Increase your book of business using existing clientele

One of the best ways to increase the size of your book quickly is by tapping into your existing base of customers. There’s almost always more business to be had with your existing clients. Start by doing a review of coverage with each client. Then sit down with them and ask the right questions to elicit and uncover coverage gaps you can offer to fill. Use that opportunity to make them more loyal to you when you offer to shop their coverage and find them better coverage at a better price.
Start with your top premium clients and work your way down – selling personal lines to commercial-only accounts, and ascertaining if your personal lines clients have businesses you could potentially write for them. You already have a number of P&C clients on your book. What better place to look to increase revenue, than the people you already do business with? Not only does this increase retention and loyalty, it makes less likely your client will want to shop and move their business elsewhere down the road.

Part 4, Fees: Should I Join An Insurance Aggregator or Agency Network?

Many independent insurance agents, both new to the industry and established agents, at some point find themselves asking the question: “Should I join an aggregator or agency network?” Independent agents aren’t tied down by the restrictive contracts and obligations that captive agents are – but they face their own set of challenges as an independent business owner. This ongoing blog series investigates both benefits and drawbacks of agency groups.

Drawback #1: Membership fees
Agency networks exist because there are many insurance agents who need access to markets for their customers. The networks provide a service, and have to be compensated in some way to make money and stay in business. Therefore, they charge fees to the agency owner in exchange for access to markets. For an agency owner who’s just starting out in the industry and needs markets, but has little profit and cash-flow, this can be a problem. Agency networks typically charge fees in one of three ways: Monthly membership fees, initial start-up fees, or commission splits.

Some agency networks charge agency owners fees in MORE than one way, requiring a start-up fee, a monthly fee, AND a commission split on business written through their program. While others only charge a commission split. The commission split charge in some networks is taken on income earned through the carriers the agent accesses through the group, and/or on the commissions agents earn on the carriers with whom they have a direct appointment.The agency owner must investigate the contract of each agency network, and decide which network offers them the best markets for the littlest cost.

Part 3: Should I Join An Insurance Aggregator or Agency Network?

Many independent insurance agents, both new to the industry and established agents, at some point find themselves asking the question: “Should I join an aggregator or agency network?” Independent agents aren’t tied down by the restrictive contracts and obligations that captive agents are – but they face their own set of challenges as an independent business owner. This ongoing blog series investigates both benefits and drawbacks of agency groups.

Benefit #3: Access to training and other resources

Often an agency network can help with a variety of different types of training to help keep your agency current and competitive. They can set you up with specialized product training through the carriers with whom they partner, including keeping you updated on current carrier appetites in your state, and new products and services. In addition, they can assist you with learning to add other lines of business to your agency, such as education on commercial quoting procedures, or specialized markets. The best part is that you’ll often have a dedicated customer service representative available for questions as they arise, so you can learn as you build your business. Some may even provide marketing and sales advice in some capacity.

Part 2: Should I Join an Insurance Aggregator or Agency Network?

Many independent insurance agents, both new to the industry and established agents, at some point find themselves asking the question: “Should I join an aggregator or agency network?” Independent agents aren’t tied down by the restrictive contracts and obligations that captive agents are – but they face their own set of challenges as an independent business owner. This ongoing blog series investigates both benefits and drawbacks of agency groups.

Benefit #2: Higher Commissions

Another great benefit of an agency group is that they’ll likely be able to offer you better commissions with the carriers you access through them. Why? Because they’ve negotiated higher percentages paid out by their affiliated carriers on both new business and renewal business. Basically you have the benefit of being part of a large group which means you’ll have access to commission rates that are typically only given to larger, more established agencies. An additional commission point or two can make a big difference! This benefit can help off-set the fees or commission sharing required to become part of the agency group in the first place.

Should I join an insurance aggregator or agency network?

Many independent insurance agents, both new to the industry and established agents, at some point find themselves asking the question: “Should I join an aggregator or agency network?” Independent agents aren’t tied down by the restrictive contracts and obligations that captive agents are – but they face their own set of challenges as an independent business owner. This blog series will investigate the different types of groups that exist in the insurance marketplace, as well as the benefits and drawbacks of aggregators and agency networks.

