29 Sep How to Grow and Shrink at the Same Time
There is a very basic concept regarding E&O loss prevention. Essentially, the more client exposures that are insured, the less the E&O exposure. E&O claims most often occur when the client suffers a loss and that loss is either not fully covered or possibly, not covered at all. For that reason, when agencies have an active process to interact with clients and advise them of exposures that are not covered, that agency is significantly minimizing the potential for an E&O claim to occur.
Now factor in the premise that virtually all agencies are looking to grow. More often than not, agencies plan for that growth to come from securing new clients. This is certainly easier said than done. So how can an agency achieve growth while at the same time, minimize the potential for an E&O claim to occur? One of the more common approaches is to develop a cross selling initiative and implement that process for their personal, commercial and benefit clients. Cross selling is certainly not a new concept as evidenced by the McDonald’s slogan, “Do you want fries with that burger?”
So, while you want to add some new business clients, is it fair to say that you may have a decent amount of new business potential in your current book? Examples would include adding an umbrella or floater for your personal lines accounts or adding EPL, cyber or D&O coverage for your commercial accounts. There are no doubt opportunities to cross sell within your benefits book including, vision, dental, etc.
Key issues to consider when designing a cross selling program:
- How can your agency system help you? Many systems have the ability to design various scenarios that will help to identify selling opportunities. Scenarios such as: you write the auto and homeowners but no umbrella; or you write the package, auto and WC but no EPL or cyber. Hopefully, these filters will identify the specific accounts. A letter or email campaign targeting these accounts can then be implemented. The agency system should have documentation of this initiative in case that information is needed as part of a discovery process for an E&O matter. Following up this written communication with a phone call should bear some benefit.
- Training. There is a good chance that staff will need some training on “selling” or broaching the issue with the client. In many cases, this was not a skill set that was required when they were initially hired. Agencies may want to develop a script that the staff can use.
- Compensation. This deals with the issue of whether the staff should be provided additional compensation if they are able to add products to that client’s portfolio. When I have interacted with agency owners on this topic, I have encountered a fair number of owners that ask, “Why should I give them additional compensation? This is part of their job.” Personally, while I understand their perspective, I do not agree with it. Consider providing the specific staff additional compensation when the account is written as new business. I know of agencies that provide 50 percent of the new business commission to the agency staff member. While some may feel this is generous, it is important to note that on future renewals, the agency is receiving 100 percent of the renewal commission.
A good starting point is to determine the average number of policies per client. A couple of years ago in personal lines, that number was less than two! Imagine the impact of adding an average of one more policy per client. It is significant.
A key issue is to make it fun including contests and incentives for staff to hit certain goals.
Who would have thought that an agency could have fun while reducing their E&O exposure and growing at the same time? What a concept!