Re-Inventing Your Insurance Agency for The 21st Century

Well here we are – in a new century and in a new millennium (sort of – it actually begins NEXT year). How many insurance agencies will continue to try to operate 20th Century businesses in the 21st Century? How many more frustrated agents will take the next lucrative offer to meld their agencies into larger organizations?

The insurance agency system has changed dramatically during the 20th Century, and it will change much more dramatically in the 21st Century. The ability of insurance agency owners to convert from insurance salespeople with support staffs into entrepreneurial business owners will dictate whether an independent agency system will exist at the end of the 21st Century.

The conversion from the “journeyman” insurance agent into the insurance business-owner is, by far, the hardest transition ever required of the insurance agency system. Look around you. Agents, large and small, have chosen to sell, merge and associate with others rather than accept the challenges of 21st Century business practices. Those opportunities continue to offer themselves to every agency. The question to ask is not, “Can I make a lot of money by selling?”, but, “Do I have a better reason to sell or to continue my business and internally perpetuate it?”

First, let’s clear up a fallacy — the agency “system” is not a system, at all. It is a homogeneous grouping of insurance professionals who happen to be independent insurance agents. No association or union makes any demands or has any power or influence over these independent insurance agents. They are true capitalists, doing business for their own best interest. Even those agents who claim to be altruistically in the business of serving customers would perform far less service if the commissions and fees for those services were eliminated.

But self-interest is not bad. Unless it is immoral, self-interest is a perfectly acceptable motivation. That is why the “URGE TO MERGE” is an appropriate response for many agents who have no reason to further perpetuate their agencies. The offers are myriad and lucrative. Some are so lucrative that they move into the category of “offers you cannot refuse”. If an agent seeks financial independence and a healthy retirement and has no reasons to internally perpetuate his business, sale or merger must be considered in light of the returns received.

On the other hand, agents who have children or employees who expected to perpetuate the agency should give them the opportunity to continue the business as an independent entity for at least another generation. These agents should avoid the temptation of banks and other ready acquirers in favor of the perpetuation of their businesses as independent entities. They should permit the next generation to also take the risks and the advantages of business ownership.

The worst-case scenario involves current agency owners who are unable to change with the times and the market. Instead of turning over the reins to a younger generation who are more likely to flex with the times, they assume that their own myopic view of the insurance business is accurate – that the business is degenerating and that they are doing the younger generation a favor by selling the business to someone else. That conversion from journeyman to business entrepreneur may better suit the younger generation than it does the existing owners of insurance agencies. Rather than selling out, it may be time to sell down and let the next generation stretch their wings.

The human condition appears to value one’s personal experience much more than experience learned from others. None of us were around at the beginning of the 20th Century to view insurance agencies operating then. History tells us that very little changed in the agency business until the advent of combined insurance policies in the middle of this century, and those changes were insurance changes, not process or market driven changes.

The advent of direct writers and of automation has caused an ever-accelerating change in the agency system during the last fifty years. Yet while agency operations have grown tremendously more complex due to automation and the requirements of the insurance companies, the keys to the changes in our business revolves around speed, efficiency and competitiveness in the marketplace. Many insurance products have become commodities. While they may not be truly understood by the populace using them, products like auto insurance are considered interchangeable by most insureds. The financial institutions, the direct writers, the internet companies and other non-traditional insurance providers are marketing differences to customers that have little to do with the insurance product. No one claims that their auto insurance is better than the next company’s. Instead, they claim to “cut out the middleman” (that’s you) in order to trim insurance costs. Or they claim to be available 24 hours/day for customer service. Or they claim to tell the customer which company has the best price if it is not theirs (that’s the “Miracle on 34th St.” ploy in which Macy’s sends customers to Gimbels and evokes the customers’ good will even more). Or they claim to be everywhere that a customer can be in the event of a loss.

These marketing strategies are all valid, and the independent agencies can use them, as well, if their mindset is changed.

* Are you easy to do business with?

If so, tell your customers and marketplace — no one else will!

If not, RE-INVENT your service strategy to become the easiest business with whom your target customers can do insurance business. This involves thinking “outside the box”. The “box” describes the way your business currently operates. Being easy to do business with implies that the customer can always access a person who can help them solve their immediate problem. The focus is not on what the customer must do in order to accommodate agency procedures, the focus is on satisfying the customer, quickly and efficiently.

* Do you make insurance buying easy?

If so, anyone seeking a quote will have one before they leave your office or before they hang up the phone.

If not, RE-INVENT your marketing process. Would you go to a store (more than once) if you had to wait for help or if you had to come back to get a price on an item? Why would customers come back to an agency if those were the responses when asked for a quote? Face the facts – prospects are interested in competitive pricing until and unless they are provided other benefits of doing business with you. You must address the pricing issue first since that is often the customer’s first priority.

* Do you seek to accomplish your clients’ objectives?

If so, you and your staff are trained to find out what those objectives are before beginning the sales or quote process.

If not, RE-INVENT your sales training to listen to the customers and to ask leading questions to identify the objectives before launching into the sales pitch.

* Do you quote or do you educate?

We already know that most personal and commercial prospects and customers are primarily interested in price, and, unless they are given additional important points to consider, price is all they rely on for their insurance decisions. If you have viable, real benefits to customers doing business with you as an independent agent, you likely have a closing rate above 40%.

If not, RE-INVENT your sales strategies. Create solid, believable benefits statements for every line of insurance that you sell. Once you have assured the prospect that the cost will be imminently competitive, sell benefits until you have at least three benefits that the customer acknowledges would make you the logical choice as his/her agent. Agents who sell benefits will close customers, even if the price is somewhat higher than that of the competition.

* Are you “all things to all people” or do you serve a distinct population and know the profile of your clients?

The days of the generalist are waning fast. Large agencies are establishing Select Accounts Departments to deal with small commercial accounts in a more efficient manner to permit them to become profitable. Small and specialty agencies are actually selling off unprofitable customer blocks to permit them the time to concentrate on the customers who “pay the rent”.

If you already specialize in commercial lines and target significant market segments in personal lines, you find it easier to advertise and market to your target audience because they are homogeneous.

If not, RE-INVENT your organization to cater to the customers who provide your profit, and either reorganize unprofitable departments to become more efficient or eliminate them in favor of profit centers.

The insurance agencies that survive the 21st Century will certainly look different than their 20th Century predecessors. That is neither bad nor good – just different, but they will be led by 21st Century business owners who are more focused on the conduct of the business than on the insurance products themselves. Yes, they will still be professional, knowledgeable insurance agents. But they will also be target marketers, Internet providers, direct marketers and joint-venture capitalists. A minority of existing agency owners will be able to make the transition. The majority will turn their businesses over to a younger generation who will be comfortable with insurance processing and marketing speed and technology that will be expected and demanded from the insurance buying public in the future. Your decision is whether or not you or your successors can operate in the “future-world” of insurance that is quickly approaching us. If not, the decision of perpetuation is already made. If you are willing to re-invent your agency (or permit your next generation to do so), the time is NOW to begin. When you cast your next Strategic Plan, do so from a zero base and “create” the agency you expect will succeed in the next five to ten years.