the-policy’ monitoring and maintenance of the client’s Total Cost of Risk.

Most agents, whether they read the rest of this article or not, will think that these words are meaningless and that all the insurance client thinks about is the cost of next year’s premiums. Agents who are not willing to convert from the easy sell (“Let me quote your insurance”) to the Asset Protection Model (“My goal is to protect your assets and lower your Total Cost of Risk.”) will not be able to change their methods of operations and beliefs. Many old-line agents will simply not believe that relationships are more important than sales. Others will not understand HOW to change their organizations. And most will not be willing to learn all of the business models and disciplines required to REALLY help the insurance client. It is very simple to keep grinding up new prospects, getting a small percentage to accept your quotes and writing an even smaller number each year.

A small number of forward-thinking agents, young and mature, in small, medium and large organizations have already seen the ‘handwriting on the wall’. The price sensitive insurance buyer who changes providers as the annual premiums dictate are NOT their prospects. Their prospects are the business owners who understand that they need help with the complexities of regulation, insurance and HR matters that continue to complicate their lives. Most smart business owners understand (and are frightened) that they don’t even know the things that they are not doing that could affect their business success. They seek advisors who can lead them through the myriad of issues that their businesses face that are not related to their own products. They want the advice and, for the most part, they can’t afford to pay for it.

The Asset Protection Model of relationship conversion directs itself to that precise model of client. The goal of the APM is to identify business prospects for whom you can establish so much added value that you become INDISPENSABLE to them (or at least acknowledged as much more valuable than their current agent). The basis of the APM is that, while you are a professional centered around providing the client insurance protection, you must expand to identify and provide other services that enhance and protect the client’s business (and personal) assets.

WHY? You must provide a range of services to enhance a prospect’s Total Asset Protection because insurance agents have become as numerous as flies around a carcass. Most businesses that are large enough to attract the insurance industry can count the insurance solicitations by the dozens each year. If they are small enough that premiums (and commissions) are not attractive enough to solicit them, they experience a virtual drought and cannot entice an insurance provider to protect them (even though their business asset is still the most important thing they own).

The answer for the professional agent of the 21st Century is to convert his sales ability into a relationship building model. We will still solicit prospects according to our skills and knowledge base, but we can expand that knowledge base to attract a much larger venue of prospects. And the target and goal of prospecting is to identify business-owners who are smart enough to understand the difference between quoting insurance premiums and providing value-added protection to them and their businesses.

A few companies have arisen who provide the tools to be used in the relationship building model, three of which are Compliance Check (800-506-4225), Zywave (414-475-1591 www.zywave.com ), and HR That Works (800-234-3304 www.hrthatworks.com ). All three are deep and wide in their products and provide quite different services. All will train the agents and make them more valuable by learning tools to help businesses (of any size) outside of the traditional insurance products. All provide value-added services to the agents’ tool belts that cannot be found at most competing agencies. And all acknowledge that their services are wasted if the agents do not take the time to build relationships with the prospect as the basis of TRUST.

TRUST ....

Tell me – why would an insurance prospect “trust” a new insurance agent (new to the prospect)? Would you trust a stockbroker who solicits you by mail and asks you to invest with him? Would you be ready to turn over your assets to that broker the first time you meet him (or the second or the fifth time you meet) because the broker, himself, has told you that he can do a better job than your current broker? If the broker evaluates the prospect’s portfolio and suggests that he could have achieved a better return with different investment strategies should that prospect consider that sufficient evidence that he moves his assets to the new broker?

I assure you that even I can do a little research and show you how your investments could have earned a much greater return than it did in the last year or two. It’s not that I’m a particularly smart investor. It’s simply that hindsight (in the investment market) is 20/20. I make the same mistakes that most investors do every year. But if I look backwards, it’s no trick to identify the winning investments. Does that mean that I can sell you on using me as your investment strategist simply because I can research history??

In fact, the broker is trying to build a relationship with no tangible evidence that he can do better than the client’s prior broker. However, the more frequent the new broker’s visits, the more chance he has of establishing a budding relationship. He is establishing a level of familiarity that (he hopes) will bloom into a business relationship and friendship. However, without giving the client free advice and tracking the result to show the client what happens (or would have happened if he followed the broker’s advice) the best the client can believe is that the new broker is a nice guy and is more interested in him than his current broker.

Now let’s convert this into an insurance model.

Like the stockbroker, you try to convince prospects that you can do a better job as his agent than his incumbent agent. But you have nothing to show him your qualities except by providing an analysis (and quote) on his insurance program. And you ask the prospect for copies of his current program to analyze !!!! To many business-owners, it seems that you are using his prior agent’s efforts to identify flaws. And we’re back to the 20/20 hindsight, as well. If you didn’t have the prior insurance program to tear apart, would you have created a similar program for the client? Who knows?

The answer is to convert to the APM that neither quotes nor accepts the prospects insurance program during the initial visits as you and the business owner become familiar with each other.

The key to the APM that you clearly state to all prospects in the initial interview is that you can provide him help in Total Asset Protection, not just for his business insurance and that your goal is to limit his Total Cost of Risk for all of his personal and business assets. You tell him that you would love to become his trusted advisor and insurance agent but you won’t write his insurance program until he understands the on-going value that your relationship can bring to him.

Then you go about providing value-added services, at no cost or at a fee, until the client requests you to take over his insurance program as a part of your efforts.

This relationship can take up to two years to mature, but the conversion rate of prospects to clients is over 80% and the retention rate is close to 100% with no chance of other agents breaking your relationship (as long as you continue to be that valuable to the client).

You must have a full range of insurance products available to begin the process. Then you must educate yourself (or let Compliance Check, Zywave or HR That Works provide you with the ancillary services that will provide new value to your relationships). I urge you to contact these firms and gain an understanding of the unique services they can help you provide to your clients and prospects. But don’t bother unless you are prepared to enter the new realm of the APM relationship building and conversion to replace price quoting and insurance sales as the modus operandi for your own company. Call me if you would like assistance establishing the APM for your agency (800-779-2430).