Strategic Management for Independent Insurance Agents & Brokers: Positive Change for Sustained Excellence

Tuesday, July 31, 2012

Continuous Improvement as Competitive Advantage

Let's talk about what's keeping you up at night.

If you could change anything about your business, would you, and what would it be?

Oh, wait. You can change anything about your business. It's your business. Political rhetoric notwithstanding, you don't need to wait for the government to do something for you. Or to you.

Think about all the things you could do differently in your business that would increase your profits.

Think about all the changes you could make to your customers' experience, resulting in more and better referrals. Would that increase your profits? Think about all the changes you could make to your teams' effectiveness, resulting in more and happier customers. Would that increase your profits?

But change is hard. Oh, it's not hard to talk about change. Think about how hard it is - how long it takes - to break a bad habit. (Forever?) Or to replace a bad habit with a good habit? (21 days, so say the behaviorist experts.) It's not hard to tell someone else to change. But think about how long you've been trying to get ____ (someone)___ to do __(something)__ differently.

The kind of change that's going to make a difference to your bottom line has to be a special kind of change. It has to be positive change that makes it easier for your customers to do business with you and easier for your team to do the right thing for the customer. When you and your team are always looking for that kind of change, that's continuous improvement, and it gives you a competitive edge.

If you can see an opportunity and be able to line up your resources or change your strategies to be on the leading edge. If you can understand a threat for what it is and take action to avoid the common pitfalls. If you can make adjustments in your operations or your organization to maximize strengths and minimize weaknesses.  Doesn't this give you a tremendous advantage in the marketplace?

Being eager and willing to make changes does come with a caveat. Change for its own sake is not a productive strategy. Making too many changes that don't work or don't "stick" will chew up resources and demoralize your staff. So to ensure the right balance of continuous improvement and consistency, do some strategic thinking before you make any major change. Make sure that any change can pass this test:

  • Is this change Strategic? Will it help you achieve one or more of your strategic goals - or at least move in the right direction?
  • Can you and your team Implement this change? You want to be able to understand clearly what it will take - who is going to do what by when - and then what will need to happen next. If you can't see your way through the implementation, you should reconsider whether you want to start. (Really can't say this strongly enough. If your team feels they are always starting never to finish, they will give up trying.)
  • Does the change Matter? Will making this change make a difference for the customer? For your team? If the outcome will be invisible, you will get no return on your investment.
  • Will the outcome be Positive? Think through the costs, the consequences and the expected outcomes. If there's no real benefit then don't do it.
  • Will the change Last? Will it "stick." Is this one of those things that people will look back on and say, "Hmmm, whatever happened with that?" If the outcome is going to become invisible, you should have saved the trouble.
  • Does everyone involved have clear Expectations for the change process and the changed outcome? Of course there will be follow up required - did everyone do their job to get the change made and maintained. If you're thinking strategically about this change, you should be able to create a vision for all those involved. What will their experience be during and after the change? How will they benefit? What will be expected of them? What should they expect?
Continuous improvement is continuous change. In this context, change is good. It's not easy. but it should be simple.

So what will you change?

If a threat or weakness is forcing you to change. If a strength or opportunity is calling you to change. If you are constantly making changes that don’t help or don’t last. If your staff has trouble adapting to change. Or if you want help in putting positive changes into strategic perspective, we can help. Call me, or send an email. No Strings. No Charge.

Tuesday, June 26, 2012

Operational Excellence As Competitive Advantage

Let's talk about what's keeping you up at night.

Property Casualty 360, June 22, 2012, "GEICO Ad Spending Far Outstrips Its Peers"

A lizard, a caveman and now a possum. GEICO spent far more on auto insurance advertising in 2011 than their competition, both on an absolute basis and as a percentage of the business the company wrote. This, according to a new study released last week and reported by Reuters. With aggressive pricing and heavy advertising, GEICO has quadrupled its market share of the U.S. auto insurance market share over the last 20 years. GEICO's advertising budget represented 6.5 percent of premiums written in 2011.

Anyone who watches  even a little television is familiar with the GEICO brand. And Allstate. And State Farm. You can't compete against these giants by increasing your ad budget. You can't consistently compete against them using price as the competitive advantage. So how do you compete?

Many independent agents say it is their superior customer service that sets them apart. Competing on the basis of service in a 24/7, on-demand, marketplace requires a level of operational excellence that embodies efficiency and effectiveness, employee engagement and customer and customer focus, profitability and business value.  Read more about operational excellence as a competitive advantage here. 

From Theory to Practice

Can you say with confidence that the way you do business gives you a competitive advantage?

If the answer is, "YES!" 

Sustain it. Stuff happens. Take a proactive approach to sustained excellence. Continuously measure, test, improve, measure.

Proclaim it. Make sure everyone in your organization understands the value you bring to current and prospective clients. It's part of your culture. Make it part of your ongoing communications. 

If you're not sure, the the answer is probably, "No.

