Although premium prices are not everything, demonstrating an insured's ROI fosters long relationships because the return on investment is expressed in dollars saved and retained. (Photo courtesy of Foresight)
Business stakeholders are value-hunters. Getting a return on investment is core to the executive's responsibility to the company. Demonstrating your insurance agency's ROI will therefore boost client retention and revenue over time.
Measuring basic ROI is more straightforward than you might think. Simply take the amount of money you helped clients save (in premiums, benchmarked losses, etc.), divide by the initial value of your clients' investment into your services and their premium, and multiply by 100 to arrive at a percentage.
Calculating ROI is that simple — but it's not easy.
In reality, the value you bring goes beyond dollars saved, especially if you offer added services. A savvy leader will recognize this and assess your standing with their company holistically. You can set your agency up for success by understanding how to prove your value beyond the dollar bill.
The many layers of value
Measuring your impact is more complex than quickly calculating your ROI at the end of the year. Why? Value looks different for each client.
From the very beginning, you need to know your client's desires, including but not limited to:
- What they hope to get out of partnering with your agency,
- What they want from their broker,
- Their 1-year, 5-year, and 10-year business goals, and
- The specific loss issues they need to address.
You should also record your clients' pain points, such as:
- Number and severity of losses over the past four years.
- Past poor claims management experience.
- Past employee fraud incidences.
- Business cash flow and financial needs.
Understanding what's important to your client will determine how to frame the value you add to the business. It should also keep you from leaning entirely on information you pull from your CRM, which may not tell the whole story.
During onboarding, your agency should ensure brokers gain an understanding of the client's big picture goals, and wherever possible, put a measurable goal or action alongside it. For example:
- A construction contractor wants to lower their worker's compensation premium; set an incident rate reduction goal like -0.25% LTIR.
- A manufacturing client wants to open a new US-based plant; set a date and time to meet with your client to go over anticipated payroll, class codes, risks, and liabilities.
With these goals in hand, you don't have to lean entirely on the ROI equation to demonstrate success — but you can't leave the dollar figure out entirely, even if it doesn't make it on this year's report.
Calculating client ROI
Even if you're providing white-glove service, you'll need to demonstrate your impact in terms of real dollars at the end of the day.
Let's say you helped a client maintain a healthy trend of reduced workers' compensation claims. As a result, they'll pay $325,000 in workers' comp premium this year instead of last year's $400,000.
The healthy $75,000 in savings, or 18.75% ROI, is now a profit for your client. Set up a process for reporting your ROI as a percentage and dollar amount. Have your brokers renew it annually or after a notable change.
Looking at savings alone is adequate, but you should factor in benchmark data where possible. What could have been lost had you not been involved?
The claims that could have been
Because premiums generally decrease slowly, you should factor in more recent results by comparing this year's losses with past losses.
You can even take it a step further by comparing this year's losses to expected losses based on industry and class code benchmarks.
To calculate client ROI using benchmark data, take their overall investment into their policy and measure it against their own or similar sized/industries losses, including workers' comp claims, federal/state OSHA fines and fees, legal fees and a ballpark estimate of internal HR expenses related to incidents at the average frequency.
Drive better results with better systems
If your brokers consistently struggle to demonstrate results, you may be tempted to blame the clients. After all, a broker can have the best recommendations in the business, but if the client doesn't act on them, nothing will change with their policy.
Your team must avoid the temptation to coast along when it comes to difficult clients. There's an alternative to forgoing ROI as a valuable retention strategy: systems.
There is a current philosophy in safety management called New View, or Safety-II, that minimizes human behavior and maximizes systems that effectively reduce or eliminate risk through engineering controls, like safer equipment or IoT technology.
As an agency, you can adopt a similar line of thinking when it comes to getting results for your clients. How can you set up a system that drives results with less dependence on the client?
One option is to implement a loss prevention system, such as a safety management solution in workers' compensation.
Another place to look is at InsurTech carriers. The best InsurTechs are data-obsessed and motivated to develop earlier warning signs, better loss control and improved systems that promote success from within the client's company.
InsurTechs with in-app client management allow your team to stay on top of timely corrective actions. Tracking and reporting client progress is easier too.
With systems that drive results in place, whether it's an InsurTech carrier's claims management solution, a loss prevention solution, or your client's safety management app, you're effectively set up to demonstrate success wherever you earn it.
You're an agent of change. Show it.
Clients need to understand the value you add. Demonstrating their ROI fosters long relationships because the return on investment is expressed in dollars saved and retained. It's also expressed in what's gained: improved risk management, better company culture and less employee turnover.
Use technology to provide better services, drive down losses and demonstrate the results for your agency and for your clients. How's that for value?
David Fontain is the founder and CEO of Foresight, the first Insurtech to focus on middle-market workers' compensation. David leverages his experience in investment banking, fintech, commercial insurance, and workplace safety to drive the development of tech-driven insurance products that reward insureds with lower premiums and value-adding brokers with higher commissions. The opinions expressed here are the author's own.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.