It seems as if the entire insurance industry has been reduced to three words: price, price and price. Agents–especially independent agents–like to say, "We're all about the relationship," but the message relentlessly conveyed in the media through literally billions of dollars of insurance industry advertising is, We'll save you 15% or more. Some time ago we asked ourselves, "What are we doing that's really different, if all we're doing is quoting insurance?" The conclusion we came to is that Clark-Theders is not an 800 number. The results of that conclusion form the basis of this article.
Referrals, and the customer service that inspires them, are the lifeblood of our organization. We live and breathe service. It's how we differentiate ourselves from our competition. The value we provide our customers–which has nothing to do with price-last year resulted in $1.7 million in new-business premiums. Almost 100% of that came from referrals. This year, by April we'd already exceeded last year's total of new commercial-lines business, and 90% of that was from referrals or additional policies for existing customers. Our customer retention is always in the high 90s; last year in personal lines we lost only 26 of approximately 3,000 customers.
Reach out and touch someone
We used to invest a fair amount of resources in various advertising and marketing efforts. Eventually, we began to track where our new business was coming from, and we discovered it certainly wasn't coming from advertising and marketing. It was all coming from referrals. We finally asked ourselves, "Why are we trying all these things, most of which cost a lot of money, instead of simply doing the best job we can for our customers, continually nurturing those relationships, and asking if they know of anyone else we might help?"
And so we began to focus on giving our customers a reason to choose us–and retain us–that went far beyond price. We decided to create a culture that revolved around flawless personal service, which led to highly satisfied customers, which resulted in a lot of referrals.
To that end, our staff today consists of 28 people, only three of whom are sales producers. The rest, excepting one part-time producer, are dedicated to customer service. People often ask why I need so many on staff. My answer is, "Where do you think customer service comes from?" Whenever someone calls our office, a real human being answers the phone. Every member of our staff has been through state licensing school. If someone has a question, it's answered–now. If someone needs a certificate, they get it–now. If something needs to be changed, it's changed–now.
Our corporate structure is designed to foster personalized service. We dispensed with personal-lines and commercial-lines departments. Instead, we created teams around our producers. Each producer has his or her own personal and commercial CSR, personal and commercial processor, and so forth. Our goal was to create several small agencies within a large agency. I know we've succeeded because sometimes customers express surprise when they find out Clark-Theders is not actually two desks and a phone in a tiny office somewhere: "Oh, I always thought it was only you and Linda!" When I hear that, I know we're where we want to be.
And those teams work. Our agency is labor-intensive, because we want it that way. We're fully agency bill in personal lines and also print and issue policies. Recently we had a chance to have our main personal-lines carrier take over policy issuance, but we declined. Our philosophy is to never miss a chance to connect with our customers, including by mailing them policies. This hands-on philosophy informs everything we do.
We also wanted to demonstrate stability. Our customers want to know that the person who is here today is going to be here tomorrow, and that the agency isn't going to be jumping in and out of markets or changing procedures every year. My father likes to say, "Do the right thing every time, and you never have to worry about making it up." Honesty and reliability are the heart of customer service.
Another important component of our corporate culture is a family atmosphere. We may have nearly 30 employees, but we're still a family business. My father is CEO, I'm president and COO, my mother works in the agency, and my brother does all of our property inspections. I stress to our staff that just because your name isn't Theders doesn't mean you're not family. If our employees feel they are, it will be evident to customers and give them a feeling of comfort and security.
We spent over $10,000 on greeting cards last year: sympathy cards, new baby cards, congratulations-on-your-new-home cards, etc. We have the entire staff–all 28 people–sign each one. Our underwriter at one of our carriers recently left her job, so we sent her a best wishes card for her new endeavor. Whatever the occasion, we're constantly getting these cards out, because that's what a family does.
We're committed to these regular "touches." We have a program called CCS, for Customer Communication Strategy. At renewal, we specify in customers' files how often they're to be contacted in the coming year. These touches include letters, e-mails and phone calls. Also, each week we randomly select four customers to receive handwritten notes from staff members, saying things like "We were just thinking about you," or "Haven't heard from you in awhile; hope everything is OK." We send thank-you/we-value-your-business cards to customers who pay on time.
