Your Account Rounding is Bad

I’ll admit this is not a friendly way to start a post.  In fact, you are probably much better than this.  In fact, your account rounding is good, but I promise it is not as good as you think.

It does not take long in this industry to understand the importance of account rounding.  You’ve heard the reasons.  1 policy customers retain at least 1 yr.  2 policy customers 2-5 years.  3+ customers retain 5-8 years.  Nothing new here.  Also if you only control one policy another agent controls the other one or two policies, that’s like letting another agency keep one of their hands in your wallet.

There not a best practices handbook that does not address this issue.  Every agency I visit talks about the importance and how they account sell.

I challenge you to verify the truth of this in your agency.  I promise you are not as good as you think.  I have done multiple hands on counts of account rounding in agency after agency and they are always dramatically less than they expect.

How does this happen?  We get lazy.  We write a policy and tell ourselves we will solicit the other later, but we never get around to it.  Also a customer can move one of their policies and we planned on getting it back but we didn’t.

This is definitely a metric that should be revisited annually or it gets flabby.  Call your management system, and get them to help you run the report.  Crack open the file cabinet and pull samples per drawer and count it out.  You will be surprised how accurate this could be.

Once you have your number, put in a system to account round this year.  Increase your percentage by 10 or 20%.  The marketing on this is cheap.  You don’t have to buy leads or worry about cold calls.  These are your people and they probably like you.  Your close rate will be high.  Ask your companies and I bet they will give you money to help this effort.

Have you run the numbers?  Were they better or worse than you thought?  What did you do about it?  How successful were you?

Generating Referrals

If you ask any agent where he gets his business, he will tell you “Referrals”.  This is true, and probably true for most agencies, but do you have any plan around referrals?  Is there anything that you do to increase or even stop referrals?

Referrals are extremely cost-effective forms of advertising.  They are usually free.

Here’s some quick tips around referrals that would be worth experimenting with in your agency:

1.  Ask.  Make sure everyone in your agency asks for referrals on a regular basis.  If this is a problem, create a competitive environment to prime the pump.  Create a contest for the person with the most in a period of time.

2.  Track.  You are probably getting some referrals that are bad.  Track what you are getting and stop the flow from bad sources.

3.  Incentivize customers to give you referrals.  Put customers in a drawing for every referral they give.  Reward customers with referrals such as gift cards.  One cheap reward with a high perceived value is movie tickets.  These are cheap but provide huge value for the customer.  Check with your states on gifting and rebating laws.  Usually as long as you are only paying for the quote and not the business you are fine.

What do you do to generate referrals?  Do you have a plan or just hope they flow?

Outsource Your Agency – Part 2

Capacity and strategy were questions left unanswered in the last post.  Let’s take both and see if it makes sense to outsource some of your service work.

1.  Capacity.  Is there room for staff to grow your book of business?  The magic number here is 700-900 clients per CSR.  Beyond that there is no room to grow new business.  These numbers have been corroborated through various insurance studies.  Some agencies may be able to push into 1000 customer range if their staff is extremely efficient with their work.  Another way to look at it that might be easier is around 1 million in WP per CSR.  Again beyond that there is no new growth.  If you desire growth, then the decision is to outsource or hire more staff.

2.  Strategy.  If you take work away from staff, new business does not automatically happen.  Have you heard of Parkinson’s Law?  It will kick in here.  It says that “Work expands so as to fill the time available for its completion.” The new time will be filled with other activities.  Either things will get slower or new unproductive tasks with take place.  Determine what you want the new time to filled with, and put into place at least 30 days prior to launch.  Your staff will feel overworked but it will create habits and relief will be felt on launch day.

What kind of strategies could be put into place to make up for less service work?

Outsource Your Agency

Many companies offer service centers that will help with routine service.  Is this something you should consider?  Here are a couple of factors that can help determine whether to use one.

1.  Capacity.  If you have capacity in your agency to hit all the goals you have set, then outsourcing service is not advisable.  Why should you pay for something that can already do without incurring any more expense?  Determining capacity could be another topic for another day.

2.  Cost.  Most companies charge a service fee.  Usually it is around 2% of your written premium.  It is charged as a service rather than taken from commission so that you can deduct it as a business expense.  If you have 1 million with a carrier, is $20K cheaper than hiring another staff person?  In most cases, it is; and in reality cost is never the major issue.

3.  Strategy.  If you took a significant amount of service work from your staff, what task would replace the service work.  If there is no plan, then a service center would generate a cost with no benefit.  Can your staff do the new tasks?  Are they willing to give up a portion of the service work?

What other considerations are important?