Insurance Agent Web Power

As a follow on to the post on The Future of Independent Insurance Agent in Personal Lines, though this post is applicable to all lines of insurance and insurance agency customers..

I recently was contacted by one of Confluency’s client agencies who was concerned that their satisfaction ratings were lower than average.  A prospect/client survey report card is included as part of our website admin so some data is provided to all agents after a website service or quote request.  In this case, the ratings were low across the board:  timeliness of response, satisfaction with explanations and information, etc.  But the real vote of confidence is in this question:  Would you be comfortable referring a friend or family member to us for their insurance needs?  Clients who provide referrals, as well as those that don’t, are voting with their feet, so to speak.  Most of the rest of the questions have to do with why clients are happy or unhappy  - learning about that gives you an opportunity to influence future survey results (and ultimately, retention, account sales and referrals).

So if you ask your clients if they are satisfied that you have explained insurance coverage and options adequately and a disproportionate number answer ‘no’, then you obviously need to spend a little more time with each client.  Spending time with clients is a real key to happiness.  Let me digress a little and share information from the medical world.  A few years ago, a medical malpractice insurer correlated malpractice lawsuits with the amount of time doctors spent with each patient.  Some doctors that spent, on average, just a couple more minutes with each patient.  And those doctors were sued a lot less often than doctors who hurried on to the next patient.  It’s harder to sue someone you like and you are more prone to ‘like’ a doctor who actually spends a minute or two talking and listening to you.  In the same way, clients who feel ‘loved’ by your insurance agency are far more disposed to ‘like’ you and are less inclined to shop their insurance elsewhere every time they experience a minor bump in the road.

In this context, love is synonymous with communication.  You can’t do a better job explaining insurance coverage and options to clients unless you spend just a little more time with them.  You can do that by being more efficient and taking advantage of every low-cost communication medium you possible can (i.e., your website, email and Facebook).  But even if you do that, insurance agency management will need to spend a little more time by taking a moment or two each month to communicate with all clients (newsletter, social media) and your CSRs and producers are going to have to spend just a bit more time with each client and prospect on the back end of every transaction.  Time is money, so at the end of the day, that means that the pot of gold used to pay salaries and bonuses will be a little smaller, at least at first.

Most insurance agencies are working at capacity – maybe your staff isn’t necessarily spending time as efficiently as you would like or maybe they aren’t choosing the tasks they spend time on wisely – but there is no doubt everyone is busy.  Something has to give.

What Kind of Communication Makes Insurance Consumers Happy?

Writer’s block is the bane of all authors, and that includes insurance agents who want to pen newsletters or post to Facebook or start a blog.  The first hurdle, coming up with a topic to write about, is often insurmountable.  Here’s a clue for insurance agencies, courtesy of a recent survey conducted by Siegle+Gale:  consumers find every single touch point in the insurance relationship to be complex.  And they are willing to pay more if the insurance experience can be simplified – the study suggests 5% – 6.5% more.

Survey Data from Siegle+Gale Global Brand Simplicity Index 2011

So take advantage of all the inexpensive and easy-to-use communication channels that are available to your agency and start to develop strategies to simplify insurance for your customers.  They will love you for it.  Just as important, they will be willing to pay a bit more for their insurance.

Your Agency and the Independent Agency Distribution System

For thirty-years now, pundits have been predicting the demise of the independent agency in personal lines.  It still  hasn’t happened.  Oh sure, there have been losses in market share over the last several decades, mostly to captive agency companies, but also some to the direct marketing companies.   But there are still plenty of insurance agencies making a good living producing personal lines.  Can it last?  I think so, but I’m betting that over the next 10 years there will be a far smaller number of agencies with the majority of their revenue coming from car and home insurance and those agencies that are 60% commercial today will be 75% – 80% commercial.  That means less income stability year-to-year for most agencies; personal lines, while not sexy, does’t exhibit the rate and underwriting capacity volatility that commercial insurance does.