Benefit #1: Access to markets and carriers

Perhaps the most obvious advantage, and the reason a majority of independent agents seek out these types of groups, is access to markets. What does that mean? It means independent agents don’t automatically have a carrier or insurance company they represent. They have to actively seek out contracts with multiple insurance carriers in order to offer their clients insurance coverage. The advantage for independent agents is that by representing multiple carriers, they can offer their clients more options, including TYPE of coverage plans, AND at the best price. Unfortunately, it’s extremely difficult to get markets when an agent first starts out in the business because they have no history with the carriers in the industry. They have to gain the trust of the carriers first. Agency networks and aggregators can help the agent achieve this by establishing a relationship with the carrier first. This means that the agency network is directly contracted with the carriers themselves, and then – with their pre-established relationship – helps agents they’ve vetted and contracted with themselves, become appointed to write business with those carriers.

Stay tuned for more in our blog series!

Off The Record

Off The Record
By: Josh Seibert, Sandler Training

The STORY:
Tim had mentally decided that the prospect he was talking to was never going to buy. For the past 20 minutes Tim had tried all of the trial closes that had worked in the past.

“I have to tell you Tim, I don’t know that this will do what I need.”

Tim had already tried the “what do you really need” response with no luck. Figuring he had nothing to lose and might learn something that he could use on other prospects, he innocently asked the following.

“Off the record . . . since you have decided not to buy . . . what are you really looking for?”

For Tim, the resulting silence was painful, but he really wanted to know the answer. If I can get this information, he thought, I can use it. So I’m just going to outwait the prospect.

Finally, and much to Tim’s relief, the prospect responded.

“Well, since you asked, off the record as you put it, here’s what I’m trying to do,” responded the prospect for the next five minutes.

At the conclusion of the prospect’s response, still convinced that he’d never close this one, Tim answered.

“That’s very interesting. So I suppose since we’re still off the record, you’ll never see yourself purchasing this . . .” and as Tim struggled to find the words to continue, the prospect jumped back in.

“Hold on a minute, Tim. I didn’t say I’d never buy it . . . and now that I talked out what I was looking for, well, you know, what you have might actually do it for me.”

The RESULT:
Perhaps Tim will make this sale. What Tim did do by going off the record was to subtly pressure the prospect into defining just what he needed. And by adding the assumption that the prospect was never going to buy, Tim was forcing the prospect to see a future where Tim’s product was not part of the solution. Either the prospect would view this future as good, in which case Tim never had a chance to make the sale, or bad. If bad, then Tim had an opportunity to make a sale. Off the record, how do you see it?

DISCUSSION:
Tim did not act like most salespeople. How many salespeople have the guts to state, “Off the record, since you have decided not to buy . . . what are you really looking for?” What is the salesperson afraid of when he makes this statement? Simple — the prospect is going to walk out the door. Consider this, if the prospect does immediately leave, then he never had any intention of purchasing. You’ve just saved yourself a lot of time.

The prospect who remains after hearing this question has no option other than to respond. What he says at this point will help you in determining whether he is a serious potential buyer or someone to follow up in a phone or mail sales effort.

APPROACH:
Pairing “off the record” with “since you have decided not to buy” accomplishes two goals for you.

First, “off the record” suggests that now you and the prospect can talk freely. Neither of you will use what is said to make or break the sale. Of course, this is ridiculous. Anything the prospect says will be used by you to either pursue the sale or end it. But just the phrase, “off the record,” often achieves the goal of getting the prospect to reveal what his concerns are.

Second, “Since you have decided not to buy” forces the prospect to bring the future into the present. In other words, he perceives right now what it will be like without your product. If his concerns are painful enough, seeing the future today is often enough to get a prospect moving toward purchasing.

THOUGHT:
Giving the prospect a way to see the future often helps the prospect buy today.

Josh Seibert is the president of Training & Development Solutions, Inc., Sandler Training located in the Piedmont Triad.  He can be reached at 336-884-1348 or www.training.sandler.com

©Sandler Systems, Inc. All rights reserved.