This may sound like overkill, or at least needlessly expensive. And we have asked ourselves if we really need to be doing this. After all, we might send 80% of our 3,000 personal-lines customers quarterly postcards. But people frequently tell us: "I love getting your cards. You're the only people who send me a card for paying on time." If someone who should get a card doesn't, we hear about it. If our customers feel that connection, then yes, it's definitely worthwhile for us to spend that money. I don't think the importance of these regular touches can be overestimated.
We focus on being proactive and maintaining contact year-round, because in customer service little things are big things. So we send out an informative newsletter and various mailers, and provide cell phone numbers for after-hours availability. Such things differentiate us from the commodity-pushers the public sees portrayed in the media.
We still advertise, by the way, but now we have a better idea of why we're doing it. We advertise and sponsor community events to maintain a positive image for our existing customers. We have no expectation that new business will result directly from these activities, so we choose opportunities we believe will maximize goodwill or visibility. For example, we recently arranged for banners to hang on the light poles on the main street in town.
Service creates satisfied customers, and satisfied customers create referrals; but, hard as it may be to believe, our customers don't wake up every morning wondering who they can refer to their insurance agent today. If we want referrals, we have to ask for them. And so we do.
If they're happy and you know it … ask!
Just as we never miss an opportunity to connect with our customers, our CSRs are trained to recognize and seize opportunities to ask for referrals. Recently, we gave paint paddles with Ask for a referral printed on them to the staff. When an employee appeared to be engaged in a dynamic phone conversation with a customer, his or her co-workers would whip out their paddles and place them in front of the CSR: Ask for a referral! It became a fun little game around the office, with people challenging each other, and it resulted in $100,000 worth of new business. That technique has since run its course, so soon we'll develop another.
It's worth noting that those dynamic conversations need not concern insurance. Our goal is to build relationships, so the topic itself isn't important. What some owners may consider "gab"–about last night's basketball game, or what their kids are doing in the school play–we consider building security and trust. When you've achieved that comfort level, the next step is obvious: Ask for a referral!
While we keep our eyes open for referrals wherever or whenever they may arise, we also have a system for asking customers for referrals. With our personal-lines customers, we ask at the point of sale. When people feel you're a good fit for them and are willing to break a relationship to go with you, they're completely satisfied. What better moment are you going to have to ask for a referral?
Next, we ask the customer to contact the referral on our behalf. That's extremely important, because otherwise you're just another annoying voice on the phone. When we follow up, we try to quote right then and there. We're persistent, but polite. For example, if the prospect responds that it's not the right time, we say, "I understand. When would be the right time?"
Contact only starts the ball rolling; follow-up is what makes the process work. Each referral goes into an agency management program, and at the appropriate time a re-market letter is generated. Each letter gets a personal signature–in fact, nothing leaves our office without a signature. Not only does this provide a personal touch for the prospect, but when the letter stops at the producer's desk for a signature, it serves as a reminder of the contact and provides him or her an opportunity to write a quick note on it.
We have a system for obtaining referrals from claims too. Our claims liaison person contacts not only our customer after the claim but also the third-party claimant, to make sure that everything is handled properly. Then, at settlement, we ask our customer to rate how the claim was handled: excellent, good, fair or poor? Probably 95% of our claims are rated excellent.
Now that we've just provided a service with which our customer is highly pleased, we have the perfect opportunity to ask, "Is there anyone else you know who would like excellent service as well?" Next, we approach the third party: "How was your claim handled?" Not only do we get valuable feedback, but we also can then say: "If your level of service was excellent as a claimant, think how your experience would be if you were a customer. Is there something we can do here?"
We take a similar approach with our commercial customers. We ask them for referrals at renewal. As we bring them what we hope is good news, what better time to ask, "Do you know any more businesses we might help?"
The follow-up is the same, but we add a touch for the commercial prospects, both referrals and cold calls. For 25 years, we've been photographing prospects' business premises as part of qualifying accounts. If the grounds are well-kept, you likely have a company that's making money and investing in the facility's appearance. Conversely, if the bushes are overgrown and the paint is peeling, the account might not be such a great risk. Between the photos and a little Internet research, we can learn a fair amount about a company before we meet the principals.
The photos serve another purpose as well. We mount them on nice boards and bind them up with marketing brochures, a sales letter, references and testimonials, and other materials and hand-deliver the packet. The point is to make the packet as heavy as possible, so when prospects get something, they feel like they got something. Now, I have no doubt they quickly throw away most of the materials, but not the mounted photo! That goes on a desk somewhere, and our company information is on the back. We've had people call three or four years later because of the photos. It happens at least once a year.
