It’s no secret that it is easier and less expensive to keep an existing policy than to acquire a brand new one. With most commercial lines agencies, there are well-defined renewal processes for the business insurance portion of the book; however, the same usually cannot be said for the personal lines department.
It is not uncommon for personal lines service staff to place their accounts on autopilot. Of course, when a customer reaches out to the team, they still provide a great level of service. The problem is that this is typically a reactive service methodology rather than a proactive one.
Agents believe this level of service is effective because they think they retain a high number of those customers with very little effort. However, when you ask an agency what its policy retention percentage is, producers often start by saying they have no idea, then they make up a number.
Retention is critical
For ease of use, let’s go with the simple definition of retention to mean a count of policies in force. By using this simple metric, you eliminate the variability of premium increases and decreases to endorsements or rate increases. This becomes a true measure of policies that move from one term to another.
Otherwise, agents can have a false sense of retention security when last year’s premiums are bolstered with rate increases. They may
have lost two in 10 policies, but because of a modest rate increase, they may think they only lost one in 10 policies.
In a recent in-depth survey of more than 1,000 agencies across the country performed by EZLynx, personal lines departments averaged policy retention of only 78%. Put another way, it is normal for an agency to lose more than one in five personal lines policies at each and every renewal.
Making matters worse, personal lines is under direct attack from direct writers, captives, alternate distribution channels and other independent agents. One way for agencies to combat this challenge is to be smart about how they service policies and manage renewals to improve their retention.
Agencies can no longer wait for a customer to call and complain about rate hikes at renewal. Instead, agencies need to quickly and efficiently identify, on a daily basis, those customers who are most at risk of being uncompetitive.
Beyond the obvious importance of an agency to keep more of what they write, insurance companies tend to segment agencies on three key factors: growth, profitability and retention. An agency that can achieve all three is highly valued by any insurance carrier. However, it is easier said than done.
How to keep more
The key to retaining more business is rather simple. Treat the customer the way you would like to be treated – be thoughtful, knowledgeable and transparent.
Let’s be clear: When it comes to prices, customers don’t like surprises. In today’s information age, people want instant feed- back on what is happening. The last thing they want is to receive an increase in their renewal premium without an explanation as to what happened. Agents should review the policy renewal for potential changes that might impact the premium. Beyond rate increases, it is not uncommon for carriers to remove discounts, change products or adjust the customer’s rating tier due to losses, credit or other factors. Customers would like to know that the agent is on top of things like this when they take place, not after the fact.
Next, agents should find excuses to thank customers for their business as well as keep them informed about how they are doing relative to their peers. In other words, if a customer has a small rate increase, which is in line with his or her community, explaining this goes a long way in building trust.
Finally, always give customers options. This is one of the main differentiators for an independent agent. If their renewal price increased, let them know what else, if anything, you may have as an alternative. When given options, customers regularly opt to stay with their current program to avoid the pain of switching. When you earn their trust, they will say things like, “Let’s stay where we are, but keep an eye on it at
next renewal. If it goes up like this again, we’ll switch.”
The key to all of this is to be customer-focused and proactively reach out to customers when there is a change. Those agencies that shift from reacting to each customer to proactively reviewing the account and contacting each customer in advance will certainly keep more than those who wait for the phone to ring.