Positioning with Companies as the Market Changes

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 products that customers would stand in line to buy, even when charging a high price. 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. 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 to determine whether to offer a coupon based on the speed someone clicks through a site will 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 choosing insurance companies, knowing which clients you want is essential to maximizing success. Some companies are better at providing a low price and lesser service, while others are better at providing great service, but charging for that service too. If you want to maximize your business, 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 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 goal?

Growth

Another example of positioning your agency has to do with growth. Some agencies are well-positioned for growth. Many agencies focus on slow growth and low loss ratio business. Others focus on fast growth. Nothing is wrong with either model.

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!

Just because dovetailing an agency with its companies is difficult does not mean it is impossible. Aligning your company with goals is a challenge with a large reward.

Relative to growth, a mismatch often occurs 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, how easy is it for their agencies to write business with that company? Demanding their agencies place more business with them will not solve the problem.

As the market changes, agencies may be faced with this situation. 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. Downgrades are expected to exceed upgrades in 2013. Considering the industry likely finished 2012 with near-record surplus, this suggests many companies are much more solid than the market, and another group of companies are much weaker than the market.

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 an expensive endeavor. If the market gets truly hard, finding a market may be difficult. A proactive option might be to move some business now, positioning your agency to go after 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. Positioning an agency with its carriers will greatly enhance its ability to position itself with the customers it most wants.

Topics Carriers Agencies