The 7 biggest insurance agency business busters

The combination of higher premiums and a treacherous economy offers a minefield of challenges for insurance agents. With stricter underwriting, for example, they may find themselves trying to explain to long-time clients why costs are way up or why coverage was declined.

Clearly, it's no longer business as usual. Who can doubt that the economic storm will pass without doing serious damage? However, what will harm insurance agencies the most in the current environment will not be outside forces, but what goes on inside the organization.

Here are seven of the biggest insurance agency business busters -- any of which can do irreparable harm:

1. Poor follow-through. Many insurance people -- including principals and producers -- seem to have a difficult time keeping their promises. When it comes to wreaking havoc, failing to follow through is near the top.

Whenever you hear "We'll take care of that right away," "I'll get back to you tomorrow" or "I'll have it for you by Tuesday," you can almost be sure it either won't happen or what you get will be less than complete.

The lack of follow-through is destructive because it causes delays, confusion and disruption. It's demoralizing for those who have to put up with it, and disappoints customers who are far less forgiving than in the past.

2. Marketing information paralysis. Data is the lifeline of an insurance agency and its most valuable asset. While policyholder information is generally up-to-date and accurate, marketing data is either non-existent or near death.

Making contact with prospects -- either electronically, by direct mail or any other way than picking up the telephone -- is next to impossible in most agencies. Here's why: 1) there are no prospect files (other than the half-dozen random ones that are in the hands of producers); 2) the files are so old they are useless; or 3) data was entered inaccurately. Even if there are prospects, there are few, if any, e-mail addresses.

Who's at fault? Anyone who relies on producers to keep accurate prospect records is delusional. Someone in the organization must be charged with the responsibility for maintaining proper data if an agency wants to market itself successfully.

3. Failing to differentiate. Even though differentiation is a popular issue with insurance agents, it suffers from too much lip service and not enough action.

Differentiation has nothing to do with how an agency thinks about itself. Yet, just about every agency Web site is a near copy of every other agency Web site. There is nothing distinctive when it comes to what's important: Understanding what customers want and expect.

If taken seriously, differentiation can provide a significant competitive advantage. It may help to learn from the experience of two fierce retail competitors, Wal-Mart and Target. As it turns out, there's a minimal price differential between these two retailers. Yet, The Wall Street Journal's Ann Zimmerman points out that 87% of shoppers think Wal-Mart's prices are better.
While Target seems to be struggling with declining profits as compared to Wal-Mart, its president blames the problem on Wal-Mart for being better at marketing.

Wal-Mart's consistent message of lower prices pulls in customers. When they need to save money, they think Wal-Mart. If they have a little extra, they may turn to Target, with its slightly upscale image.

Basically, differentiation is what customers think about when they think about a company. For Wal-Mart, Target or an insurance agency, it's no minor matter.

4. Expecting positive results from misplaced effort. Although it is difficult to believe, there are producers who rely on cold calling. Perhaps it's because they don't know any better. Whatever the reason, it may well be the biggest misuse of time in the insurance business.

If you want to depend on getting lucky to build a book of business (and fighting to get the lowest price), good luck. However, if you want continued growth over time, the task requires careful research to identify those you want as personal lines and commercial lines customers and implement a marketing cultivation program so prospects can come to recognize that there is value in doing business with you.

To make this as clear as possible, your task is not to sell insurance, but to create conditions so someone wants to buy insurance from you. Anything less won't work today.

5. Inability to stay on plan. Failing to stay on plan is the deadly disease of the insurance business. To put it another way, insurance people love to chase gimmicks. They spend more time looking for "the latest and greatest" idea than they do talking to clients or marketing to prospects. Worse yet, they are willing to pay for whatever someone touts as a "winning solution." When that doesn't work, it's on to the next sure-fire moneymaker.

Get real. The only "silver bullet" is developing a marketing plan and sticking with it. Anything less won't work and will turn out to be a waste of time and money.

6. Not making sense to customers. Of course, anyone in need of insurance doesn't want to deal with insurance sellers. Why should they? They don't understand the coverages and terminology, with the possible exception of auto insurance. They feel at a disadvantage because they don't understand insurance and that's uncomfortable.

If an agency wants to stand out from the crowd, it can please customers by making sure every communication is understandable to the average person. The best way to make sure your letters, memos and proposals are clear is to hold a focus group of a dozen or so clients and have them review and comment on your various communications. The results will foster rapid change.

7. Forgetting who you work for. A large segment of insurance people take great pride presenting themselves as "independent agents," who put the interests of their customers first. That makes for good PR, but having to meet insurance company expectations strains the meaning of "independent."

In more and more cases, claims handling is passed off to an insurance company. The agent is an irrelevant participant in the process, even though there's an effort to appear otherwise. Of course, there are exceptions. And there's also a need for balance and cooperation with a carrier. But with the real pressures to reduce operating costs, it is often quite convenient for an agency to pass off more and more tasks to an insurance carrier and making it more and more dependent on this "generous benefactor." Instead of representing a broader range of carriers, the tendency is to narrow the field and further diminish the meaning of "independent agent."

All of which is to say, the survival of the local agency is more dependent today on demonstrating that it is a true customer advocate, an organization that clients can count on to do what's best for them -- and that may include challenging carriers.

What's so troublesome about these seven business busters is that they undermine the strength and effectiveness of a local insurance agency. At a time when individuals and companies are more concerned than ever about protecting assets, there is no substitute for speaking with those whose business depends on how they take care of the customer.

John R. Graham is president of Graham Communications, a Quincy, Mass.-based marketing services and sales consulting firm specializing in the insurance industry. His articles appear regularly in business publications and he speaks on business, marketing and sales issues. Contact him at (617) 328-0069 or jgraham@grahamcomm.com.