Writing Hard-To-Place Risks

Writing Hard-to-Place Risks Starts with a Good Relationship with Your Excess & Surplus Carrier—
and Your Underwriter
By: Michael Miller, Smart Choice® State Director

Most insurance agents can write auto and home policies in their sleep, and many understand commercial insurance like the back of their hands. But sometimes, clients throw us curve balls. They might have had multiple losses that make finding a policy difficult. Others might be in an industry so unusual or risky that standard carriers won’t cover them. In these cases, relationships with excess and surplus (E&S) lines carriers can be the difference between making the sale and turning a potential client away.

A look at what E&S lines carriers can do for you

E&S lines carriers are insurance companies that write policies for unusual or specialty businesses that standard carriers consider too risky. Sometimes, this is due to a history of loss. But more frequently, standard carriers simply do not have the experience writing these businesses to be able to offer a policy that comprehensively and appropriately covers the risk.

Many E&S lines carriers are licensed in a single state but can do business in other states. But they don’t have to be based in the United States. In fact, the largest E&S carrier in the United States is Lloyd’s of London, a British company. At Smart Choice®, we have partnerships with several E&S carriers, including Burns & Wilcox and Willis.

Your relationship with your E&S underwriter

The E&S lines market operates slightly differently from the standard commercial lines market. Usually, you must try to write the policy with one or more standard carriers before shopping the policy on the E&S market. Doing so requires a relationship with an E&S carrier.

It’s important to maintain your working relationships with the E&S carriers you have appointments with. That starts with your E&S carrier underwriter. If you invest a little time in your relationships with your underwriters, it’ll pay off in the long run.

Underwriters are in a tough position. They have to answer to their employers, the carriers, who reward them for writing high volume of policies with “good” risk. But they also need to please their agents, who bring in the business but often make requests that are riskier than their carriers prefer.

To write a good policy, your underwriter has to trust your judgment on the customer’s risk. And since most E&S policies do not have standard clauses regarding binding authority, back dating, and do not give advance notice of changes to policy, it’s important for you to understand how your E&S carrier underwriter operates and stay on top of each customer policy.

If you make it clear to your underwriter that you understand what “good” risk is, the more likely he or she will be willing to work with you on your more complicated policy requests. Give your underwriters the professional courtesy of asking thoughtful questions and submitting a clean request that has all the information they’ll need to feel comfortable writing it. Make your requests complete, clear, and timely.

If you take the time to get to know your underwriters and their carriers, you’ll learn certain carriers will never write particular policies, while others are eager to take on your riskier requests. But you’ll only know this if you invest some time and effort to understand how and why your underwriters write what they do. Take a moment to get to know them better. It’ll pay off for your agency in the long run.

Customers requiring E&S policies may not come through your door every day, but being proficient in writing this type of business can create real opportunities for your agency. You could become the resource for niche industries who can’t be insured through their current agent’s standard carriers. Imagine writing all the car dealerships or pizza delivery businesses in your metro area. What impact could that have on your agency’s profitability over the next five years?

Common Hard-to-Place Risks

  • Engineering Companies
  • General Contractors
  • Implement Dealerships
  • Motorcycle Dealerships
  • Large Habitational Risks
  • Trucking Companies
  • Used Car Lots with Inventory of 30 or Fewer Units
  • Vacant Buildings

[Sources]

Insurance Journal

Claims Journal

Property Casualty 360

 

Refinancing Your Existing Debt

Refinancing Your Existing Debt
By: Kelly Drouillard, Live Oak Bank

The goal of any independent insurance agency is to grow and build long-term wealth. To get to a place where an agency can fund growth initiatives and make money, owners often obtain capital via specialty loans, use of liquid investments, seller finance, or funding from friends, family, and other supporters. This financing may be debt on less than ideal terms, including interest rate, loan term or both.

If you are an agency owner, with an expensive or steep repayment plan on your business debt, you may be feeling like you’re never going to generate the kind of cash flow to meet the needs of your agency, extinguish debt and experience the growth and achievement you dreamed of when starting your company.

The backbone of an agency is the cash flow.  It may have been prudent and necessary to take out loans, seek investments, or otherwise bring outside money into the company to get off the ground; you don’t want to let repaying those debts prevent you from actually taking off. When looking at the obligations you need to pay back, consider how much extra money you will have after making your monthly payments.

