Dodging Distractions: Focus on Relationships for Long-Term Agency Success
Life has never held more opportunities for our attention to be pulled away from what is most important. We have all seen the statistics about the number of messages the average American has bombarding them every day. While these distractions do fragment our attention, they do not pose the threat to our businesses that something more insidious does — disintermediation.
In today’s agency business, virtually everything is changing and at a pace that is almost beyond anyone’s ability to keep up. These challenges seem to come more quickly and with more complexity every day and at the same time seem to make all too real a future that increasingly pushes the independent agent out of the picture. But that doesn’t have to be the case.
Agents who choose to understand the changes coming at them and greet them with renewed energy to do what agents do best — build and maintain relationships with policyholders and team members through service and development opportunities respectively — will see past the distractions and toward a profitable future.
Change Is Upon Us
The insurance marketplace, as well as society as a whole, has undergone tremendous change in recent years from a global pandemic to economic turmoil and now, to a hard insurance market.
The economy is fundamentally different than it has been for at least a generation and not even the experts know how to predict its direction. Attempts to manage economic distress with historically effective tools appear to be no longer working. Additionally, the apparent rise of artificial intelligence and the speed at which it may impact our business is unprecedented.
Further, insurance carriers have reacted to the post-COVID environment with a belated ballooning of rates and a slashing of availability in one of the most challenging hard markets to hit in a long time. This is frustrating agents and clients as finding comprehensive, affordable coverage becomes increasingly difficult.
Finally, retirements of a majority of agency, and carrier, employees are picking up steam as baby boomers age out of the workforce. At the same time, employees who remain are demanding flex time and work-from-anywhere arrangements while managers struggle with productivity and margin compression.
All of these challenges are distracting to owners, managers and even producers as they seek to grow their businesses, serve clients, and think about how to do so in the immediate future. But the disintermediation these challenges could translate to is even more concerning and seems to be growing like a thunderstorm cloud on a hot summer day.
Disintermediation has been on agency professionals’ minds for a generation.Occasionally, something occurs that brings it back to the forefront, Brigadoon-like. The dramatic increase in direct-to-consumer sales of personal insurance, and some limited small commercial products, in the United States proves it’s a real threat. Additionally, new AI tools and solutions have turned up the temperature, and potentially, the timing of when disintermediation could upend our way of doing business as agents.
Common Misconceptions
One reaction to these challenges is to focus on driving more volume through the agency itself and the constituent books of business produced and managed by its employees. Another is an ever-increasing focus on price as the predominant value in what the agency produces.
Unfortunately, with so many issues to navigate, it can be easy to pursue an ill-advised approach and make the issues worse instead of better.
At the root of each of these challenges is either a function of productivity or product cost. And in each case, I think agency leaders often calculate the cost incorrectly.
Many years ago, at the beginning of my career, I had a client who took me to lunch in a big S Class Mercedes car. He was my age, an attorney and obviously doing well. He was also a friend so I asked him, “how can you afford to drive such an expensive car”? He said, “your pickup will cost more than my Mercedes because the difference in what you bought it for and what you will sell it for will be much more than mine.” He was looking at the real cost of ownership while I was hung up on price.
As a large insurance company senior executive once told me, “Price is table stakes,” and we cannot ignore the costs of our client’s coverage. But today too many agencies focus on price as the first, and most important, factor in approaching how they sell. I believe for most consumers price is very important, but I also think an agency that focuses on price alone immediately disqualifies itself in the eyes of the customer for long-term service. Eventually, they’ll move their business, and possibly to an agent who offers more in terms of service even if the price is higher.
On another note, pushing productivity, and its close relative, volume, as a priority is also turning off talent and hurting agency employee retention rates. Today’s employees have many more choices of where to work than ever before. They are seeking development opportunities where they can learn, grow, and build their careers, more deliberately.
Relationships, Relationships, Relationships
The solution to these urgent challenges, for both clients and colleagues, is the same. It is to recognize that seeing them one dimensionally in cost terms devalues them. It does so because this focus on costs, either in terms of discounted insurance sales or professional development costs, misses the long-term value found in retaining long-term clients and developing skills of team members.
It takes time to develop a relationship that is more than transactional. In the case of an agency’s clients, it’s the relationship nurtured by all the agency’s team members that results in world class retention. Retention is the ultimate driver of agency profits and long-term retention is in turn driven by a deep relationship. No agency can always produce the lowest price.
In the same way, outstanding, long-term team members want more than a job today. They can have that anywhere. They seek a culture that is affirming, encouraging and altruistic. Peter Drucker is credited with saying “culture eats strategy for lunch,” but I think the future requires agency leaders to think about how to strategically build team centered cultures to drive their success.
The time and effort involved in getting to know someone, whether an employee or client, takes money. Whether leaders view this as a cost to be minimized or avoided or an investment to be maximized is based on their ability to find ways to cut through the distractions and focus on principles.
If our industry, and our individual businesses, are doomed because of any of the challenges I’ve mentioned, this is the time to abandon ship, not cut costs.
On the other hand, if human nature remains unchanged, then focusing on building, deepening and nurturing relationships with our clients and team members is the most important investment we can make.