With commercial prospects, we sell around X-dates. Naturally, we try to set up a breakfast or lunch meeting. Should we meet with resistance–e.g., "I'm very happy with where I am; why should I take an hour and talk to you?"–the response is always the same: "We have 24 staff members who are non-salespeople, dedicated only to service. We are 100% confident that our turnaround time and level of service is superior to what you receive now. We'd like an opportunity to tell you more about it."
Admittedly, some people don't care about service. They might say all they really care about is a lower price. If that's the case, we'll usually walk away. We're about service and value, not bargain-basement rates.
For the last several years, we've done monthly "Lunch-n-Learn" sessions for our commercial customers. We provide lunch and bring in guest speakers who talk about a variety of business topics. We have 35 to 45 attendees every month. Some people have attended every session for four years. Naturally, we encourage customers to bring along other people from their companies. Again, it's all about differentiation. We provide value-added services that our competitors don't.
You may look at the composition of our work force and wonder about our profitability. Historically, we've thrived by reinvesting our profits into systems and people. Our revenue per full-time employee is $142,000, and the revenue per producer is $840,000. Over the past three years, our pretax adjusted profit has been approximately 35% of gross revenue. Our P&C premium volume in 2006 was $17.5 million.
Circles of influence
Some customers volunteer referrals without being asked. We pay particular attention to those. Long experience has taught us that good people associate with good people, and bad people associate with bad people. We look through such referral sources' activity: How do they typically behave? Are they high-maintenance? Are they slow payers? You can get into a cycle of bad customers begetting more bad customers. If a referral source isn't sound, we'll still try to help his referral, but we'll be extra diligent.
We don't do as much pre-qualifying as one might expect, since so many of our referrals qualify themselves. We've found that where the referral comes from is whom the referral turns out to be 95% of the time. It's an amazingly reliable rule. And trust me, when you break it–if you don't do your due diligence–you pay for it every time.
What we call "circles of influence" are important referral sources. These are groups of people you cultivate, whether friends, neighbors, networking contacts or the people you always see at the lunch counter. Meetings of local business organizations are good places to cultivate circles of influence. So often, people show up for these events, robotically put in their time and leave feeling they've done their duty. When we attend such meetings, we get everyone to know who we are. We get around and ask questions.
I have one businessman friend I met through a local business connection. I've known him for two years, and we've yet to talk insurance. This isn't by accident. My goal is to get to know a person first, taking as long as it takes. By then, whenever discussing insurance becomes appropriate, that person will frequently say, "Here, you can have it." Along with their business, I'll usually receive referrals as well. That's how circles of influence work. Think of it as long-term, no-pressure networking.
We've experienced a lot of success in our community, so we feel it's important to give back. Recently we started our CTIA Cares program, in which we give our entire staff four paid days a year to donate time to local non-profits. Although the intent is not to write business from our involvement, with so many of our people expanding their own circles of influence, we'll obviously reap business benefits as a bonus.
We've had great success with Business Networking International groups too. I've personally never had much luck with BNI groups, but they've been fantastic referral sources for our other producers. We found that the key to obtaining referrals was having the meetings in our office, which take place every Wednesday morning. When people visit your office every week, they almost become part of your organization.
As noted earlier, we do a lot of mailings. We recently sent out a "Spring Into Safety" postcard to all our personal-lines customers. (We did one for the commercial customers too.) It displayed a list of safety tips and directed customers to our Web site to answer a questionnaire and qualify for a chance to win four Cincinnati Reds tickets and $50 worth of "Reds Bucks." The questions asked what they like about doing business with us, how they would rate us, would they give us a referral, etc. We sent out 3,100 cards, and received 121 responses. All but two said they would refer us. We followed up with every single one of them.
Insurance agents are always asking, "How can I get more referrals?" The answer has always been simple: Ask for them. Build your service team, build your circles of influence, build your confidence, build customer satisfaction, and ask for them. If you're providing the best value and service you're capable of providing, how can you possibly fail? Jonathan Theders, CPIA, is president and COO of Clark-Theders Insurance Agency in West Chester, Ohio. Clark-Theders had a P&C premium volume in 2006 of approximately $17.5 million, as well as another $2 million from a separate agency specializing in group health and ancillary life insurance. Mr. Theders was recently selected as 2007 Producer of the Year for his outstanding production and innovative and value-added client service by the American Insurance Marketing and Sales Society.

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