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Protecting Your Nest Egg: Avoid the Great Customer Exodus

Much is made of an agency’s ability to convert top prospects into clients. However, true measures of profitability require an agency to look no further than its own backyard. In short, customer retention is the most important effort agencies can make to become or remain profitable.

Why Customers Leave
Here are three common reasons agencies lose customers:

  1. Competition has a better product. Insurance is a free marketplace and customers can shop ’til’ they drop. Sometimes, agents must be willing to concede that someone out there has something better.
  2. Competition has a better relationship. If your client’s best buddy from college becomes an insurance agent, you may be out the door sooner than you can name your school’s mascot.
  3. Customer feels neglected. Now we’re getting somewhere! This is why most customers leave. Luckily, this is one an agency can do something about.

Reasons Customers Feel Neglected
During the sales process, agents make promises: “great service, lowest price, always available,” etc. These are intended to separate themselves from the competition. Customers agree to do business with the agent—but when the moment of truth arrives, agents fail to deliver.

In addition to botched trust, customers often leave agents due to the lack of a relationship. A recent industry survey reaffirms that more than 70 percent of consumers prefer a personal relationship with their insurance agent. Agents who only contact customers at renewal time for more money fail to realize the importance of a good relationship. Many consumers leave their agents because they feel the agency no longer cares about them. They feel “like a number.”

Why You Should Keep Your Customers
It is more difficult to lose a current customer than gain a new one. Similarly, current customers are much more likely to purchase additional services from the incumbent agent. Account development is the most successful method used by agents in increasing their agency’s profitability and personal income. Consider the following:

  • The average personal lines client has a need for at least six types of insurance.
  • The average commercial lines client has a need for nine or more.
There is a direct correlation between a customer’s willingness to do business with an agent and the personal relationship that customer has with the agent. Statistics prove that the fewer policies a customer purchases from a firm, the more likely he or she is to leave.

Simply stated, a process of maintaining good relationships with current clients is good for profitability, growth, and reducing errors and omissions issues.

How to Keep Your Customers
First, agents must promise and deliver. If the sales process included a promise to "always provide the lowest price" and your customer finds the lowest price somewhere else, your relationship with that customer may be in jeopardy.
Second, make sure your customers understand that a relationship is important to you. Tell them what they should expect from you as an agent, but make sure they know what you expect from them as a client. Customers seeking personal relationships will appreciate your candor. Third, formalize steps to solidify customer relationships. Such steps may include:
  • Recognize birthdays, policy inceptions, or other important dates that help define your relationship.
  • Schedule pre-renewal contacts via phone or e-mail to discuss customer concerns. Try to contact your customer at least three times annually in addition to renewal.
  • Keep customers informed of happenings at your agency. Customers who value a personal relationship with you may appreciate being “in the loop.”
  • Make clear efforts to educate customers about their insurance. Such efforts may help customers realize that you actually care about them. Smart agents use postcards, letters, e-mails or newsletters.