The “secrets” to affluent market success

Independent agents, like companies, are increasingly under pressure with increasing costs and decreasing revenues. One way around this dilemma is to segment the agency’s personal lines business and to focus on the affluent clients where agents can differentiate themselves based on value-added services.

Affluent market carriers who are focused on this niche have found it to be the best way to compete against the price-driven, commodity writers. By providing unmatched service and the most comprehensive products, affluent market companies can excel and receive a fair value for its products and services.

We believe it’s time for independent agents to begin the same process. We’ve seen a number of our top agents make this shift and have learned some of the “secrets” to their growing success.

What makes the affluent market attractive for today’s independent agencies?

First, the affluent client can be more profitable–and a solid contributor to an agency’s income. One agency calculated that its top-tier accounts were one-third more profitable than the mass-market segment.

Second, once an agency is confident in the quality of its top-tier personal lines service, cross-selling commercial lines customers can help commercial lines retention. By delivering quality service to top-tier customers, agencies have conquered the perception that personal lines service issues can damage commercial retention. And cross-selling commercial lines customers can be a key source of affluent personal lines revenue.

But just how does an agency make a transition from a one-size-fits-all business model and create a successful niche business serving high-net-worth clients?

What we find is that those independent agencies that succeed (and sustain success) with affluent personal lines clientele take the following three important actions in a planned, decisive way: define a top tier of high-net-worth clients; define a service level for the top tier; and leverage personal relationships with these top-tier, affluent clients.

Sounds basic, of course–but to successfully implement these actions requires detailed financial analysis, a frank assessment of strengths and weaknesses, a business plan, training resources, technology, carrier support and products, and good-old-fashioned commitment.

Define a top tier
Agencies say segmenting clients into tiers allows them to profitably match service levels with the revenue potential of each client. A “one-size-fits-all” service approach does not work with the affluent customer. And from a financial standpoint, agencies cannot afford to offer the same level of service to their mass-market clients than they do the top-tier accounts with significantly more revenue.

Agencies typically segment their personal lines client base into three to five tiers based on personal lines premium or revenue per client, plus other criteria. The top-tier client typically generates at least $6,000 of annual premium, and in some markets over $10,000 annually.

Define service level for the top tier
While every insurance person in the United States has uttered the words “good service,” the proof is in the execution. Providing a higher level of service is crucial to attracting and retaining top-tier clients. Agencies often “brand” service with names such as “VIP” or “Premiere” and promote it, but those are not really key differentiating factors. What does matter, say top performers, is having qualified employees who exclusively serve top-tier clients.

Agents can also take a page out of the affluent carriers’ book by building on some of the value-added services they provide, such as custom home appraisals. Agents who annually visit the insured’s home to ensure that all of their belongings are properly scheduled and that changes to the dwelling are updated can expect a high level of customer loyalty.

Leverage personal relationships
Affluent clients view customer service representatives or account managers (many of whom are licensed) as their personal advisors. They request them by name when they call. And while technical knowledge is important, it’s the ability to develop and build personal relationships that defines a successful CSR. Top-tier CSRs are often hired with a high level of experience instead of trained at the agency.

Agencies leverage these personal relationships based on two touch points: in-bound calls and annual reviews. Incoming calls from top-tier clients are quickly routed to the person (not the “department”) that handles that particular client. Additionally, prior to renewal, the service representative works with that client personally on an in-depth annual review.

What to do
Any agency, whether its leaders are new or experienced in the affluent personal lines market, can:

Estimate (or re-estimate) the affluent market opportunity.

1) Segment the agency’s current personal lines client base into at least three tiers and assess the revenue potential within the top tier. 2) Determine how much business could be added to the top-tier segment with improved new business methods.

Consider the structure of a top-tier service operation. 1) Determine how many top-tier CSRs/account managers are needed. 2) Decide how to efficiently route calls from top-tier clients to top-tier CSRs, and how to “flag” these clients in the agency management system. 3) Establish or enhance the annual review process.

Success in the affluent personal lines marketplace is not a coincidence or an accident. The secret is in independent agents’ ability to deliver the key differentiating factors the affluent consumer expects and demands.

Dan Olmsted (Dan_H_Olmsted@atlanticmutual.com) is president of Atlantic Mutual Insurance Company, which specializes in serving the affluent personal lines customer exclusively through independent agents.

Topics Agencies