But some agencies will continue to thrive in personal lines and I have a good idea which ones.  Here’s how to tell if your insurance agency is likely to be one of the personal lines survivors – just answer this question:  How many policies does your agency have per personal lines account?  Here are your possible answers:

1. I have no idea
2. about 1.5 policies
3. 3 or more policies

If you chose answer 1 or 2, and you don’t make some changes to your customer development programs (i.e., actually implement some customer development programs) then your agency has no future in personal lines.  If you chose answer 3 then you probably will continue to produce personal insurance business profitably.

What has really changed in 20 years?  A lot, yet in some respects, nothing.

I was at an industry conference in the fall of 2011, the keynote speaker was Risk Information’s Brian Sullivan.  As always, he delivered some thought provoking information in an engaging way.  During the Q and A, someone asked him what he thought about the future of personal lines for independent agents.  His answer, more-or-less, went like this:  Independent agents can continue to grow in personal lines but they have to do something to justify the extra cost of doing business (within the independent agency system).  The only way to do that profitably is to do more business with fewer clients.  Today, most agents don’t do anything extra and the average number of policies per personal lines account is 1.4.

Over 20 years ago, I spent time in a lot of insurance agencies, helping them analyze their marketing opportunities and one of the things I measured was the number of policies per personal lines account.  Guess what that number was.  If you guessed 1.4, you would be absolutely right.  The number hasn’t changed in over 20 years; the conclusion I would have to draw is that most agents, despite all the rich and inexpensive communication mediums available today, still don’t communicate regularly with their customers.  That is, there is no systematic communication process to capture more account sales, improve retention, and earn more referrals.  However, the agencies that have 3 or more policies per account are on their way, and for the most part, these agencies are using their website blog, Facebook, and email newsletters to build relationships with customers and reinforce their value proposition.

I have seen estimates of seven as the average number of ‘personal’ insurance polices held by the average person.  I can’t cite the source however, so instead, let’s think about policies a person should have in three groups:  Must Have, Should Have, Might Need…

Must Have (Bought Products)

• Car Insurance
• Home, Condo or Renters Insurance

So there’s two.  They are in the Must Have group because (with the exception of renters insurance) the state or the bank require most of us to have this kind of insurance.  These insurance policies are what I call ‘bought’ products, meaning you don’t have to create demand for them – people will shop for them and buy them because they have to.  Because of that, most insurance agents start their personal insurance relationships with one of these products.  Unfortunately, most agents also end their customer relationships with these products as well.

Should Have (Sold Products)

• Life Insurance
• Health Insurance
• Disability or Accident Insurance
• Critical Care Insurance
• Inland Marine (Valuable Articles)

I’m counting Inland Marine as a separate policy because it is often written on as a separate line from homeowner insurance.  Most people, even renters, have some personal property that is not adequately covered by unendorsed home, condo or renters insurance.  Yet how many property policies in your book-of -business include some inland marine policies?  Individuals may get basic life insurance through their employer as well as health and disability, but we all know that employee benefits have been slashed over the last several years and far fewer people have employer-provided coverage today.  Maybe your agency doesn’t write life, health or disability.  That’s a business decision and is certainly your call – but if that’s the case, instead of 5 more potential product relationships you are limited to one.  These policies are different than the Must Haves in that there is generally no government agency or financial institution telling people they have to buy one of these policies.  For that reason, I call these products ‘sold’ products; you have to create a demand through education and that requires customer communications.

Might Need (could be Must Have or Should Have)

• Boat Insurance
• Home Business
• ATV, RV
• Motorcycle
• Pet Insurance

There are more of these, of course, but these insurance policies are the most commonly needed.  Sometimes, as in the case of motorcycle insurance, the products are actually ‘bought’ products courtesy of the DMV licensing process; other times, individuals will finance a boat or RV and the bank will create demand for you.  Home business insurance and pet insurance are most always ‘sold’ products – you’ll have to do a little work.

