Prepare Now For The Soft Market, Agents Warned By Marketing Experts

"Now is the smartest time ever to start prospecting for new business because we know the market is going to go soft again," said Darren N. Clevenger, president of DCM Inc., a marketing firm in Laguna Hills, Calif. "If someone wants to coast on a book of business right now and the market corrects itself by 25 percent, your book of business will automatically go down."

Insurance is a "strange business," he said. "You can work hard and have fewer sales than the year before simply because of rate decreases."

When the market hardens and clients are shopping insurance, "agents are spending more time scrambling to save their current books of business," he said. "The most common excuse we get right now as to why they wont start marketing programs is theyre too busy with their renewalsthey dont want business going out the back door."

Its okay to focus on renewals, he said, but "youre not focusing on the new accounts that are going to save you when the market softens."

Mr. Clevenger said that industry averages show about 85 percent retention rate for most agents. "So if I was to recommend what agents should be spending their money on, I would say make sure you have the staff capable of keeping your current clients."

He added that some carriers are giving agents the option of giving up a point or two of commission in exchange for the insurer taking care of customer service.

"Everybody likes it when they go from a soft to hard market because they make more money on the same book of business they had before because premiums are higher," Mr. Clevenger continued.

One downside is that it becomes a buyers market. Another, he said, is that because of the increase in premiums, carriers often decrease commissions. When the market corrects itself, "they dont raise their commissions to normal levels," he noted.

"So in this market, if theyre not increasing their market share, its a known fact that their book of business will go down," he explained. "And when that starts happening everybody starts scrambling." By that time, he said, its often too late.

Currently, he said, "its a mixed bag." A lot of agents have been through, this but newer agents havent. Agents and brokers who have, however, "understand that its going to get soft again and they need to increase market share now."

Joe Arak, principal, Professional Marketing Associates in Amherst, Mass., said that in the current marketplace "there are two things going on. There is a lot of receptivity, but that means that agents renewals become a much more exciting process."

Agents have to work harder in submitting renewals to carriers who demand more information and more detail, he said.

Agents and brokers also are more anxious that their customers might be talking to the competition. With the additional workload, however, "some small agencies dont have the infrastructure, the back office staffing. So its more of a strain on their operations," he said.

This leaves fewer resources for prospecting and selling. Some agents, he added, "might say that even if we got them some good appointments, they might not have time to follow up and put the necessary efforts into new accounts."

In response to those arguments, "I would say, I understand what youre saying, and there is not a match at this point," Mr. Arak noted. "We dont try to sell our services to everybody because its a situational fit." He added that some agencies are less proactive in selling because of their limited resources.

"It happens in soft markets as well," he said. "Key people leave, relationships with carriers change and you have to roll over a book of business. Smaller agencies become caught up with the activities to do those things."

When PMA and the agency are a match, he said, the marketing firm works closely with producers and the agency to determine the kinds of target businesses they want to write, including the class, category and size of the business.

"Once we focus on who they want to target, we order a teleprospecting list or the client could supply the list," he said.

Next a personalized or custom phone approach is developed in terms of the agencys strengths and particular coverage options. "We want to be able to talk about the strengths of the agency and why we are calling a specific business," he said.

Then a database is built up. The list goes into the database and specific account executive callers are assigned.

"Sometimes people have an image of a boiler room with a sea of voices in the background. Thats not at all what we do," Mr. Arak said. "Its a one-on-one kind of service so that a specific individual is representing a specific agency."

The callers job, he said, is to contact decision-makers and facilitate meetings with the client.

He noted that if agents can focus on meeting and working with interested clients, their time can be much more profitable.

PMA, he said, charges clients by the hour. "But we also keep a keen eye on being productive because were not paid to talk on the phone. Were paid to produce."

The bankable results to the client are appointments and qualifying information. "Appointments are where the rubber meets the road, but not all appointments are the same," he noted. "The quality is as important as the quantity. Getting to see someone who is working with an agent for 20 years and goes golfing with them on Saturday isnt that effective."

Mr. Clevenger said DCM takes a different approach to charging clients. "DCM is the first company to charge by the results," he said, noting that the firm achieves this by putting themselves "as close to the agents shoes as we can."

This includes setting up agreements to generate a certain number of leads or appointments in markets the agency wants to sell insurance to.

"Everything we do is guaranteed," he noted. "If we say theyre going to get 300 qualified leads and from that theyre going to get 60 appointments, thats exactly what they get."

At a recent meeting with 25 agents of a direct writer, "I said who likes to make cold calls?" Mr. Clevenger said. "A couple of people raised their hands, and I said, How many can make 150-200 every day? And nobody raised their hand. I said thats what the average DCM rep does every single day."

The reps can do this, he said, because they are "not burdened with the extra tasks of underwriting or submitting." They just make calls. "So, in my way of thinking, we have an easy job, we make the call and pass it on. The headaches come from renewals and closing."

Mr. Clevenger said DCM helps agencies determine what they have to offer and what types of clients they should pursue. Then the marketplace is analyzed by ZIP code and county.

"We come back and show them how many they insure and how many are left," he said. "So we design a plan around marketing the ones they dont have a market share with."

Once DCM identifies where a client is competitive and what type of industry it should pursue, "We break it down by standard industrial classification code, or SIC," he said.

He explained that SIC was set up by the government during World War II to classify all businesses so that if something happened to, say, a manufacturing company used in the war effort, a similar business could easily be located.

SIC is available from the government, but the most widely recognized user of the system is Dun and Bradstreet, he noted.

DCM, he said, is able to tell a client how much it would take to generate the number of appointments they want, as well as how many companies they need to call on to get those numbers.

"Once we have all the numbers, we go back and do our research and see if there are enough businesses in their territory, and we see if it is even plausible," he explained. "We can show them with 95 percent certainty what the outcome will be before any money has exchanged hands."

Mr. Clevenger described DCMs clients as typically "a medium to heavily aggressive agent focused on growth" that understands the importance of outsourcing. Size runs the gamut, he observed.

"The main thing is they understand to leave it to the experts to do their part so [the agent] can do what they do best"closing business."

He continued that agents and brokers should not "think of themselves as salespeople spending all their time prospecting and trying to get in the door. They should be in the door trying to sell and were the ones who do the door knocking."

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, October 31, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.