In my last post, I listed four things smart agency owners need to think about in order not to go backward during hard markets. I hope it provided some impetus for thought and action! In this post, I’d like to foster that with some suggestions on dealing with each of those issues.
For issue number one, there is no better time to develop and implement aggressive marketing efforts! Perhaps you’ve been lax. Forget it and get busy – there is no better time to be looking for customers than when they are looking for alternatives to high prices!
The second issue —poor retention — is a little more difficult. But the best time to be proactively talking to your customers is during a hard market. Perhaps you’ve kept them over the last few years with little effort. But now that they are getting increases, they’re shopping! Get in front of that. Educate them before renewal on what to expect. Talk to them. Tell them you will shop for them. Suggest ways to reduce their costs with coverage, if necessary. Provide solutions in advance of renewal. You may lose some, but you’ll keep a far larger number than if you do nothing!
The commission reduction on non-standard business is difficult to rectify in a hard market. The business is simply going to move back where it belongs. The best strategy here is to focus on retention and service. The next strategy — and this is critically important — is to work on account rounding! If you don’t write every line of business for this type of customer, this is where your marketing effort needs to go first! From there, work on developing a marketing effort to a different niche that is always standard lines. If you work at this, average commission dollars will go up even if commission rates go down.
If you have a small book, or marginal loss ratios, get in front of the problem by talking to the carrier and developing a plan to fix the problem. That may mean account rounding, account moving or it could mean consolidating the book with another carrier before the agency cancellation happens. Again, your best bet is to be proactive!
The final issue is commission cuts. You should complain! Then try to move as much business as possible to carriers who haven’t cut commissions. Try to negotiate a new business incentive to offset (OAA and SIAA does this very aggressively and successfully for members) commission cuts. Make sure you are selling something besides price to your customers and consider carefully whether they need to be in a different tier, company or rating group.
Hard markets don’t automatically mean more money for agencies. Often they mean less. But the owners who avoid or fix these problems we’ve been discussing have the best chance of coming through the hard market successfully. Good luck!