Can you afford to hire the producers you need? Are you meeting the demands of your customers? Are you ready for an acquisition? Or are the payments holding your agency back from really being what it could be? If so, you may need to consider restructuring debt to reduce your monthly payments.

Here are a few ways you can refinance your debt, significantly decrease your current monthly payments, and begin seeing your agency grow.

  1. Live Oak Bank’s SBA 7(a) Loan Program

With the SBA 7(a) loan program, you can restructure your debt into a more manageable repayment plan. While not all debts are eligible for this program, if you meet the requirements of the policy, it is an easy way to reduce pressure from your lenders and start seeing more money going into your business.  Typical insurance agency loan terms are 10 years with interest rates from 5.5% to 6.25%.   There are no prepayment penalties for loans with terms less than 15 years.

To be eligible for the SBA 7(a) loan program, you will need to meet the following qualifications:

  • Money secured from loans, borrowing, or investments must have been used for eligible business purposes.
  • The debt must be current.
  • The monthly loan payment for the proposed plan must give at least 10% cash flow savings or the existing note must include a balloon payment.

If you meet the requirements of the SBA 7(a) loan program, you can create a plan that is much more manageable for you and your agency. With a lower loan payment, you can focus on growing your business, put the money into things like agency development, and see your company reach the levels of success enabled by improved cash flow.

  1. Refinance to avoid “Balloon Payments”

When you take out a small business loan for your insurance agency, it is not uncommon for a loan to have what is called a “balloon payment.” A balloon payment occurs when the terms of the loan state that one large payment will be made at the end of the loan’s term. While this can give you years with a smaller payment, it also means you will be faced with a significant payment once that time is up.   A typical structure would be a loan with a 10 year amortization / five year balloon.   Thus, your monthly payments are based on a 10 year loan; however, the remaining balance is due all at once at the end of Year Five.  Balloon payments create a looming financial obligation.

If you do not properly plan for a balloon payment, you will be left to drain the extra cash from your business, reducing any cushion you may have created. You may also face high interest rates, meaning you’ll pay much more for the loan than the initial amount of money you received.

If you are trapped in a loan that ends in a balloon payment, you will probably want to consider refinancing. Refinancing your debt allows you to spread that balloon payment out over more time, preventing you from paying one large sum. With a refinanced repayment plan, you make small payments on your loan while ensuring that the cash flow to your business is not disrupted.

  1. Refinance for Longer Loans

For most agency owners, the typical loan acquisition may have seller financing with a term of five years. While a shorter loan term can be paid off more quickly, it also means you will be making higher payments on the loan each month. For a growing business, this can take away cash needed for operational growth and marketing.   A refinance solution under the SBA 7(a) program may be a 10 year loan.   Plus, there is the bonus of paying off the seller note and finally cutting ties with the seller.

SBA 7(a) loans (under 15 year terms) do not have prepayment penalties.   This gives you the cash flow flexibility to pay off your note early if you desire.

Before taking out a loan, be sure that you understand the details of the repayment and if it is a realistic situation for you and your agency. If you find that you are unable to meet the needs of your loan, don’t hesitate to restructure.

Restructuring your debt opens up doors to allow that money to be used elsewhere. With the money you will save each month by restructuring your debt, you can hire new producers or other staff to take your agency to the next level.  You could also buy equipment to be more efficient in the workplace or relocate to a new area with better customer access.

Thinking about your cash flow is the most important aspect of running a business. When it comes to your success, it is mostly determined by how smoothly you run your business and if you make enough money to keep moving forward. Don’t allow the loans, investments, or financial support that got you off the ground be the reason your company didn’t reach your desired levels of success.

For a refinancing proposal, gather tax returns for the past three years (agency and personal), the details of your current agency debt, and give us a call.  We can quickly analyze your situation to determine if a refinance make sense.

Kelly Drouillard is the General Manager of the Insurance lending division at Live Oak Bank. Reach her at 913.980.7773 or kelly.drouillard@liveoakbank.com

Marketing At Its Core…

Marketing At Its Core…
By: Katie Wilmoth, Director, Marketing and Communications

This past summer, my husband and I took our kids to the beach – our kids (at the time) were 6 years old, 4 years old, and 9 months old, so we had our hands full! I find that at their current ages, they’re like a mini case study in the ways of the world. I never cease to marvel at how perceptive and astute they are for their ages.