Find the gaps. Make the investment in time and resources to understand what works and what doesn't.
  • Ask your employees. Use surveys, focus groups and one-on-ones to tap into the talent you already have.
  • Ask your customers. Get employee feedback on customers, use focus groups, and individual and group surveys to understand what customers want and how well you deliver.
  • Review your operations. Start with a checklist or ask for help. If you don't feel you can be objective enough or thorough enough, hire a consultant.
  • Measure your results. Focus on business value rather as well as productivity and profitability. Compare to industry averages but only as a way to create your own benchmarks.
Fill the gaps. Use what you learn to build a strategic plan to get to operational excellence. You can't do everything at once and you shouldn't try. Set priorities. Itentify accountabilities - who is going to do what by when and how will you measure results. Involve the entire organization and communicate constantly. 

Think of it as a process. You'll never really be done so be prepared to sustain it and proclaim it as you go.

Do your excellent operations give you a competitive advantage? Are your employees engaged in keeping your customers delighted and bringing more in the door? Can your team deliver on time every time, even when things don't go just right? If you're not satisfied with the answers to these questions, call or email

Tuesday, February 28, 2012

Insurance Industry Staffing

Let's talk about what's keeping you up at night. 

"NU Online News Service, Feb 9: Industry Adds Jobs in Dec."

Total insurance-industry employment grew by 5,000 in the last month of 2011. During the same period agents and brokers shed 200 jobs. 200 jobs out of a remaining 646,000 doesn't seem like very many. And the previous month, jobs were added in the agent/broker sector, so there shouldn't be much sleep lost over the employment situation. Unless, of course, it's your agency being affected by the additions and reductions in staffing.

How about your agency? Did you lose staff last year? Was it intentional? If not, did you lose the "right" people? Staff reductions can have a positive effect on the bottom line. But only if you lose a poor performer or someone in a non-critical job. Losing a strong performer or someone in a key position puts you in a dilemma. Do you hire a replacement and forgo an expense reduction or do you ask the remaining employees to take up the slack, knowing you will likely experience a deficit in sales or service ability? Whether the economy is good or bad, you want to make sure that improvements in productivity don't result in the loss of effectiveness.

The difference between productivity and effectiveness is that one is about the numbers and the other is about the people. Improvements in productivity with no loss in effectiveness requires accountability. As the boss, that makes you accountable to ensure that competent, skilled, accountable, individuals want to be a part of your business and you're accountable to ensure that those who don't measure up are the ones to go.

Competent, accountable, employees want to know what "good performance" looks like. They also want to be clear about how performance is measured. They want regular feedback. Employees who meet or exceed expectations want to be recognized. They want a positive consequence. When they fall short, there should be a negative consequence.   No measurement, no consequence, no accountability.

What about employees who are incompetent or unaccountable? The only way to ensure that your organization is accountable is to ensure that there are no positive consequences for poor performance. Rewarding everyone the same hurts two ways. First, you won't see any improvement. Worse, you'll lose the respect, and likely the good performance, of good employees.

Remember that recognition and rewards come in all flavors, some with intrinsic value and some not. There are some few people who take sufficient reward from a job well done. Most of us, however, want something a little more tangible, even if it's just acknowledgement. Since people do things for their own reasons, it's likely that different people will respond to different types of recognition. It just needs to be fair and consistent.  So...

As the boss, you're accountable to make sure there is a formal process for evaluating performance.One that is consistently and meaningfully followed.

Or is that what's keeping you up at night?

Wednesday, February 8, 2012

Contingent Income Rising

Let's talk about what's keeping you up at night.

"Agency Compensation Expected to Rise in 2012: Ward Group"

Well, that's good news. No sleeplessness on account of that. Right? Right!

Unless, of course, you're counting on your contingent income to cover operating costs. It's been a couple of tough years and many agencies are reporting low or no growth. Without those profit sharing checks, profits would be down significantly instead of just a little. And there is a reason it's called "contingent" income. It depends on several factors -- some of which you control and some you don't. Catastrophic losses are not predictable. Premium volume and growth you can predict. And while you can't know exactly how your growth and volume will convert to contingent income, you can predict operating revenue and expense. Making sure the former covers the latter is critical when there are so many negative factors driving the economic forecast. It's enough to keep you restless if not outright sleepless.

In the study referenced above, reported in the Insurance Journal on line, there are also some potential trade-offs to go along with what are expected to be increases in agency compensation. Requirements for premium volume and growth are likely to increase for some of the companies in the study, as are loss caps. So, both the controllable and the uncontrollable may be more challenging to manage.  All the more reason to make sure your contingent income is only used for contingent outgo.

Forecasting and budgeting for the independent agent has become for challenging than ever. If you're not already doing contingent projections, you may want to start. It's a good way to look at your finances, regardless of the economy. Start with a baseline budget and project no change in income or expense. That probably means cutting back on some things just to stay even. Then create a second budget for growth, projecting realistic revenue increases based on realistic but aggressive sales projections. And, last, create a third budget projecting worst-case revenue projections and a worst-case expense budget. You can then look at what you will have to do to make each budget a reality and set your plans accordingly.

