Time to talk to the redheaded stepchild

Let's get the dirty little secret right out in the open: Personal lines is the redheaded stepchild of the independent insurance agency system. Its detractors say it's high-volume, low-profit business best left to direct writers or rookie producers on their way to greater glory in commercial lines. It's certainly not something an agent would want to build a career around.
Well, I disagree. Make that vehemently disagree. The above line of thinking just drives me crazy. I think it's as wrong as wrong can get in this business.
I think that for several reasons. First, I believe that an independent agency should be a true full-service business. We should offer personal lines, commercial lines, life, health or whatever else our clients need. That's who we're supposed to be. Second, while I readily admit that personal lines isn't as profitable as some other lines, that hardly means it's unprofitable. It's as profitable as you care to make it.
Third, and most important, we're ceding a huge amount of business to the direct writers. We gift-wrap and hand-deliver it. I literally cringe whenever I see their commercials on television. Every personal-lines producer I know–and as recent president of the Independent Insurance Agents of Iowa, I know a lot of producers–feels the same way. Why do we so cheerfully and carelessly give away the store?
As you might guess, personal lines is my passion. I love people, and personal lines is all about people. I enjoy coming to work every day, because I've had an extremely nice career selling nothing but personal lines. What works for me and those like me can work for your agency. Redheaded stepchildren need love and attention too!
Yes, Virginia
I've been an insurance agent for 25 years, the last seven with The Dana Company. My experience had been in personal lines, so I was brought in as a full-time personal-lines producer. We have two other producers devoted exclusively to personal lines, and it makes up about 25% of our $20 million premium volume.
I'm well aware that comparatively few independent agents are interested in pursuing a career like mine. Besides its perceived low profitability, personal lines can be detailed, high-maintenance work. In largely rural states like Iowa, however, few agents can afford the luxury of specializing solely in commercial lines. Since it's common for an agency in this region to do 60% of its business in personal lines, there's always a demand for good personal-lines producers.
Good producers don't just walk in the door in Iowa any more than they do anywhere else. If an agency fails to adequately compensate its personal-lines producers, they'll simply move along to one that does. So yes, Virginia: If you can produce, you can make money in personal lines.
I receive most of my leads via referral. When I joined The Dana Company, I had zero business, so I started in right away. I sent out some letters and direct mail cards, and got referrals from commercial-lines agents. I promised myself that I, along with our CSRs, would give our clients the best service we were capable of giving. Not only is that the right way to do business, but it's also the quickest route to a high number of referrals–and that's how it's worked out for me.
Service is where we, as independent agents, really need to shine. Unlike with direct writers, clients can call me or their assigned CSR and know they'll actually talk to us. There's no 800 number or “a service representative will be with you shortly” message. They know we're going to be there, and they know they'll be dealing with the same people year to year. In this highly automated and impersonal age, most clients find that comforting.
I also get referrals from real estate agents and from clubs and organizations I'm involved with. (I ride a Harley, and you know my biker friends will always need insurance!) Additionally, the Internet provides almost endless means of prospecting. In particular, I've found that sites for assessors' offices contain a wealth of information for a personal-lines producer. For example, you can do a query of reports by a home's value or by a particular area. The report includes the sale date, which means the X-date of the homeowners policy likely follows closely. I've found such sites and many others to be a tremendous help.
In terms of marketing, we do radio spots and we sponsor community events or organizations, such as Little League. The goal is to maintain a local presence. We also do various types of direct mail. I send out about 500 cards, targeted to a certain demographic, on a biweekly basis. Direct mail, of course, is never a high-response technique, but two or three new accounts pays for everything, so it does work. We pass on telemarketing.
The agency “touches” clients several other ways during the year. We send Thanksgiving cards, because no one else does. (We tell clients “thanks” at Thanksgiving.) We have an annual Christmas party. And we send out reminder cards several times a year–for example, that flood coverage is not included in a homeowners policy. In January we send out a newsletter, which addresses timely topics like identity theft, as well as reminders to schedule personal property, etc.
