Business as usual won’t work in a hard market

Four steps to help your agency come out on top

By Paul James, National Sales Leader, VP Personal Lines, February 6, 2023. This article was originally published in Insurance Journal.  

Prices are increasing. Customers are at risk of being underinsured. They have questions. And your phone is starting to ring more.

Many agents were already struggling with staffing post-pandemic. But with historically higher renewal increases on the horizon, many agency owners will find themselves facing higher call volumes they’re not ready – or able – to staff for. With the best of intentions, teams will scramble to retain as many customers as possible by re-marketing to save a few dollars.
But that’s the opposite of what you should be doing now. Why?

This approach inherently means you’re being reactive to the loudest customers – and not spending your time proactively recognizing your most valuable clients who are your agency’s lifeblood. Many agents tell me they speak to their customers all the time. But when I ask them what about, it’s usually when customers call regarding a bill, a policy change, or a claim. What they overlook is that these calls are – at their core – negative. Our customers don’t wake up and get excited to call their insurance agent. They call when there’s a problem. And just solving a problem isn’t enough to build a deep customer relationship – not without proactive, positive touch points built in.

While some agents may have gotten away with a non-proactive approach before, with more customers calling to discuss price increases, there isn’t going to be enough time to answer all of them and protect your most valuable clients. Agents will need to re-prioritize.

Leveraging the 80/20 rule

You’ve probably heard of the Pareto Principal – or the 80/20 rule: 80% of all outcomes come from 20% of causes. The same is true for how we operate our business and the customers we serve. 80% of your agency’s growth and profitability likely come from 20% of your customers. Let’s call these customers your “A” customers and do a quick exercise to see why these customers are important for your agency.

  • Picture who you’d consider to be an “A” client. There are a few themes that tend to stand out: They generate the most referrals, they’re an account customer, they pay on time, have no claims and lastly – they rarely call you. And when they do, it’s for counsel on their insurance needs.
  • Then there’s the “B” client. What’s different? You might picture them also as an account. They have some billing delinquencies, a few claims. And they probably call you a lot more about price increases and help with billing.
  • Now let’s think about a “C” client. Monoline. They have late payments – you’ve probably fought for reinstatement for non-payments for them more than once. They have multiple claims. And you are talking with them all the time about minor rate increases and shopping their policy – you may even be reaching out to them regularly to remind them to pay. 

Which of these clients is  more  desirable for your agency? Hands down, the answer is A. In fact, our internal data supports that, showing that an “A”  client on average may provide  up to a 10x higher  value over time than a “C” customer.

So now – what if I asked how much time you spend with each of these groups? When I talk with my agency partners, most say they spend between 60-70% of their time with their C clients, 20% with B and the last 10% with A. If you’re in a similar boat, you might consider re-prioritizing your efforts.
An important step you can take is identifying who your “A” customers are and making a conscious effort to focus on those clients. 

Four steps you can take

  1. Segment your customers, and then reallocate time to proactively serve your “A” clients. Don’t wait for them to call you. Reach out to these customers to explain trends, what to expect at renewal, and review potential coverage risks. This creates a positive experience that shows these customers you value their loyalty and have their best interests in mind.
  2. Partner with carriers that focus on serving more complex clients. Accounts with common effective dates retain up to 9 points better than monoline business according to our internal data. You need partners that offer solutions for common effective dates, package policies, and keeping everything together with one account to help you maximize retention and provide an optimal customer experience.
  3. Leverage efficiency resources to help free up capacity for your agency. Self-service tools, EFT and carrier service centers can be your best friends here. Automatic payments help recurring delinquent payers stay on track. And mobile apps help your customers find answers to their questions while you focus on your “A” customers to consult and advise. The more advanced service center partners can even handle more complex questions and consultations on your behalf.
  4. Remove your re-marketing threshold. Many of our partners have shared they have a built-in re-marketing threshold at a 10% increase. But this year, a 10% increase is going to be common – don’t overwhelm your team trying to re-quote all of these customers. Plus, re-marketing should only be used as a last resort. It reinforces an annual shopping habit that can eventually end with your customer leaving for an even lower price elsewhere, and also losing your agency money each year. Our research shows that agencies lose 10% premium on every re-marketed policy. On top of that, based on average CSR compensation, you’re essentially paying your staff $25-$30 in time spent to remarket each one. By changing your re-marketing practices, you’ll protect your agency’s profitability and free up valuable time you can re-purpose for proactive outreach.

With more of the standard auto and home market being commoditized, the future of independent agents is more with their complex accounts that value consultation and risk education. Agencies can take a big step in this direction by segmenting and identifying customers in their book of business accordingly and refining how they proactively add value and defend those clients. By prioritizing where they spend their time, agents will set up their businesses for long-term success.


Headshot of The Hanover's Paul James, VP Personal Lines, National Sales Leader

About the author

Paul James is a national sales leader, VP of Personal Lines at The Hanover Insurance Group Inc.