So in short order we have a list of 12 fairly common personal insurance policies.  The average of 7 per person is starting to look very plausible.

Developing deep customer relationships in personal lines requires systematic communication.  That communication can be scheduled in advance – a newsletter, for instance.  That communication can be planned in advanced but developed ad hoc, as information becomes available – Facebook or blog posts, e.g.  But systematic communications should also be situational.  For instance, I recently filed two auto insurance claims.  In both cases, I contacted the insurance company claims department directly, because that’s what I was instructed to do.  The insurance company did a good job for me in both cases (of course, I haven’t seen my renewal premium yet).  I knew what to expect, was kept apprised of the process and settlement was speedy.  And the number of times my insurance agent checked in with me during either claim?  Zero.  If I were a cynical person, I might start to ask myself why I have an agent at all.  And when my renewal does come, and most likely with a premium increase, do you think I will hear from my insurance agent then?  Probably not.  It’s scenarios like this that predispose consumers to shop their insurance – and never tell their agent.  If I were to move my car insurance I would become a one policy account instead of two…and I’ll bet my agent’s policy per account ratio is 1.4.  Does he have a future in personal lines?  I’m dealing with anecdotal evidence here, but it doesn’t look like to me.

How about your insurance agency – do you have a future in personal lines?

I recently attended a series of insurance company events during which one of the vendor presenters repeated this statistic:   85% of insurance consumers start their research with the search engines.  That sounds plausible; the problem is, it’s not true.  A 2010 study by AIS Media found that only 32% of consumers begin their insurance quest with the search engines (not that that’s insignificant, it’s just not 85% – by any method or rounding up).  The number one place where consumers start their purchase research?  By asking family, friends and other acquaintances where they have their insurance.  As noted in Confluency’s June newsletter, this behavior is the reason referrals are the number one source of new business for most agencies at 69%.  But there’s even more.

An article posted by eMarketer today cites data from surveys performed by Knowledge Networks and MediaPost Communications who find that 37% of social media users trust what friends and family say in social media about a product or service.  That percentage is strikingly similar to the AIS Media survey results:  the percentage of consumers who begin their insurance research by checking with friends and family is 37.5%.  And there’s more.

Mobile search is on the rise, but is still less than 10% of all search (that’s projected to change rapidly in the coming two or three years); however, 40% of social media users access social media via mobile devices on a regular basis.  Think about the typical scenario…I’m out shopping, maybe for a car, and the topic of insurance comes up.  Or I’m about to close on that home or refinance and the realtor or mortgage broker brings up insurance.  Or I’m at work, grousing about that that insurance premium rate increase I got in the mail yesterday.  Who am I going to turn to?  If I’m like 37% of the population (or 37.5%) I’m going to check with my friends and family – my social network – and there’s a pretty good chance I’m going to do it on my smart phone by accessing social media.

So the question most insurance agents should be asking is this:  Will my customers’ friends and family see my agency when they engage with my customers through social media? For those agents who have established profiles on Facebook and other social media, and have been engaging their customers there, the answer is probably yes.  For the agents who have not, the answer is less clear.  But I’m willing to bet that the level of referral business will drop for agents who do not engage  in social media.

Here’s what Wikipedia has to say about ecommerce, ‘… (it) consists of the buying and selling of products or services over electronic systems such as the Internet and other computer networks’.  They say a little more of course, and concede there is often a physical deliver component, but for the most part, the classic definition of ecommerce involves little more than circuits and networks.

The Seduction of Insurance Ecommerce

And the idea of ecom is alluring, how can it not be?  You set up a website, humans find it and enter information, get coverage and pricing information, and then enter payment information.  On the other end,  money comes out, straight into the pocket of the insurance provider.  And there’s flaw number one with insurance as ecommerce from an insurance agent’s perspective:  There is no role for the insurance agent in the foregoing scenario.  If insurance consultation and purchase could be conducted this way, why would anyone need an agent.  This view of insurance and ecommerce was pretty much the thinking in 1995 and it hasn’t come to pass yet.

