retention fundamentals workshop missy allen district 65

Retention Fundamentals Retention Fundamentals WorkshopWorkshop

Missy AllenMissy Allen

District 65District 65


Keeping a firm grasp on auto Keeping a firm grasp on auto policies written in the past can be policies written in the past can be just as important as developing just as important as developing new business when it comes to new business when it comes to maintaining a successful agency. maintaining a successful agency. First let’s define two terms.First let’s define two terms.


RETENTION: the action involved in RETENTION: the action involved in keeping current customers “on the keeping current customers “on the books.” This action can take a books.” This action can take a number of different forms and number of different forms and should be an integral part of the should be an integral part of the day-to-day activity of running a day-to-day activity of running a business.business.


ATTRITION: the loss of customers. ATTRITION: the loss of customers. Although you may have already taken Although you may have already taken action to stop attrition, there is action to stop attrition, there is always more to learn about always more to learn about preventing those precious customers preventing those precious customers from walking away, even while from walking away, even while maintaining your new business maintaining your new business momentum.momentum.


We are well acquainted with the difficulty We are well acquainted with the difficulty of soliciting and writing auto insurance. of soliciting and writing auto insurance. That’s why it is vital to keep sight of That’s why it is vital to keep sight of the importance of keeping those the importance of keeping those policies in force on a long-term basis. policies in force on a long-term basis.

In today’s workshop, we will revisit some In today’s workshop, we will revisit some of the key reasons why customers of the key reasons why customers leave, as well as offer some basic leave, as well as offer some basic strategies on how to hang onto those strategies on how to hang onto those hard-won customers far into the future.hard-won customers far into the future.


Our attention will be on our auto Our attention will be on our auto customers - certainly the biggest customers - certainly the biggest part of our book of business - but part of our book of business - but the concepts cross over to all lines.the concepts cross over to all lines.

Findings from Farmers’ own Findings from Farmers’ own customer surveys and supported by customer surveys and supported by industry statistics, have disclosed industry statistics, have disclosed some valuable information on policy some valuable information on policy retention.retention.


Today’s discussion will draw on the Today’s discussion will draw on the findings of those studies, helping to findings of those studies, helping to reveal the extent of your own reveal the extent of your own attrition, point out reasons why attrition, point out reasons why some policyholders remain loyal some policyholders remain loyal while others defect and, most while others defect and, most importantly, begin to outline what importantly, begin to outline what can be done to prevent customers can be done to prevent customers from leaving your agency.from leaving your agency.


Each of us can become actively involved Each of us can become actively involved in customer retention. Our session in customer retention. Our session today is just the beginning of a series today is just the beginning of a series of related workshops I’ll be providing in of related workshops I’ll be providing in the coming months. the coming months.

Future meetings will use the information Future meetings will use the information we’ve discussed today to build we’ve discussed today to build actionable plans to improve retention actionable plans to improve retention in your agency.in your agency.


Upcoming workshops will feature Upcoming workshops will feature communications for building customer communications for building customer loyalty, value-added services for loyalty, value-added services for building product density and ways to building product density and ways to identify competitive advantages in our identify competitive advantages in our local markets. local markets.

This is integrated training that will equip This is integrated training that will equip you with ideas and information for you with ideas and information for building and maintaining programs in building and maintaining programs in your agency.your agency.


Please pay close attention to what Please pay close attention to what we are about to discuss because we are about to discuss because you’ll be asked to take a short you’ll be asked to take a short learning assessment. learning assessment.

It’s not a final exam, so relax! This It’s not a final exam, so relax! This extra step will help me help you by extra step will help me help you by directing additional training and directing additional training and follow-up where it can be of most follow-up where it can be of most benefit.benefit.


In order for you to focus on In order for you to focus on retention, it’s important that you retention, it’s important that you understand how the loss of auto understand how the loss of auto policies affects the financial growth policies affects the financial growth of an agency. Let’s look at how to of an agency. Let’s look at how to determine net policy loss and how determine net policy loss and how you can calculate its effect on your you can calculate its effect on your own earnings.own earnings.


To help with the calculations, we have To help with the calculations, we have developed a worksheet with formulas developed a worksheet with formulas based on figures you may easily obtain based on figures you may easily obtain from your own statement of operations from your own statement of operations and auto experience analysis. By and auto experience analysis. By using the worksheet and plugging in using the worksheet and plugging in your own agency’s statistics you can your own agency’s statistics you can get a good idea of how lost auto get a good idea of how lost auto customers can affect the revenue your customers can affect the revenue your agency creates.agency creates.