While we're on the subject of projections and budgets,  if you're having trouble making ends meet, be sure you distinguish between revenue problems and expense problems. Whether your income projections are positive or negative, if you haven't already addressed your expense problems, the time to do it is now.

How many ways are there to measure profitability? At least four. Check out our Models of Profitability.  And if you would like some objective third party help with projections and budgets, call or email and let's have a conversation.

And if the expected rise in agency compensation predicted for 2012 is great news for you, is there something else keeping you up at night?

Thursday, January 19, 2012

Soft Market or Soft Economy

Let's talk about what's keeping you up at night.

"MarketScout: P&C Rates Rise for Second Straight Month in December"
"Marsh: The Two Speed Insurance Market"
"Moody's: Measured Rate Increases to Continue, but No Hard Market"
"Berkley: Market is Hardening; Good Companies Can Seize Opportunities"
"Best: 2012 Insurer Market a Mixed Bag"

Is the soft market finally turning? 

If you've been watching the industry press for the last couple of months, you may be optimistically confused.  Most sources seem to see signs of price increases, but the extent of the shift and the timing are uncertain, at best. Selected classes and lines of business look better than others. So when you ask, "Is the soft market finally going to give way to a hard market?" the answer is going to be, "It depends."

But, so what? What will that mean for your customer? What will it mean for your business?

Regardless of how the market shifts – hard or soft – your success depends on the effectiveness of your sales organization, your skill, your expertise, your value-add, your competitive advantage. And if your competitive advantage isn’t clear, a market shift won’t help you attract more customers and retain the ones you have.

Competition is the new normal. If you’ve successfully grown your business over the last few years then you’ve had to sell through the soft market, around the soft market, in spite of the soft market.

Regardless of how high prices go, for your customer, it's still about finding the best protection for the best price. Since the consumer has learned so well to shop for the lowest price, you’ll work hard to try to keep the cost down in order to retain the business.  And if the cost of insurance goes up faster than the state of the economy, the trade-off for the insurance buyer may be coverage.

When the insurance company describes their pricing structure and willingness to underwrite in terms of "fear and greed," as in the Berkley article, it's easy to see why the typical insurance buyer doesn't understand why his price soars or drops regardless of whether there have been claims or not.

You have to understand where the market is. You have to be able to offer cost-effective insurance coverage to protect your customers from financial loss. And you have to be able to bring appropriate customers for the carriers you represent. You can’t control the insurance market any more than you can control the economy.

So what if the market is getting harder? Will you be sleeping better because of it, or in spite of it?

Monday, December 19, 2011

Customer Satisfaction in the Insurance Industry

According to NU Online News Service, December 15th, the most recent American Customer Satisfaction Index shows property and casualty companies get higher satisfaction scores than life and health insurers.  The survey lists scores for the five large direct writers, i.e., State, Farm, GEICO, Progressive, Allstate and Farmers. The factors cited for causing better results in the P&C companies: lower premiums and, get this, fewer customer interactions. 
So, in order to keep their customers satisfied, large direct-writing insurance companies should strive to keep customer contact to a minimum. Fewer contacts mean fewer conflicts. Less frustration.
Well, I guess that makes sense. Have you tried to do business with a large company (of any kind) lately? Automated voice trees that delay and confuse. Sales and customer service representatives reading from scripts. No one with the knowledge or authority to make a decision.
Seems to me that the survey just emphasizes the value added by the independent insurance agent. And the huge competitive advantage this gives you if your sales and service models have an emphasis on personalized, professional relationship building.  

Tuesday, November 29, 2011

Retention & New Sales

Let's talk about what's keeping you up at night.

We need more new sales. Retention has been better than expected, so we stayed almost flat, revenue-wise, but new sales are harder than ever to make. No one wants to change and there are no new accounts. How do we get back on a positive growth path?

Start by asking yourself a few questions. The answers can tell you what you're doing right and what you could do better.
  • Why did your toughest account renew their account?
  • Why did you lose that great account?
  • Why did your newest account move their insurance to your agency?
If you can answer these questions, thoroughly and analytically, then you know what your competitive advantage is. And that's the key to sales success - leveraging those things that you do better than the competition. If you can't answer those questions, then your sales team - in fact your entire business - is at a disadvantage. 
Business and personal insurance buyers have a lot of choices. And there is always someone who is willing to provide a lower price. When you can demonstrate that the lower price comes with a cost and you can provide added value in terms of something important to the customer, you have something to sell.
For growth and profitability, it's all about competitive advantage. Make sure every member of your team is able to talk convincingly about why customers buy from you and stay with you.
If you don't know what sets you apart from your competition - if you can't answer those critical questions - let's have a conversation.