About five years ago, every insurance company we represent suddenly got focused on something besides new business flow. They began focusing on something they always knew about. They knew it was important, but seemingly not as important as sales. Then I guess they all went to a seminar, did the math, and discovered how valuable focusing on retention is. Now, I don’t have a single carrier meeting where that number isn’t discussed, in detail.
It’s just as important for agents to focus on and it’s the best way I know of to make a lot of easy money.
Let’s consider an agency with $250,000 of annual commission income, and an industry average retention of 80%. This agency is losing $50,000 of income every year! Just to stay even they must have an incredible new business machine.
What if they could move their retention from 80% to 90%? Obviously, changing this number would increase agency revenue by $25,000 per year, and agency value tremendously.
This was our challenge a year ago with an agency we acquired. We aren’t there yet, but in one year, we’ve gotten to 89%. Here’s how we did it:
We focused on it. That number is reported every month and everyone on our team looks at it. There is an old business saying that, “what gets reported gets done.” It’s true.
We did a coverage review on every customer. This has all kinds of benefits, but it drives retention too.
We shopped every customer’s insurance and we do it every year. Let me ask you, “what the hell good is an independent agent that acts like a captive?” Captives only have one product to offer. A huge part of the IA value proposition is choice. But, if you don’t offer that, you’ve thrown away a competitive advantage.
We quit writing monoline business. This business has the highest acquisition cost, the highest turnover, and the lowest profitability. Why would you do it? And, if you are going to do the second most important thing to drive retention up (cross sell) you need to lock the door on customers first. Don’t write monoline!
We aggressively cross sell. Our agency goal is 2.5 policies per customer. We aren’t there yet, but we measure and report this number every month. Every study since the beginning of time shows that retention goes up when the policy per customer count does.
We increased communication. We contact customers about something every month. We don’t let them forget us. The side benefit is there is a much-improved chance they’ll think of us when they decide they need some other kind of insurance.
What are you doing to drive retention, agency income, and value in your business?