As you work with the formulas on the As you work with the formulas on the worksheet, keep in mind that the worksheet, keep in mind that the ratio it produces is similar to what’s ratio it produces is similar to what’s called the called the CustomerCustomer LoyaltyLoyalty RatioRatio or or CLRCLR. This is an important . This is an important indicator of quality business and indicator of quality business and agency growth, plus it is a standard agency growth, plus it is a standard of Achievement Club qualification. of Achievement Club qualification.


The CLR measures the net growth of The CLR measures the net growth of an agent’s auto book of business an agent’s auto book of business and is determined by dividing your and is determined by dividing your year-end Farmers policies-in-force year-end Farmers policies-in-force by the sum of the beginning by the sum of the beginning policies-in-force and new business policies-in-force and new business written during the year. written during the year.


The CLR formula is shown in the The CLR formula is shown in the latest Achievement Awards packet latest Achievement Awards packet along with the rules for the along with the rules for the Retention Bonus - this new bonus Retention Bonus - this new bonus will be your extra-special reward will be your extra-special reward for keeping your policyholders.for keeping your policyholders.


Retention Bonus flyer - Rules:Retention Bonus flyer - Rules:Sample statement of operations

Sample Auto Experience Analysis


Because of the worksheet formulas Because of the worksheet formulas and CLR are similar, you could easily and CLR are similar, you could easily

say that an auto retention action say that an auto retention action program may not only save lost program may not only save lost

commissions, but could also help you commissions, but could also help you qualify for additional dollars by way qualify for additional dollars by way

of the Auto Retention Bonus.of the Auto Retention Bonus.


Using EXHIBIT ONE, we can review the steps Using EXHIBIT ONE, we can review the steps of the formula and see how you can of the formula and see how you can generate statistics for your own agency. generate statistics for your own agency. EXHIBIT TWO is a completed example that EXHIBIT TWO is a completed example that will give you a better idea of how the will give you a better idea of how the formula works.formula works.

Let’s walk through an example…the Let’s walk through an example…the shadedshaded boxes relate to the letters in the boxes relate to the letters in the

worksheet.worksheet.


To determine auto retention for the last full year, start by obtaining the number of auto policies in force from the Statement of Operations distributed in January of last year.

This gives total auto PIF through December of the prior year.

EXHIBIT B (A):EXHIBIT B (A):

Prior year-end PIFSource: Statement of Operations.

To calculate calendar year retention, begin by listing the prior year’s year-end PIF (this is found on the last year’s January Statement of Operations).

834 A


Using the appropriate Auto Experience Analysis, find the Using the appropriate Auto Experience Analysis, find the number of new business applications written through last number of new business applications written through last year. (B) Add this to the beginning PIF obtained in the year. (B) Add this to the beginning PIF obtained in the first step. (A) The Result here is the PIF at full 100 first step. (A) The Result here is the PIF at full 100 percent retention, as if there had been no policy attrition. percent retention, as if there had been no policy attrition.

(C) (C)

EXHIBIT B (B):EXHIBIT B (B):New Business Issued Source: Auto Experience Analysis

List the number of applications from last year’s report through December 223 B


Using this year’s January Statement of Operations (showing Using this year’s January Statement of Operations (showing results through year-end results through year-end Last YearLast Year), find the most current ), find the most current year-end auto PIF figure. (D)year-end auto PIF figure. (D)

EXHIBIT B (C):EXHIBIT B (C):

PIF Before Attrition (100 Percent Retention)PIF Before Attrition (100 Percent Retention) A+BA+B 1,057 C


To determine your auto retention ratio, divide the most To determine your auto retention ratio, divide the most current year-end PIF (D) by the full retention PIF obtained current year-end PIF (D) by the full retention PIF obtained in the prior step. (C) This is the percentage of business in the prior step. (C) This is the percentage of business that is being retained on a regular basis. The other side that is being retained on a regular basis. The other side of this equation, what could be called the attrition factor, of this equation, what could be called the attrition factor, is the portion of business that does not renew.is the portion of business that does not renew.

EXHIBIT B (D):EXHIBIT B (D):Most Current year-end PIF Source: Statement of Operations.

