Create a Sales and Marketing Plan for Your Agency

The current market conditions for insurance are rather ambiguous. It seems that the “soft market” is on its last legs, but the uncertainty of political changes and issues like mold, asbestos and terrorism make it difficult to guess at long term trends. So, what can the typical independent insurance agent and broker do in order to succeed? What are the basic ingredients to a well written sales & marketing plan?

Know Thyself

The best starting point is to first define the insurance agency’s “personality.” The “personality” of an agency is the book of business and it will in turn define what to look for from the various markets and the selection of new markets to represent. For example, a large urban agency that sells only very large commercial accounts will have different expectations than a small town agency that sells all lines of insurance.

Start by finding out what the split of business is along each line: personal, commercial, life, group benefits and program business, etc. Then calculate the average size of account for each line. Also, how much of the agency business comes from the top ten accounts? Finally, analyze the distribution of business and identify the top five industries.

List the breakdown of the current book of business by line of business, top ten accounts and key industries. Calculate the current percentage of the overall book for that line of business. Is the mix of business healthy for the agency? This is a judgment call for the owners. Niche selling is usually more profitable, however, it is also riskier. If the agency has a lot of small accounts, the procedures in place for selling and servicing them are critical in order to make a profit.

It is important to distance oneself from the book of business and objectively ask the question “is this book valuable enough the way it is or should its composition be changed?” If it needs to be changed, what should the agency target? This depends on the expertise of the producers and service staff, as well as the appetite of the firm’s current markets. Write down those future targets next to the current composition. This thought process is what separates the entrepreneur from the average person.

How Much Can You Grow?

It is important to review the new sales for the agency overall and for each producer. An experienced producer in a typical agency should generate at least $30,000 to $50,000 in new commission dollars each year, depending on their size of book. For large firms with large accounts, the amount would be much higher, maybe even $100,000 in new commissions.

The hit ratio of each producer needs to be determined. Hit ratios less than 25% to 33% costs the agency a lot of time and money. The technique of producers with low hit ratios needs to be checked and adjusted. Often, the producer fails to pre-qualify the prospect. Sometimes producers just are not approaching businesses that match up with the products the agency has expertise in writing, nor markets that are competitive for those classes of business. Use the successful producers as a model.

The agency may have tremendous sales, however if there is loss of business through attrition, much of the effort for new sales is wasted. Calculate the attrition rate for the agency and each producer. The goal should be around 10% or less attrition for the typical property/casualty insurance agency. Higher attrition rates are usually an indication that the business the agency writes is transient and either the clients are price shopping or not good risks.

When writing a sales & marketing plan, list the current overall hit ratio, average new business produced and the average book of business in the agency. Write next to those numbers the target for next year. Below that list write two or three actions that need to be accomplished to reach those goals.

Market Relations

If the current uncertainty in the marketplace continues, the insurance carriers will be making a lot of changes, such as tightening up on underwriting or pulling out of certain markets. Today’s agent or broker needs to have a clear understanding of what the carriers can do for them and how this fits into the overall agency plan.

Run a list of all of the carriers with volumes, commission rates (or commissions), loss ratios and contingents received. Analyze how the agency’s book of business stacks up with the existing markets. Compare all the carriers and their products against what the agency has with the top ten industry groups the agency writes.

Some of the questions that should be asked include: will volume commitments be met and how will it be done, are there new markets the firm should seek out, is the volume spread too thick or too thin, is the agency maximizing profit sharing agreements?

In the sales & marketing plan also list the five most important markets (not necessarily the largest) and the agency’s volume with them. Write realistic agency production goals for the next 12 months next to those numbers. Then, list one or two markets that you do not have, but feel the agency could use. Write down next to those names the date you will approach them. Finally, list two or three markets that the agency has outgrown and should get rid of.

Take Responsibility

Agents & brokers are dependent upon insurance companies for the insurance products that the agency sells. A strong relationship with the carriers is imperative. The key to any good relationship is communication. Agencies must have a well-organized plan to communicate with each carrier. Some insurance companies communicate better than others do, so the independent agent needs to take full responsibility to ensure a dialogue occurs.

Agencies need to take a proactive approach to managing company relations. Good relations cannot be allowed to stagnate, and weak relations must be built up. Agency owners need to evaluate which companies they should do business with to meet their needs for competitive, responsive markets.

Both parties need to grow, and relationships of the past may no longer meet the needs of today, especially if either party has targeted certain classes of business that aren’t of interest to the other. Resources should not be wasted on maintaining relationships with carriers that offer little benefit to the agency. Companies continue to limit the number of agencies they do business with, often to better utilize their resources and to reduce costs.

Take Action

So how does an agency keep the communication open with its markets and perhaps become a “preferred” agent? Create a process that makes it easy for management to focus on company relationships. The first step is to assign an individual or two from the firm to each carrier as that carrier’s “relationship manager.”

Responsibilities for the management of the firm’s top carriers should be divided up among the owners and/or a key non-owner producer or CSR, depending on whom has the best relationship with each carrier. Overall carrier relationship management should always be a major focus for all owners; however, dividing up the duties with others in the firm will insure that the steps are implemented.

A specific action plan should include job assignments, planned visits, information and data to communicate, and a budget to implement the plan. Keep in mind that it takes time and money to nurture a successful company relationship. It’s important to keep track of the plan and make sure it is followed. Even a strong relationship will eventually die if it is neglected.

The collection and presentation of information and data is a significant step since it will set the tone of the communication. Agencies that are prepared and well informed will create an immediate interest in the company representatives, since unfortunately, most agencies fail to do their homework.

Stop By to Say Hello

Take the Sales & Marketing Plan directly to the insurance company representative. Set an annual meeting to discuss agency goals and future opportunities. In this annual meeting, the agency principal in charge of markets and the relationship manager for that carrier should meet face to face with the regional vice president or branch manager of each contract company and the main underwriter assigned to the agency.

There are three objectives for this meeting: 1) inform the company’s management about the current status of the agency and future plans; 2) find out where the company stands now and its plans for the future; and 3) discuss how the agency and the company can do more business together in the future.

There should be follow-up meetings to discuss progress on the agency-company game plan on at least a quarterly basis.

Both parties need to be open and frank. The agency Sales & Marketing plan should be reviewed and discussed at the meeting. Reasonable goals and commitments for future business need to be established. Relay the highlights of the meeting back to the agency staff.

Plan ongoing carrier “schmoozing” activities to enhance the relationship. It is easier to develop a relationship if parties meet often, and social visits are especially effective. The whole agency needs to be involved with fostering good relations with the markets.

Ask the companies to fill out a report card on the agency in order to identify the carriers’ perceptions of the firm. Discuss what the firm can do to improve the existing relationship and to write more business. Determine how the agency can take advantage of the value-added services offered by the carriers, such as financing, training, etc.

SUMMARY

Now, more than ever before, it is extremely important for insurance companies and owners of agencies/brokerages to build partnerships that are responsive to the business plans established each year by each party. Building improved relationships needs to be a two-way street.

It is easy to get this relationship-building program underway and it really works. Responsibilities for this program must be shared and communication needs to be flowing within the firm, within the carrier and between each other. Improved communication and a focus on improving relationships will save time and will make both parties more money, guaranteed.

Agencies without a sales & marketing plan are totally reactive to their environment and have little control over their future. Firms that incorporate an annual planning process tend to be more efficient, more profitable and highly valued businesses. The choice is yours. Take the time to plan ahead and be successful or be at the mercy of the winds of change.