Life Insurance and Auto Insurance for Basic Needs Consumers

That isn’t to say that some insurance sales have gone mostly online, term life and personal auto are two examples.  But even there, many consumers would be better served by involving a trusted adviser.  I sometimes ask agents how often coverage options on an original car insurance quote submission end up the issued policy limits.  The answer is almost never.  That’s because, even for basic auto insurance, consumers don’t understand how to determine coverage needs or the interplay between deductibles and other credits.  And while term life quote requests are easy to complete, not every company offers advantageous rates to consumers with health concerns or  a little long in the tooth.  A little experienced guidance would come in handy for many term life prospects.

A Shot in the Foot?

Advertising by term life insurance companies, and particularly advertising by the likes of direct marketing giant GEICO, lead people to believe they don’t need an agent.  And that mentality extends beyond just those two products.  Insurance agents have lots of opportunities now to participate in ecommerce through auto and home rating portals for comparative rateers, like EZLynx and Silver Plume, and company provided website widgets that allow website visitors to quote and buy online.  But if we just throw these on our websites indiscriminately aren’t we just reinforcing the message being pounded out by GEICO?  Are we shooting ourselves in the foot?

Internet Communication with a Sprinkle of Ecommerce

Most agents are local businesses and are no where close to fitting a traditional ecommerce model.  Most insurance agents can deliver benefits that can’t be matched by ecommerce alternatives but they need to make the case for agency value proposition and that’s where internet communication comes in.  Using email, the agency website, and social media agents have multiple low cost channels through which they can reach out to customers and prospects and communicate differentiate value propositions; but we need to actively communicate and those communications need to include a clear and advantageous alternative to quoting and buying online.

There is evidence that consumers want, and maybe even expect, to be able to get comparison pricing online.  So let them do it, but also let them know that going lone wolf may not yield the best combination of price, protection, claim paying ability and service, and convenience.  And let them know you have a good alternative – your insurance agency.

GEICO is the Insurance Watson

It isn’t news to most of us that IBM’s super computer, Watson, recently matched wits (or more accurately, databases) on Jeopardy with two of the worthiest opponents the human race could offer.  The results of that game are neatly summarized in a recent Mashable post:

IBM supercomputer Watson has defeated two of Jeopardy‘s greatest players, and it wasn’t even close.

But some weaknesses in Watson’s otherwise impressive capabilities were revealed.  So you can look at the Jeopardy spectacle in two different ways:  1) Singularity is right around the corner so suck up to the machines to make sure you get a good slice of the pie in our cyborg dominated future; or 2) We need to change the rules of the game so the humans win, not the machines.

An article in CNN Tech provides some further insights into those weaknesses:

At the end of the day, Watson is not really conceptualizing a clue’s meaning. It simply number-crunches its way to the right answers by comparing vast amounts of data. This is why it dominates the “fill in the blank” knowledge clues (Aeolic, spoken in ancient times, was a dialect of this), but falters on some more “common sense” deductions.

So, to all you humans who like to be humiliated by wires and circuits:  go ahead and play jeopardy with computers (and the future *is* written).  Or perhaps you would rather compete with computers in a game where the questions were framed by common sense clues instead of straight-on facts and data?  I would.  I like winning.

So what does all this have to do with a blog about insurance marketing?  It has to do with an observation I make from time-to-time, that is, I see insurance agents trying to match the value propositions of insurance marketing equivalents of Watson – GEICO and Esurance.  While it may be true that your agency can also save new customers 15% or more, and you do it just as frequently as GEICO, competing on that value proposition is a losing proposition.  GEICO is really good at it, and while they promote the 15% or more savings, they simultaneously devalue relationships (what are those anyway?), one-stop convenience and other value propositions that most local insurance agents could be cultivating.  GEICO is Watson.  Don’t compete with them in a game dictated by rules that work to Watson’s advantage.  Come up with your own rules, and beat the borg.

