Customer Retention Should Be Priority No. 1 for Agency Managers

In this economy, there are many things that agents should be looking at in terms of how they manage their agencies, but what should be the top priority?

Juan Andrade is executive vice-president for sales and distribution at The Hartford. As part of his job, he oversees his company’s agency management consulting arm, Business Management Group, and speaks with agents across the country about management practices.

Andrade believes that while agency management requires a holistic approach, it is also important for agency managers to set priorities. Today, agents should put customer retention above all else as the No. 1 priority — above new sales, above expense reduction, above cash management. Insurance Journal‘s Andrew Simpson recently asked Andrade to explain his top priority.
Andrade: Customer retention, particularly now, is very important. We are in the fifth year of a soft cycle, particularly in the commercial lines of insurance, and probably the second or third year in the personal lines of insurance. So it is very competitive out there.

It is particularly tough for independent agents …. The best way to preserve the profitability, the viability of an agency is really to focus on customer retention, really keeping the folks that you already own within the agency.

Insurance Journal: What goes into a strategy then for customer retention? What things should agents be doing?
Andrade: The most important thing is to always let your customers know the value that you as an agent, as an adviser, as a counselor, can really bring to the table. After all, that is a big part of the service that you are selling to them.

A big part of that is really the relationship that you are able to maintain with the account, whether it is a commercial account or a personal lines account — really continually showing that individual, that business-owner, that you are there for them, that you can provide value, that you can provide advice. So the relationship part of it, I think, is very critical.

Following that is the fact that on the value proposition that you continually look out for their best interests, their coverage, their price, etc., just to make sure that as prices come down in the soft market, you always are giving them the most competitive quote that you can find, basically to make sure that you, again, enhance the value that you can offer to them.

Insurance Journal: In this economy, it might be tempting to cut back on some expenses and travel. How important is face-to-face contact with clients in this economy?
Andrade: Contact is the most important thing, period. Now for some accounts, probably the larger commercial accounts, the face-to-face is very important because there is a substantial amount of premiums at risk. So I think for that we ought to make sure that we are spending enough time whether it is with a risk manager, the CFO, the human resources manager, to develop and nurture the relationship.

As you maybe move down to smaller accounts, just being in contact with them on the telephone, just letting them know that you are keeping their best interest at heart, I think is very important. To me, the most important thing is to contact the engagement, the continual engagement with those people.

Insurance Journal: Is everyone in an agency involved in this strategy? Are there certain people that have to play key roles and others that play support roles?
Andrade: It really does depend on the nature of the account and the nature of the agency that we’re talking about. For some of our largest partners that are dealing with very large commercial accounts, everyone is involved from the principal, all the way down to the CSR that is actually binding the business on a day-to-day basis. So I think everyone has a role to play.

At the principal level, it may be really from the perspective of being the rainmaker, bringing in the account, developing that relationship with the CFO for example at a larger firm and then passing it on to his team or her team to make sure that they develop additional relationships with other people in the firm, but they most importantly execute on the promises that have been made.

Now for smaller accounts or for personal lines types accounts, it may be the CSR as the production people that are primarily involved in this account. But the more successful agencies that I have seen, everyone is involved, whether it is the owner of the agency, the principal, all the way down. It becomes really a service-oriented business. The more you are engaged with your customers, the more you will understand your business and the more you can execute on the vision that you have.

Insurance Journal: How does an agency know it is doing a good job? Can it expect 100 percent customer retention in this economy?
Andrade: No, in this economy it is difficult. You know some of the data that we have seen out in the marketplace would indicate that at an account retention level, the best agencies would probably run at about 90 percent. If you are south of that by far, then you are probably worrying about where is the business going, is there competitive activity in your market, are you with the right carriers, pricing, etc.

But I would say account ratios of about 90 percent are probably very strong right now. And you are right, given the economic times and the pressure with rates, it is difficult, and this is why customer retention is one of the critical strategies.

Web Resource:
This is the first installment in an Insurance Journal interview with The Hartford’s Juan Andrade. View the entire Insurance Journal video series, “Managing an Agency in a Troubled Economy,” at www.insurancejournal.tv.