At home, we don’t keep cable or satellite and instead, stream or download things we’d like to watch. So our kids have no concept of what television was like in the old days, and therefore, they aren’t familiar with commercials.

Throughout the course of the week, our oldest daughter would run up to one of us and say something about one of the commercials, or “previews” as she called them. IN fact, our kids were more interested in the commercials than in the shows they watched. As someone who’s made a career in marketing, I marveled at just what an impact direct marketing had on my kids in that short amount of time. I even caught them singing “Nationwide is on your side!” repeatedly as they played in the waves one day – “Mom, did you know Nationwide is on our side?” my six year old asked me – proving that, whether or not they knew exactly what the product did or was, the message the marketers had intended for them to remember had indeed been successful.

One night, my daughter said “Hey Dad, we need to get some of this lotion because it will make our skin super soft and shiny.” And I listened as my husband said “Okay listen Lila…these are called commercials, and the people who make them are trying to sell you their product by making it sound like the greatest thing in the world. So they’re lying to you to make it sound better than it is…that’s what your mommy does for a living…”

I looked up at him shocked and amused that he would say such a thing to our daughter, and he was looking back at me laughing. My reply to him was “You’re a LAWYER! Why don’t you tell her what YOU do?!”

The story is funny, but it got me thinking about the definition of marketing at its core. Sure, there are plenty of infomercials that use over-exaggeration and half-truths to peddle cheap wares (though I’d say that’s closer to the definition of sales, not marketing) – but at its heart, that’s NOT what marketing is. Marketing is about highlighting what sets your product or service apart from the competition. And if you’re doing it RIGHT, it’s also about highlighting the things that you do well and at which your product or service excels. You pick out your best assets and tell people about them. Think of it as socially acceptable bragging!

If you would like to read more Marketing tips, check out Issue IV of the Smart Choice Magazine!

Top 5 Sales Tips For Insurance Advisors

Top 5 Sales Tips For Insurance Advisors
By: Ashley Wingate, Vice President, Personal Lines

Selling in the insurance industry is not the same as sales in many other industries. Unlike most commodities being sold and advertised, insurance isn’t a choice in most cases, it’s a necessity. Many customers don’t view insurance as something they want to spend money on, but rather something they HAVE to spend money on. So, you’re really trying to counsel your customer into meeting their own coverage needs, even when they don’t want to spend the money. YOU have to be able to flip the conversation into a positive one so they feel like they’re walking away with something tangible, and not just spending their money on a “have to.” After many years working in this industry, here are my top 5 sales tips for insurance advisors:

  1. Listen to your clients and their needs. It’s tempting to just sit down and begin explaining all the benefits of your insurance policies and plans that your agency offers. My suggestion is let the prospect lead the discussion and they will tell you everything you need to know to close the sale. Instead of pitching your product, ask the person you are speaking with about their life and their family or their concerns for the future. They will tell you everything you need to know and then you become an insurance consultant and not just another salesperson.
  1. Don’t just be an order taker. Too many agents fall into this trap. If you follow the first tip and listen to your client and their needs, then you can develop a consultative approach for your client and offer them Insurance solutions for their needs. Also, don’t be afraid to ask them for their business.
  1. Make sure your clients know what they are buying from you. Stop to go over the carrier you have placed them with and highlight the benefits and features that their policy offers them. Most people don’t understand insurance and this is the time to help them understand what they have just bought from your agency. It’s a time for you to shine and a time for you to educate the customer on why they’re better off with proper coverage.
  1. Ask for referrals. Referrals are an awesome way to grow your business and these customers are much easier to close. Think about a referral program for your agency and reward the customers that send you new customers. Independent agents should rely heavily on referrals, because they have the ability to really shop for their clients and customize coverage. You have the chance to foster a more personal relationship with your clients, and therefore a better chance at gaining referrals.
  2. Network, network, network.  Take advantage of the opportunity to attend trade shows, work with real estate agents, work with the local PTA, and network with other insurance professionals in your field. These are all great places to make connections and learn from industry leaders and stay up to date on what’s going on in the insurance industry.