House calls
When I get a lead, I get on it as quickly as I can. It goes to the top of my workload and I do my own quoting. If I don't already have them, I'll personally call for the X-dates on their auto and homeowners policies. I'm completely hands-on, which I think is indispensable to success in personal lines: Personal attention is what makes personal lines work. My close rate on referrals is probably 70%.
I may be the last agent in America who does this, but I actually meet with people in their homes. I really enjoy sitting down with people one-on-one and getting to know them. The more I can ask about their interests–their hobbies, their grandchildren, whatever it may be–the better the connection I can build. It convinces them that I have a genuine interest in their lives, and that I'm not dumping off a generic policy, collecting a check and running off to the next sale as fast as I can, never to be heard from again. When we're done, my clients will know beyond doubt that I'm going to take care of them.
This may sound terribly and oppressively involved–”She spends all her time sitting in living rooms, talking about pets?”–but it's not. Personal-lines policies usually are “off the shelf” products. Those offering them want to sell them the quickest and easiest way they can, which is why we have all these Web sites and 800 numbers hawking coverage. Behind that 800 number is an agent who's probably not compensated very well, and that attitude comes through the phone. So when I have the opportunity, does it really take so much to hop in my car and make a personal connection with someone? The first thing I hear is, “I've never had an insurance agent come to my house before.” The sale is often made before I even walk through the door.
To make the process as easy as possible for potential clients, I do as much as I can before I get there. No prospect wants to hear, “Where's your pile of stuff? We're going to talk insurance for a solid hour.” We'll go over their coverages thoroughly, but I'll integrate the personal conversation along the way. People have busy lives, so it's up to me to accommodate them, not the other way around.
During the meeting, I typically won't find that many “gaps” in coverage. More likely the limits are too low, or some endorsements or scheduled items are missing because no one's ever taken the time to review the policies. I normally don't quote on the spot, but I will on occasion.
Perhaps the most valuable thing I can do for clients is help them out of a difficult situation. Maybe they've suddenly been non-renewed by a carrier, or someone in the household has a few driving problems. Their current agent hasn't contacted them in a timely manner, or maybe not at all. By contrast, I make a point of keeping up with what carriers are doing, because believe it or not, there are market niches in personal lines. Since I stay familiar with the carriers, I can usually match clients with a company that meets their particular needs without sending their rates skyrocketing.
Clients need not have a problem to receive this sort of assistance. Once I get an account, I can frequently save the client a lot of money by analyzing their credit or loss history or driver's record and finding a company that fits their profile. In other words, I do what independent agents and brokers are supposed to do–and what direct writers can't do.
This is my philosophy for working with underwriters: Always respect them. Understand where they're coming from, and how they make their decisions. If they can't accommodate me on a certain account, I don't get upset; I'll just try another company. Having choices is one of the great things about being an independent agent.
In my experience, if you're going to ask an underwriter to make an exception for a particular client, that client had better be worth it. (Hint: They almost never are.) Never risk jeopardizing your long-term relationship with an underwriter unless there's a really good reason (hint: there isn't), and never burn a bridge. There are always other carriers, and if it turns out you can't sell the account after all, the world won't come to an end. In personal lines, there's always another lead around the corner.
Our CSRs are a key part of the service that gets us referrals. I consider an account as a team consisting of the insured, the producer and the CSR. We introduce the CSR when we send out the new policy. Clients are given a nice folder that includes both our cards. We're working on a new brochure that will include photos too.
I want to stay involved and maintain open communication with clients. I can't attend to every detail, of course, but they bought the policies from me, not the CSR. If there's a problem, I want to know about it. I never want my clients to feel that they can't talk to me after the sale, or that once they've sent in the check, my job is done. Personal attention is the independent agency's calling card, so we have to make the most of it.