God reached his hand down from the sky
God asked Noah if he wanted to die
He said no sir, oh no sir
God said, here’s your future: it’s gonna rain

—Here’s Your Future – The Thermals

Just a few years ago, the very future of internet music phenom Pandora hung in the balance as the RIAA tried to impose it’s legacy cost structure on this legitimate music delivery service, and by extension, every other streaming service. Today, Pandora thrives and legacy music delivery systems, like CD’s and radio are losing listeners.

According to a recent study from Edison Research, listening to the radio longer predominates as a morning activity for 12 – 24 year olds, dropping from 74% ten years ago to 41% today.  In the same time frame, 12 -24 year olds have chosen to purchase 62% fewer CDs.  This age group spends an average of 3 hours a day on the internet, and when it comes to acquiring tunes for their music libraries, they cite illegal downloads or transfers as the 2nd and 3rd most popular means of augmenting music collections.  Between the lines:  we don’t care how you manufacturers and distributors want to supply music, we want it the way we want it, ‘legal’ or not.

To fall back on another popular music reference, the video documentary chronicling former Clash front man Joe Strummer’s Clash history is titled The Future is Unwritten.  That’s not exactly right.  The stats mentioned here lead to some very obvious conclusions.  Here’s your future.

Insurance agents don’t need to drag their collective feet on the way to a prosperous future.  61% of all Americans use Facebook, more than half do so at least twice a day.  And that 12 – 24 age group – your future insurance consumers – they don’t read the papers (only 4% read a paper almost everyday).  You know where your future is, and if you want to do business in the future, you know where your agency needs to be.

Clock radio photo under Creative Commons license http://www.flickr.com/photos/alexkerhead/

Businesses that have products or services to which consumers have a strong emotional attachment.  For instance, a friend of mine runs a business that markets reggae and Rastafarian themed clothing, posters, and other products.  All they have to do is post a song lyric or two to their Facebook page each day and poof! – over 1,000 ‘fans’ and multiple comments each day for each post.

Insurance is harder.  There are two times when the emotional attachment to insurance is strong: 1)  When someone’s premium increases or coverage gets canceled, or: 2) After receiving fast and complete indemnification after a claim*.  Those attachments are at opposite ends of the spectrum – so what’s in the middle?  What is the fodder for those daily Facebook posts  – the song lyrics of insurance, if you like?

I was going to use this blog post to offer up some suggestions, but PC World beat me to it.  Here’s an excerpt from their July article, Secrets to Using Facebook to Market Your Business:

Customers want to be informed and engaged, not pitched and harassed. It’s OK to tie in your products and services where they’re relevant, but don’t simply use the Facebook page as a platform for marketing soundbites.

You can post news or stories related to your business and provide unique commentary or insight. You can also use the Facebook page to provide tips, tricks, or information content. Rather than just talking at the audience, though, try to incite comments and feedback from the members to foster a sense of community with the customers.

*OK, so there are lots of other negative emotional attachments to insurance:  I don’t understand my policy paperwork, or bill; I can’t get anyone to respond to my questions, etc.  In the Yin-Yang philosophy of life and business, each of the negative emotional attachments can also be turned to positive experiences.

The F.C.C., stymied in its efforts to ensure a level playing field for web content providers, has been holding side meetings with large internet players to find a way to regulate some form of net neutrality.  While the F.C.C. quest to see that no web content is favored over any other content continues, the New York Times reports that a deal between Google and Verizon, which in part will guarantee preferential treatment for Google’s YouTube videos on the Verizon network, may be struck as soon as next week.  Once one large content provider, like Google, agrees to pay a delivery service, like Verizon, for faster delivery of content, other deals are sure to follow.  And as with everything else, the cost of these side deals will be passed on to end users…and smaller content providers, who can pass on or pay the tariffs that internet service providers will be able to command, may see their content slowed down.  The end of the ‘free’ internet may be at hand.

