From the moment they become licensed, insurance agents are conditioned to believe that their success is entirely dependent on their ability to attract new customers. The pressure to sell can be enormous, with agents’ entire livelihoods resting on how many new policies they can issue. This often leads to an intense focus on prospecting and generating new leads. An agent’s eyes are always on the horizon, always looking for the next customer needing coverage.
Being sales driven is crucial to the success of an agency, and spending time obtaining new customers is an important part of this effort. However, retaining existing customers is just as necessary as obtaining new ones, as the most profitable agencies boast retention levels of between 93-95% (well above the industry average of 84%).
To help agents increase their retention levels, we’ve written this article outlining key practices that are proven to increase customer retention.
A Shift In Focus
Did you know that within the insurance industry, obtaining a new customer is 7-9 times more expensive than keeping an existing one? With this in mind, ask yourself the following question: “How much time do I spend prospecting for new customers vs making sure my existing ones renew their policies with me?”. If your efforts to obtain new customers cause your relationships with existing customers to suffer, a shift in focus may be required. This isn’t to say that you should abandon prospecting, but rather that you should be aware of the fact that devoting time to securing renewals is a relatively inexpensive way to generate significant revenue for your agency.
One of the best ways to increase your retention numbers is to offer products that create sticky relationships with clients. A “sticky relationship” is one where it would be inconvenient or difficult for your customer to obtain the same coverage from another agent/broker. For example, surety bonds are often subject to stringent underwriting requirements and typically require a review of the applicant’s personal credit and financial statements. Most people are not keen on disclosing this information, and once they obtain a bond from one agent they generally stick with them.
Additionally, surety bonds offer great cross-selling opportunities as most bond customers will need more traditional coverage as well.
How does your agency continue to serve customers whose policies have already been issued? Do you periodically reach out to ensure their needs are still being met or is your only other interaction sending them a renewal quote before their policy is set to expire? Agencies that continually strive to add value to their customers after making a sale are the ones best positioned for sustained and long-term growth. What does adding value look like? That depends on the agency, but a good place to start is determining ways you can continuously serve your customers outside of simply finding them the lowest price. If a customer is only with you because of low prices, then they won’t be your customer for very long. Additionally, you should look to implement technology that makes quoting and issuing policies as easy as possible for your customers. If obtaining coverage is a straightforward process and simple process, your customers are much more likely to continue working with you.
One of the best ways to ensure maximum retention is to obtain referrals. Referred customers have an average retention rate of 25% higher than non-referred customers within the first three years and can be acquired without having to spend money on marketing. A great way to obtain referrals (aside from providing fantastic service to existing customers) is to implement a referral rewards program. Successful referral rewards programs provide incentives to both the referrer (person doing the referral) and the referee (person being referred). However, make sure to consult with a legal expert before instituting any program to ensure your agency is abiding by all applicable state regulations.
The Bottom Line
Agencies survive by continually bringing in new business, and often have to spend a considerable amount of time and money to do so. However, agencies that work to secure renewals not only find themselves surviving but thriving as well.