Another pleasant feature of selling personal lines is that frequently the accounts are “pre-rounded.” Many carriers are moving to packaged personal policies, where the home and auto are tied together. The client can't have one policy without the other. So if I've sold the homeowners, for example, the auto will kick in later, at the X-date. In addition to home and auto, I frequently sell boat coverage, personal umbrellas and term life. I don't do an annual review of every single client, but I will get to everyone within two or three years. And there are accounts that I keep an eye on as time goes by, if I think I can improve on the rates.
Making it work
Right now personal lines is experiencing the softest market that I've ever lived through. And you know what? It's fantastic.
Since personal-lines underwriting is usually pretty black and white, a soft market is good. There's much less resistance from carriers. Underwriters will easily accommodate you on things that might not pass the laugh test in a hard market. Premiums go down, but not that much–nothing like in commercial lines. At worst, commissions remain steady. After the hard market of 2002 and 2003, this long soft market is just a joy.
If your agency wants to “get serious” about personal lines, then the redheaded stepchild will need to move to the head of the table for a while. At many agencies, CSRs sell some policies on a catch-as-catch-can basis, and I'm not going to discount that. If they can sell behind their desks, then that's all to the good. But that's not getting serious about personal lines. At our agency, the producers have a saying: “I eat what I kill.” Our income is tied to what we produce. CSRs can be skilled in many ways, but their salaries aren't usually tied to selling. There's only so much they can be expected to contribute, absent strong motivation.
To make personal lines work, an owner has to give it his or her full commitment. At the very least, he's got to hire experienced personal-lines producers, even if it's just one in the beginning. An experienced producer will be familiar with the products and marketing, and will have or will build relationships with the carriers. Hire the right person or people, develop a business plan for personal lines and work your plan. Honestly, it's not that hard!
The traditional objection to emphasizing personal lines is that it's not profitable; you just can't make any money at it. I simply don't buy that. Plenty of agencies make money at it. Here's the trick: Personal lines is labor-intensive, which means it has to be managed. If it's not as profitable as it might be, then you need to work a little harder at streamlining procedures and finding ways to be more efficient. “That's how we've always done it” doesn't work any better with personal lines than it does anywhere else.
The first step in streamlining may be making sure you're taking complete advantage of today's technology. Things have changed dramatically in the past 10 years, and personal lines is more automated than the rest of the insurance world. Every company has a Web site with a ton of information. You can quote, upload policies, make changes, find agency manuals and look up billing information. There's instant turnaround, and it should be exploited to the fullest.
Bad business
Obviously, I live in a part of the country where by necessity there's a greater emphasis on personal lines. We have close to 800 agencies in our state association, and 90% of those are small or midsize. Personal lines is their bread and butter and, I promise you, the direct-writer commercials make their hair stand on end. While this may not be the case in other parts of the country, it's nonetheless a mistake–a shame, really–for any agency to write off personal lines as a losing line of business.
Sure, you can make more money selling commercial lines. You can also make more money selling Mercedes than Fords, yet there's no shortage of Ford dealers in the country. Giving away personal lines is not only wrong on the face of it, but it opens the door for direct writers to begin consuming additional business. Will it take losing commercial lines as well to get our attention?
As independent agents, we should provide full service to all our clients. And if one particular line doesn't quite meet our ideal, we need to learn to simply live with that. Review your personal-lines operations, manage them diligently and get serious about increasing profitability. Doing otherwise is bad service–and bad business.
Carol Karns is a personal-lines producer for The Dana Company and has been a personal-lines insurance agent for 25 years. She holds the CPCU and CIC designations, and has passed six parts of the CLU program. She also teaches at insurance licensing schools. Ms. Karns is immediate past president of the Independent Insurance Agents of Iowa (the first woman to hold that position). She has also served on the IIAI Automation and Agency Management Committee, chaired the Education Committee and has been an IIAI board member for the past 13 years. She has been with The Dana Company for the past seven years.