Something Old, Something New

I talk to a lot of insurance agents.  Some are happy with their sales and profit growth, most aren’t.  That’s one thing most agencies have in common.  Some have little free cash to invest in marketing programs, some have literally invested over $100,000 in what they believe to be state-of-the-art marketing systems.  Even these agencies have something in common.  Almost none of them are engaging in the four basic tactics that cost almost nothing and deliver demonstrable sales results.  Two of the tactics are as old as dirt and two of them wouldn’t exist without the internet.  As much as anything, I think that shows that the insurance agent who achieves top quartile growth combines a little of the old with the new.

The New

Local Search

Almost all insurance shoppers turn to the internet at some point during their research and purchase process.  And increasingly they are presented with a short list of local businesses next to a map.  Informal research conducted by Confluency Solutions indicates that 80% of all insurance agents have not claimed their local listing with Google Places, Bing Local, or Yahoo Local.  Claiming and enhancing your agency’s business listing is free and takes little time.  That’s why every agent who cares about sales growth needs to manage their visibility in local search.

Email Marketing

Email marketing has been with us for so long that it hardly seems new but it was not possible without the internet.  Spam abuse has brought us tightened regulations (CAN-SPAM) and tightened email filters to keep out unwanted email.  Many agencies use email abuses as a rationale for not collecting and using email addresses.  But, as the Marketing Sherpa chart below shows, those businesses that use email marketing, have *not* seen diminishing returns over the last three years.

There are lots of techniques for gathering email addresses and obtaining permission to send out emails but the best place to start is with your customers and current prospects.  Intelligent email communications to the first group improves retention, account sales, and referrals.  Emails to the second group can introduce additional product (sales), expand your insurance agency value proposition, and maximize sales conversions.  And emailing to either group will have almost no impact on your marketing budget.  You can get money for nothing.

The Old

Lost Business Reclamation

Customers leave for a variety of reasons but always a variation on the ‘grass is greener on the other side’.  Often it isn’t.  Customers are frequently gone before you know you’ve lost them.  In those cases where an agency can learn about a potential customer defection before it happens, the customer is retained 86% of the time.  They just want to know you care.  And if you show them that you care, even after customers have left your insurance agency, you can win back that lost business.  You can pick and choose who you want back, and a process employing a few well placed phone calls, surveys, and emails can bring ex-customers back into the fold once you’ve helped them realize the grass really isn’t greener on the other side.

Managed Referrals

Most agencies get nearly 70% of their new business from referrals.  Nothing wrong with that, except that in most cases those referrals happen fortuitously.  A simple program, wherein you reward customers for referrals with small gifts and constantly promote – with your email, website, on-hold message, and conversation – the existence of your referral program, you can increase the number of referrals your insurance agency receives dramatically.  Of course, if you are employing the first three tactics discussed in this post, your percentage of new business from referrals will decline.  But there is nothing wrong with that – it’s all low acquisition cost.

A recent survey from Forrester Research suggests independent insurance agents need to have a little more fun.  Consider:  ‘When it comes to “enjoyable,” consumers rated independent agents “poor,” but gave them “good” ratings for “meets needs” and “easy to work with.”’  Well, two out of three ain’t bad, but what if your agency could cancel out that insurance dread and score 3 out of 3?  This low ‘fun’ score is precisely why insurance agents find it so challenging to come up with social media content – social media is all about fun, and…well, socializing.

Who was #1 on the enjoyable list?  USAA.  USAA is a unique animal, to be sure, but there is something to be learned from their Facebook page.  I just scanned their currently displayed wall, top to bottom.  Nowhere did I see a we-can-save-you-money sales pitch or read a dreadful claims scenario wherein someone found out they didn’t have the right insurance.  USAA understands that Facebook isn’t a medium for the hard sell…it’s for fun.