by Leanne Ross, Senior Vice President
COVID-19 has created a ton of financial uncertainty. We’ve seen huge reductions in revenue due to the impacts of the coronavirus as many small businesses have furloughed employees or closed entirely. In fact, McKinsey estimates that 1.4 to 2.1 million small businesses are expected to close due to COVID-19. What makes this number even more significant is that prior to the pandemic, small businesses accounted for nearly half of private sector jobs and two-thirds of net new jobs.
While nearly every sector has been affected, the private sector includes many small businesses in healthcare, educational services, and the restaurant/hospitality industry, which are most at risk for closure. While in the past month we have seen some economic upturn, with unemployment decreasing to 6.9%, the lowest since the start of the pandemic, the economy is still down. As the economy continues to fluctuate, so too will the P&C market.
Insurance agencies need to implement some key practices to overcome these challenges and streamline growth.
Especially during this time, agencies need to focus on their customers. A recent survey found that there is a gap between how much agents feel they are helping clients, and how much benefit clients feel they actually receive from their agents. To close these gaps, agents should consider implementing consistent check-ins with clients, better education for customers regarding plans, and plans to gain expertise in other lines of business. Once organizations have created strong customer lifetime value with their clients, it’s time to use these relationships to grow their business and offerings. The two best ways to do this are through cross selling and carrier optimization.
Cross selling is a highly effective strategy because of the relationship you have already built with your clients; typically, 80% of future revenue comes from 20% of the existing customer base. Cross selling entails improving the number of policies per customer. Oftentimes, adding in new lines of coverage is much easier than bringing in a new customer, and it can help further solidify your relationship with that client. To get started, agents need to ensure that they fully optimize and activate customer data.
At Renaissance Alliance, our mobile app, Arno does just that, empowering agents to reach out and have value-adding conversations with their customers, ultimately generating a sense of rapport and loyalty. Also, to cross sell more effectively, companies should pay attention to your customer’s important life events. For instance, if a customer just had a baby you might offer them life insurance. Companies should also turn service calls into sales calls whenever possible. For example, on a service call with your small business clients, you can offer to also write their home and auto insurance. It’s also a great idea to offer insurance at the close of every loan. Cross selling will not only help your agency but will better your relationship with your clients.
Carrier optimization is another best practice all agencies should engage in. Carrier optimization allows agencies to get paid more by carriers for the same business you are already writing. It’s a good idea to pinpoint industries that have continued to thrive in the face of COVID-19, as these might be lines to target. For example, home improvement/DIY, tutoring, and solo-sports related commercial lines have all flourished. By identifying these industries, you’ll gain a better understanding of the money you’re making with the carrier. If this is something that interests you, the GRO team here at Renaissance Alliance helps with generating revenue opportunities and works with Renaissance members to do so.
There’s no doubt that these are tough times – both financially and personally – so the best thing that insurance agencies can do is pay attention to their customers and grow their business in a way that suits them. At Renaissance Alliance, we work with independent P&C agency owners to grow your premium, maximize your revenue and increase the value of your agency. This is done by increasing profit sharing and fixed override revenue while simultaneously outsourcing non-revenue generating activities to focus on your core business. The net effect is increased revenue, decreased expenses, less operational risk and accelerated agency growth. Contact us today to learn more!