According to Taxi Digital Marketing, Insurance has one of the highest costs of customer acquisition in any industry, coming in at around $300 (!) per client. At such a high cost, how are the best agencies making such a killing?
There are two main ways:
Marketing is lots of fun, and we have ideas for advertising and marketing schemes that we'll share in the future. Today, though, let’s talk about retention.
First, why is retention important?
As an agent, you know that retention means more money for you. Let’s take a look at the difference it truly makes. Let’s say you have a book of business that generates $200,000 of annual commission. Here is what you could expect from that book over a period of time, based on three retention ratios:
The revenue difference between 83% and 91% retention, $362,924, is likely enough to pay off your house! That’s after only 10 years – imagine what it would be after 30!
Of course, this doesn’t take into account any new business written to make up for the lost clients, and that’s intentional. This represents the value of your residual income based on your retention.
I talk to agents every day about what they are currently doing, and if IHT can help them experience the growth they are looking for. A regular topic of discussion is their retention ratio.
Almost by luck, everyone says they are between 85-92%. When we review business reports, mid 80's is what I expect, with the occasional 90%+. Everyone says that their retention is great because they have "excellent customer service”. When I ask how their customer service stands out, most of them say similar things: they always answer their phone, they work long hours, they treat their customers kindly, or they have lots of carriers.
But these days, those behaviors are necessary just to stay in business, not to improve retention! In fact, as this safeco agent video clearly explains, having good, reactive, customer service is not a strategy – it’s defense. A successful agency needs a proactive approach to increasing retention.
In case you don’t have three minutes to watch the video, here are the three main takeaways:
People become frustrated when reality doesn’t live up to expectations. A great example of this is from 500 Days of Summer, when the main character visits his love interest’s home for a party:
Funny enough, the same thing can happen with insurance! Have you ever heard people have complaints like:
All of these can be avoided by setting realistic expectations from the start. For example, in 500 days of Summer, the main character, Tom, wouldn’t have been so heart-broken if he had known going in that his crush most certainly wasn’t going to fall head-over-heels for him. It still wouldn’t have been fun for him, but at least he could have prepared for it, and congratulated her instead of running off and falling into a depressive funk!
You can set expectations for your clients, from the beginning. In your first conversation, you can explain how quoting and insurance rates work, and why they change.
Here are seven simple ideas of how to set customer expectations:
Ultimately, if you receive many of the same complaints over and over, think of ways to proactively squash them. Be sure to follow-through on your commitments! Don’t tell a client that you’ll contact them throughout the year, and forget about them until renewal. Over-promising is the one of the fastest way to create dissatisfied customers, and destroy your retention ratio.
I once was given a box of jelly beans with a large assortment of flavors. Each color of jelly bean had two flavors – one was a normal flavor, and one was punishingly bad. As I ate the jelly beans, I was expecting to eat one that tasted like strawberry daiquiri, and it ended up tasking like vomit instead.
It was as bad as it sounds.
The worst part at first was my confusion of why on earth I was tasting something so putrid. I’m not sure I ever would have enjoyed the vomit jelly-bean, but if I had expected it, at least I could have braced myself for it.
Your clients are grown-ups. They can handle occasional bad experiences. If you can set realistic expectations overall, even bad experiences can end up being great ones. After all, a well-handled claim can be one of the best opportunities to solidify retention with a client.
Have you had any experiences where setting expectations has helped your agency grow?
IHT is a multi-state insurance agency with dozens of branches across the eastern and central United States.