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?

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. 

Change Management and Sales

An insurance agency is a sales business. Sure there is definitely a service component but nothing happens until somebody sells something. If you're feeling the economic pinch, and we all are, then sales - to new customers and to existing customers - is more important than ever. If you're not doing something to improve sales effectiveness then you are going to struggle to make it to the other side of this market.

One of the keys to the effectiveness of any sales organization is total commitment. Every one of your employees needs to be on the sales team. Are they? Is "sales" a department or a state of mind in your agency. If not the latter, then cultural change may be in order. And what does that require? Well, more sales of course.

"The key to successful leadership today is influence, not authority." As much as I would have hated it as a line manager in corporate America, this quote by Kenneth Blanchard says it all. Of course, if you're the business owner you have the authority. But that's not how you get the best from your organization. You have to sell it. My friend Marsh Egan said it very well in this article on "The Convincing Side of Change."

Employees are customers, too. If you don't think so, remember back to the recruiting and hiring process. You (or someone in your organization) spent a good deal of effort selling that prospective employee on the benefits of working for your business. Just as you don't stop selling to customers, if you want buy-in and commitment to new ideas, you can't stop selling to employees.

It never ceases to amaze me that some of the very best sales people in the world, don't use those skills where they would do the most good. Right in their own businesses.

Differentiation

"When you fail to differentiate yourself from another service firm, the competition is reduced to choosing between commodities. But, law firms, accounting firms, management consulting firms, financial service firms, insurance firms, and the like are certainly not commodities – unless those in the industry commoditize themselves by failing to differentiate their offering from that of another."

The author went on to say that any buyer, faced with competing firms that all seemed "near clone-like," will either stay with what they have or make their decision based on the best price.

The above quote and reference is from a long blog dealing with the process of responding to RFPs in writing. You can read the entire article here. The message is applicable whether the "proposal" is in response to an RFP, in writing, or verbal. And the point is clear - your ability to differentiate yourself from other insurance agencies and, perhaps more importantly, from Internet carrier and consolidator sites, is what will enable you to survive and thrive in this economy or any other.