During soft markets, it is relatively simple for insurance agents to figure out how to land an account. Come in with a lower price and your chances of writing the account are good. Agents may have the impression that Insureds are always price-focused and during the long soft market agents became accustomed to making price the top priority.
Those days are over. Insurer capacity has shrunk. For some coverages and classes of business, it is non-existent. Finding a willing market now is a bigger victory than getting a good price.
A focus on price-cutting can have other bad effects on an agency:
- The combined ratio for the property-casualty industry for 2023 is expected to be 103.8%. With underwriting losses running that high, carriers are obsessed with returning to profitability. Low prices plus normal or higher losses equals poor loss ratios. Expect carriers to pull appointments from agencies that run persistently high loss ratios.
- Carriers who do not terminate agencies will non-renew or cancel poor-performing policies, making it much harder for the agency to retain accounts.
- Carriers in some markets around the country have reduced commission rates. However, even with unchanged commission rates, selling on price may signal that agents need lower rates and the only way to do this is to cut commissions. This has been done in that past.
- Price is important to everyone, but clients who care only about the premium bill will jump without hesitation to another agent who can save them $100. These are not the clients an agency can build its future on.
It is important for agencies to escape the price-selling trap. Here is what you can do:
- If you have thought that the only way to win business is through lower prices, stop thinking that way. Potential clients may say they want lower premiums, but dig deeper and you will find that some have had bad claims experiences. Some may like self-service technology options your agency offers that others do not. Some may have uninsured or underinsured loss exposures that no one has addressed before. A bells-and-whistles endorsement that throws in $10,000 Ordinance or Law Coverage does little for the owner of a $2,000,000 building.
- Most potential clients will contact you in search of lower premiums. When they do, change the conversation. Educate them on the consequences of lower coverage and how it can impact them in the event of a catastrophic incident. Sell your agency on the services you provide. Explain the variety of carriers you represent and how you have the options to utilize different carriers if needed. If they keep steering the conversation away from coverage and value and back toward price, they might not be a good fit for your agency.
- Improve your product knowledge. If you write contractors, learn the differences between carriers’ automatic additional insured endorsements or builders’ risk forms. Form differences can be subtle but extremely important when a loss occurs. If you can educate clients on those differences and your competitor is talking only about saving money on premium, you have an advantage.
- Provide excellent client service. This can mean self-service technology, but it can also be as simple as having someone to answer the phone when a client calls. An Alabama agent is succeeding just by answering the phone.
- Always try to round out accounts. This may qualify clients for multi-policy discounts. It may also make it less tempting for them to move to another agency, as it would mean moving multiple policies while starting a new business relationship.
- Get known in your geographic and online communities. Sponsor events, attend charitable fundraisers, buy ads in the local high school yearbook. Participate actively in online discussions on LinkedIn, Facebook or other online platforms that reach out to your target market. Join trade associations for the industries you target. Become known as “the” agent to contact.
- Give proposals, not quotes. A quote is a list of prices. A proposal explains what those prices are giving the buyer. It can also include options the purchaser might not have considered. A proposal shows that you see the client as someone with problems that need solving.
The era of selling on price will likely fail over the next few years because carriers are not going to put up with it. The way to best deal with this is to start changing the culture of your agency to be true insurance professionals and not one that wants to win business on low rates. By doing this, your agency will continue to represent premium insurance companies while the low price competition will struggle to even have access to these premium markets.
