In this hard economy coupled with the soft market, most agencies expect sales and revenues to go down. Even the best performers feel the downward trend in premiums.
According to Juan Andrade, executive vice-president for sales and distribution at The Hartford, who oversees his company’s agency management consulting arm, Business Management Group, customer retention should be an agency’s first priority when managing in a troubled economy (see Insurance Journal‘s Jan. 26, 2009, West region issue, page 120).
As critical as it is, customer retention alone may not be enough. That’s why Andrade’s priority No. 2 for managing an agency in these troubled times is to follow a systematic sales strategy. While agencies may find it is difficult to maintain positive growth, they are most likely to grow if they are dedicated and disciplined about sales.
Insurance Journal‘s Andrew Simpson recently asked Andrade if his team had advice for agencies that would lead to growth even in today’s market. Following is what he had to say.
Insurance Journal: Shouldn’t agencies expect that sales and revenues might go down in this time?
Andrade: Yes, and I think most of the agencies that we deal with do see that. As I travel around the country and meet with our 10,000-plus producers, the best ones, the luckier ones — maybe not lucky but the savvier ones, if you will — have probably been able to maintain some single-digit growth rates in this economy. But I think even some of our best partners out there have suffered from basically just a downward trend in premiums.
So part of what we deal with in the soft market is that people are lowering rates on renewals, on new business, and so that will have an impact on the company, on the agency and on the revenue that you bring at the same time.
Being in the single digits these days is probably not a bad place to be, but it also depends on the line of business. Right? While for some of the commercial lines it is going to be a lot more difficult to maintain those positive growth rates, it might be easier in some of the other lines. So it really does vary depending on the mix of business that you have within the agency.
Insurance Journal: You advise agencies to take a systematic approach to sales. What does that entail?
Andrade: This is a strategy that is time and tested depending on the cycle. It works for both the hard market as well as the soft market. And you know at the end of the day, we are all salespeople. And so what we’ve got to keep our focus on really is No. 1, on the pipeline; No. 1 on ensuring that we have the right people within our organization, bringing in accounts, building that pipeline, etc., executing on that vision.
This is not a strategy that we can afford to employ only in a hard market or a soft cycle. This is something that we’ve got to continue doing at all times within our market cycles and within the economy. But I’d say the focus on the pipeline is very critical; the focus on working accounts that you already have, working on cross-sell. What I mean is really getting leads from accounts that you already own within the agency.
If you are thinking about going into a particular industry vertical or a particular segment that you may not have been in, for example healthcare, and you may already have a couple of accounts in that area, go talk to your contacts, to your relationships in these areas and find out who else they would recommend, what other areas might be that we are not looking at, etc.
The whole science of selling becomes very important, and that discipline is critical, particularly to surviving a soft cycle.
Insurance Journal: Is this a good time for agents to consider entering new markets, new states perhaps, or adding products to their portfolio?
Andrade: It is a wonderful time to be looking at diversification, particularly given that the cycle has really impacted, particularly more of the commercial lines of insurance than anything else. Certainly, you wouldn’t want to minimize it and personalize it. We are seeing that across the board. But I think if you are a commercial specific quality agent you have been particularly affected by this.
Diversifying is wise to do anyway. We are seeing a lot of our agents and brokers, basically, do that. We are looking at different industry verticals, different niches of the economy. There are pockets there. There are infinities. There are different programs that we can be involved in. As a whole, it makes sense to be able to diversify.
Insurance Journal: Are there pockets of the economy that you think are really worth an agent looking at now, some that may be stronger than others given this economy where they might be able to make some inroads?
Andrade: Absolutely. Even though we are living in unprecedented times, we are seeing things in the economy that we never thought we would see in our lifetimes. There are still areas that are very vibrant. I would say health care is one. Energy is another one, particularly as you start looking at green energy, alternative energy areas.
These are areas where you are starting to see smaller businesses make a lot more investment, and they are still growing. I think those would be places that I would be looking at.
Areas like construction, depending on what part of the country you’re in, are probably either good or bad, depending on what part of the economic cycle you happen to be in. Nevertheless, there is such a substantial amount of our gross domestic product (GDP) in the economy that is tied to construction. That’s still an area to look, depending again, on the specific area of the country you happen to be in.
From what I have seen in my experience — health care, energy — are very good places to be looking at right now.
Insurance Journal: What do you think is a realistic goal for new sales in this economy for an agency?
Andrade: That’s a tough question because it really does depend on where you are geographically in the country in the segments that you’re in. If I owned an agency these days, from a revenue perspective, I would feel probably OK about being flat with total written premium at this point in time, with a big focus on retention in trying to grow new business in whatever areas I could.
If I were in the mid-single digits I would feel pretty good about myself. If you, obviously, have reached the double digits, you would feel really good about it. It all depends, too, on where you are. Some agencies have had more of a focus on retention than new business. I would say flat to single digits is probably could be a good place to be, given market conditions.
On the Web
This is second installment in an Insurance Journal interview with The Hartford’s Juan Andrade. View the entire Insurance Journal video series, “Managing an Agency in a Troubled Economy,” at www.insurancejournal.tv.
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