Positioning with Companies as the Market Changes

By | June 21, 2013

A huge amount of press has been devoted to how important price is to insurance buyers — and it clearly is. But this is not specific to insurance. Price is a key factor in almost all buying decisions, excluding medical care. But in some businesses, price is being dethroned.

At the head of the class proving price is not the penultimate factor is Apple. Steve Jobs promoted a philosophy of building the very best product that customers would stand in line to buy, even when charging a high price. Note that he had a few failures along the way, but ultimately he achieved almost unimaginable success. I don’t think people will line up to buy insurance, but judging by the size of some carriers’ call centers, lots of people call about insurance 24/7.

A close second is Southwest Airlines. I simply admire their business model to no end. They have the best profitability record in the airline industry. They have the best customer service record in the industry. They are usually at the top of the industry for being on-time. Yet, among the loyal Southwest fliers, price is not the determining factor. Reliability is the determining factor. At some point among people that fly a lot, reliability replaces price.

A third is the revelation that Orbitz is charging Mac users more than Windows users for the same travel because they know price is less important to Mac users. The amazing, and sometimes scary, ability to track web users down to knowing whether to offer a coupon based on the speed someone clicks through a site will absolutely separate online buyers between people who always choose price and those that don’t.

Notice what has happened? The winners choose their preferred client and market accordingly. They know the message has to be geared to the customer because the customer ultimately is in charge. For what group of clients are you positioning your agency?

Company Partnerships

When it comes to choosing insurance companies, especially with a changing market, knowing which clients you want is essential to maximizing success. Some companies are far better at providing a low price and maybe lesser service while other companies are far better at providing great service, but charging for that service too. No right or wrong answer exists other than if you want to maximize your business success, not making a choice will cause you to fall short of your goal.

The most common example has to do with claims. Insureds willing to pay more likely want better claim service. Study after study shows that insureds and independent agents highly value good claims service. So have you completed a claims survey of your own insureds? How does it compare to claims surveys published by a number of survey companies and insurance associations? How can you use this information to constructively sell higher priced insurance? Do you represent the right carriers to achieve your personal goal?

Growth

Another example of positioning your agency has to do with growth. Some agencies are well positioned for growth and others are not. Many agencies focus on slow growth and low loss ratio business. Others simply focus on fast growth. Again, nothing is wrong with either model, within reason. Often though, I see agencies mismatched. For example, a high growth agency has a top company that focuses more on loss ratios creating frustration for everyone. Vice verse is true too. Sometimes I see an agency focused on low loss ratios representing companies focused on growth. During the long soft market, these agencies were frustrated beyond human limits by these companies demanding more growth when their loss ratios were in the 30s!

All this is easier said than done, but just because dovetailing an agency with its companies is difficult does not mean it is impossible. Every client I’ve ever assisted in aligning their companies with their goals has achieved significantly more than before. This is a difficult challenge with a large reward. If it was easy, every agency would do it.

Relative to growth, one other mismatch often occurs. This is when an insurance carrier that cannot grow demands that its agencies grow faster. If a company has been growing less quickly than the industry for years, just how easy is it for their agencies to write business with that company? Obviously, the company has problems and just by demanding their agencies place more business with them will not solve the problem.

As the market changes, agencies may be faced with this kind of situation. How does representing a company that can’t grow benefit your agency?

Another example of positioning with the right carriers has to do with making sure your carriers are most stable. A.M. Best recently released a study showing that 2011 was a high year for insolvencies. Their expectation is that downgrades will exceed upgrades in 2013. Considering the industry likely finished 2012 with near-record surplus, this is an interesting combination of factors suggesting many companies are much more solid than the market as a whole and another group of companies are much weaker than the market. Are your companies stronger or weaker? Use your gut rather than ratings to answer this question.

If you have material books with companies that make your gut queasy, consider re-positioning your agency with other carriers. Waiting to move a book until after a downgrade is a very expensive endeavor. If the market gets truly hard, finding a market may be difficult especially if other agencies are also trying to find a replacement market. A proactive option might be to move some of that business now, thereby positioning your agency to go after the business of agencies that were not proactive.

When an agency’s people are always struggling with companies to get things done, it has little time to be proactive and seek out the customers that most fit its goals. When an agency fails to make that match, its growth and profit suffer. When an agency makes that match, growth and profit accelerate. When so much time is spent trying to get companies to do what you need them to do, price becomes too important because not enough time exists to take the sale beyond that one factor. Positioning an agency with its carriers will greatly enhance its ability to position itself with the customers it most wants.

 

 

 

About Chris Burand

Burand is the founder and owner of Burand & Associates LLC based in Pueblo, Colo. Phone: 719-485-3868. E-mail: chris@burand-associates.com. More from Chris Burand
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