Retention, Retention, Retention
We all talk about retention and we know how important it is to realize growth. However, I have found that many agency owners have no real insight on their actual retention. Many agents that I talk to will guess and say “95%” without any real sense of how they arrived at that number.
If an agency sets a goal to grow their book of business by 10%, they need to know their retention ratio. Using simple math, an agency with a one million book of business with 100% retention only needs to add $100,000 in premium to meet their goal. While the agency down the street with 85% retention rate needs to work much harder by adding $250,000 to realize the same goal. Knowing your true retention rate is crucial to measuring growth.
Fortunately, many agency management systems can give agencies a snapshot of their retention. However, like anything else, the information that you pull from your agency management system is only as good as the information that you put in to it.
Another simple way to calculate your customer retention rate is to locate a few key numbers:
Retention Rate = ((CE-CN)/CS)) X 100
CE = number of customers at end of period
CN = number of new customers acquired during period
CS = number of customers at start of period
Once you understand your retention rate, you can accurately measure your growth and proactively plan your strategies to grow your agency.
Agency owners need to look at retention as a sales strategy. It is equally (if not more) important than your new business acquisition strategy for every boost in retention will increase bottom line profits. Studies have shown that $1 paid towards customer retention increases profits by more than $5 spent on new customer acquisition.
Now…how do you improve your retention?
Retaining your customers is based on a variety of procedures that should be set up in your agency. I recommend that you initiate as many of the below strategies to effectively boost your retention. Also remember that a retained customer is a strong source of referrals.
- Put it in writing! First and foremost, your agency needs to have documented procedures on your retention strategies. These procedures need to include that the agency’s outreach is consistent and that every employee is held accountable for delivering an exceptional experience at every level of client interaction.
- Appoint a Retention Expert in the agency. This person should be the point person that swiftly reacts to any whiff of a potential loss of a client. The ideal person for this role is someone with a strong sales ability and the authority to negotiate on behalf of the agency.
- Annual reviews are an agency’s best friend but few agencies actually follow through with this process. An annual review is your way to ‘touch’ your clients and prove your agency’s value. It can be a 5-minute call that can be used to update information, offer new discounts and necessary coverage advice, cross sell or just remind the client of your referral program. Always remember to genuinely thank the client for their business and to remind the client that you are a full-service agency representing multiple carriers and there is no reason to ever shop their insurance.
- Strengthen your onboarding process. Many agents write a new client, collect the new commission and forget it. Treat each new client as a new member of the agency family. Introduce them to the agency principal and their customer service representative either in person or by a Welcome Kit. Send out birthday cards and handwritten notes. By treating the client like family, you ‘marry’ the client to the agency and establish a bond beyond just the sale of insurance.
- Get in front of rate increases. Many agents would rather put their head in the sand, ignore the rate increase and hope for the best. But what does that say to your client? By being proactive on rate increases, you show your client that you are looking out for them. Set an alert in your agency management system to trigger a suspense for any rate increase over 5%. Be prepared with suggestions on how to possibly lower the rate or to explain that their actions impacted the rate (ticket, claims, change of underwriting factors). Remember, an unexpected and unexplained rate increase is one of the biggest incentives for an insured to shop around for new coverage.
- Offer to shop rates for them. This is a double-edged sword as it can make clients price centric. However, when you know that a client is unhappy with a rate explain that agency represents the top carriers and you will do all of the shopping for them. Head off competitor shopping and be sure to share with them the higher rates of other companies that the agency represents.
- Educate your clients. Anyone can get a price online but when you explain the coverage that they need versus their specific exposure, the more value they will see in your service. Give claim examples as a way to illustrate the need for certain coverages.
- Be a claims advocate. This is your opportunity to shine! Call every client on any claim. Show your concern, walk them through the claims process and advise if expectations are not met to call you. The worst place an agent can be is on the wrong side of a bad claim experience. When clients have a bad claims experience and they don’t tell you about it, they’ll think the only way to send a message to the company is by cancelling the policy.
- Reward referrals. A reward for referral is just a thank you on steroids! Who doesn’t like to be thanked and get a small reward at the same time. Make it meaningful and be consistent. A socially conscious act can go a long way too. Donate to their favorite charity, their kids school or their church.
- Set up automatic payments. Clients on EFT payments renew their policies at a much higher rate. A rate increase on an automatic monthly payment is much less noticeable and more palatable than a rate increase that is 12x as much on an annual renewal. Remember that carriers recognize the increased retention on automatic payments and typically charge considerably less payment fee for this type of payment. Getting your clients on automatic payments is a mini-sale within the sale and should be appreciated for its value.
Written on May 3, 2018 by Peggy Corbett