Here's how to make your insurance consumer happy. (And how to get rich doing what's right.)

Posted by Michael Jans on 3/1/16 9:55 AM

 

future-image.jpgHow do you make today's insurance customer happy? And - to cut to the chase - does it matter? It turns out that the answer to those two questions really matters. A lot. Independent insurance agents & brokers can make their customers happy. Thankfully, the customer has shown us just how to make that happen. So, just how do you make your customers happy? And, central to the point: what's it worth? One way to put it: how much money is in happiness? It turns out, if we're talking about customers: their happiness has a lot of money in it.

Darn it, if the insurance customer would just stand still this would be easy! But they're not standing still. They're changing.

The trends are going in the same direction we predicted ten years ago. The pace of their change however, is enough to make a broker dizzy.

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Worse yet, we've seen a lot of different reactions to change. We've seen a lot of reactions to all "the talk" from industry consultants, magazine articles, carriers, etc. - about how today's consumer has "gone digital."

Some agents just get afraid. That doesn't help.

Some agents get stubborn, declaring "What's worked for me in the last 20 years will continue to work for me!" That's not too bright either.

Some agents stick their head in the ground, thinking "we're too busy to do this 'digital stuff.' We're making money without it."

Some agents get greedy. The "good greedy." They see the changes that consumers are making and they respect the consumer enough to change with them.

With 81% of today's customer researching vendors online before they shop81.png

...and 72% trusting online reviews just as much (or more) than they trust the opinion of their friends and family...

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...today's independent agent better be able to "speak" digital - or else they're going to miss out on a lot of very important conversations.

 

 Here's a comment we received recently. I'm going to omit the broker's name…but I'm curious how you respond to his thoughts:

"I am 67 years old and have listened for more than 40 years about the demise of the independent broker. First it was 'direct billing,' then it was agency companies going 'direct' i.e. Travelers, then it was the aging of the broker community, then it was direct writers taking market share away, then it was milennials buying online, now it's Google, driverless autos, technology and on and on. Fellas, I'm still here and the people I've brought into our firm under 40 years of age will be here in 25 years. Globalization, smobalization. Insurance is too complicated for the man on the street and he wants someone to trust. Remember that word - trust? Relationships DO mean something."

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Agree? Disagree?

I might shock you by saying there's a lot in this broker's statement I agree with. But - let's point out the facts that I didn't:

  • When he started selling insurance, there were 80,000 independent insurance brokers in the US alone. That figure now hovers around 40,000. (You may remember the saying, "It's a recession when your neighbor loses his job. It's a depression when you do." I applaud any business person who can navigate 40+ years of business. But you can bet that even this broker is not operating the way he did 40 years ago. Did he have an agency management system then? No. Does he now? I certainly hope so. If he is marketing the very same way he did 40 years ago - and maybe he is - he's leaving a tremendous amount of money on the table.)
  • Consumer behavior has changed so much, it's self-evident. (If you need some details, read this.)
  • The independent channel has consistenly lost marketshare since 1995.
  • New, emerging and transformed competitors are stealing customers at a record pace. (Yes, as "complicated" as insurance is, some consumers are quite willing to buy it from an 800# or a website and never talk to a live person. Are they bad? Are they dumb? No, they're consumers acting the best they know how according to their personal values.)

So, if his thesis is that nothing really changes and brokers don't have to change either, that is simply not supported by fact.

But this broker every other broker who has survived the years and delivered a service to the consumer deserves a hearty congratulations.

Like I said, there's a lot to agree with.

Yes, the industry and the world around us have changed a lot…and the independent broker is still around. (But, compared to the day this broker started, our channel has been injured.)

And, a resounding YES to his comment that TRUST and RELATIONSHIP matters are of the most important lessons of all time for our channel.

The challenge, quite simply, is this. Today's consumer expects trust to be built through relationships that have a digital dimension.

 

The broker who truly respects the consumer simply has to accept that.

And here's the good news:

  • Today's technology makes it easy to connect with the modern consumer digitally.
  • Most important, if you do that, they will reward you. Richly. Measurably. Financially.
 

A few short years ago, JD Power showed us just how to make today's customer happy

And they showed us what that is worth to the broker of today.

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They identfied five ways the consumer perceives their interaction with the insurance industry.

  • They don't perceive any interaction at all.
  • They interact directly with carriers but not through agents.
  • They interact - old school - through an agent.
  • They interact with an agent who uses "traditional" technology. (Just to put this in perspective, a website is now considered a "traditional" technology.)
  • They interact with an agent who uses ermerging technology, including marketing automation.

As you can see from the chart above, whether they were boomers or younger, the reliable route to customer satisfaction is to include emerging techology as part of your customer communication platform.

But what does customer satisfaction mean to an agency's bottom line? Plenty…

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What happens when customers hit that magical "852" in the JD Power customer satisfaction score?

First, you can count on their renewal at a rate of 95.5%. If you inch that customer satisfaction rating down and you'll see your retention rate steadily go down too. (Over the years, I've been approached by many panicky brokers who got shocked by a sudden drop in their retention rate. When I ask them what their Retention Strategy is, I generally get a head-scratching daze and some empty platitude like, "Well, we've always really loved our customers." I'm sure they did. But unless you're demonstrating that love by consistently communicating value, how do they know? They don't!)

How much does a little tweak in retention really matter?

Let's take a million dollar book of business (so adjust this appropriately for your own firm). The difference between, let's say, an 89% retention and that 95.5% number represents a difference in cumulative income over the next 10 years of $1,943,652. Yes, almost $2 million. And, because you don't have to include the cost of acquisition of this formula, these are 2 million very very high profit dollars.

Customer satisfaction is a beautiful thing, and if you keep your score right around 852 not only will your retention go up, but so will your new customer acquisition. At that rate, 63% of your customers "definitely intend to recommend" their agent or broker. If 63% of your happy customers recommend you, and you close a reasonable 80% of them, you will have the elegant confluence of fast growth and low acquisition costs.

How much does relationship matter in the independent agent-broker channel?

Absolutely. In fact, much more than it does in the direct channel. It is of course, one of our unique assets.

But is this relationship strictly limited to handshakes and face-to-face contact? Absolutely not.

The truth of the matter is this. For the great majority, Insurance that is purchased through our channel cannot be supported through the economics of hand shakes and face-to-face contact.

Technology shouldn't replace those communications - but it can supplement them. It can add to them. It can help make your customer feel appreciated. It can help make your customer feel valued. Through the more sophisticated communication technologies, they can deliver value and strengthen the bond between the broker and their customer base.

We can all rant and rave about the difficulties of change. The JD power research does lay out a simple strategy. Today's consumer expects us to communicate through multiple channels. Today, we're spending 15 hours or more online per week.

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Even if you are not there with them, I can guarantee you one thing. Your competitors are.

 

Topics: Insurance Marketing

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