Use this year’s Statement of Operation that includes figures through December of last year (this is printed and distributed in January). 837 D


Taking the calculation even further, we can easily Taking the calculation even further, we can easily attach a dollar amount to the lost policies. attach a dollar amount to the lost policies. Using the worksheet and Auto Experience Using the worksheet and Auto Experience Analysis, it’s a fairly simple matter to arrive at Analysis, it’s a fairly simple matter to arrive at premiums and commission figures.premiums and commission figures.

EXHIBIT B (E):EXHIBIT B (E):

Auto Retention Ratio* 79% ED divided by C


Obtain the current year-end total of premiums Obtain the current year-end total of premiums from the Auto Experience Analysis, the one from the Auto Experience Analysis, the one listing figures through December of last year. listing figures through December of last year. (F)(F)

EXHIBIT B (F):EXHIBIT B (F):

Total Current Year-End Premium

Source: Auto Experience Analysis $729,750 F


Simple math F divide by D times .5 provides Simple math F divide by D times .5 provides the average renewal premium. (G) the average renewal premium. (G)

EXHIBIT B (G):EXHIBIT B (G):

Average 6 Month Renewal Premium

$436 GF divided by D x .5


Finally, we reach the bottom line. Applying the Finally, we reach the bottom line. Applying the attrition factor, the opposite side of the attrition factor, the opposite side of the retention equation we found earlier, gives us retention equation we found earlier, gives us the commissions that were lost due to auto the commissions that were lost due to auto policy attrition. policy attrition.

EXHIBIT B:EXHIBIT B:

Lost Commissions $9,678 (E-1)xCxGx10%

*Similar to Customer Loyalty Ratio (CLR), which is an indicator of quality business and agency growth as well as a standard for the Auto Retention Bonus. CLR measures the net growth of a book of auto business.


In the case of the example shown on EXHIBIT TWO, the In the case of the example shown on EXHIBIT TWO, the fictitious agent is doing a fair job by maintaining a fictitious agent is doing a fair job by maintaining a retention ratio of about 80%, which means he or she retention ratio of about 80%, which means he or she must write approximately five applications for every must write approximately five applications for every four policies remaining on the books at the end of the four policies remaining on the books at the end of the year.year.

As you can see, even this loss amounts to As you can see, even this loss amounts to overover $9,600 $9,600 in lost commissions for the period. If your ratio is the in lost commissions for the period. If your ratio is the same or less, could you live with that amount of lost same or less, could you live with that amount of lost commission dollars? Would it be commission dollars? Would it be more beneficial more beneficial for for you to keep those policyholders with your agency? OF you to keep those policyholders with your agency? OF COURSE!!COURSE!!


If you wish to go a step beyond the “do-it-If you wish to go a step beyond the “do-it-yourself form” we’ve just discussed, the yourself form” we’ve just discussed, the

Financial Forecaster software is available to Financial Forecaster software is available to automate your retention projections. This automate your retention projections. This

easy-to-use windows-based program can be easy-to-use windows-based program can be obtained from the district office or you may obtained from the district office or you may purchase your own copy from Field Data.purchase your own copy from Field Data.

This software is a powerful tool that can easily show This software is a powerful tool that can easily show users the dollar value of retention.users the dollar value of retention.


Using the worksheet or the Financial Using the worksheet or the Financial Planner can clearly give you an idea Planner can clearly give you an idea of the economic impact of retention. of the economic impact of retention. Now, let’s turn our attention to some Now, let’s turn our attention to some statistics regarding lost policyholders statistics regarding lost policyholders as well as reasons why these people as well as reasons why these people may have decided to take their may have decided to take their business elsewhere.business elsewhere.


The company’s longtime concern about The company’s longtime concern about attrition has been underscored by data attrition has been underscored by data

from some of their own marketing studies from some of their own marketing studies as well as information from industry as well as information from industry

sources.sources.

Here are a few basic facts and Here are a few basic facts and considerations extracted from these considerations extracted from these

surveys that will start you thinking more surveys that will start you thinking more seriously about retention.seriously about retention.


It costs It costs five to ten times more to sell to sell a new customer than to sell an a new customer than to sell an existing one. Advertising, acquisition existing one. Advertising, acquisition and office expenses must be and office expenses must be accounted for each time a new accounted for each time a new customer is added to your agency. customer is added to your agency. Even though you’re writing new Even though you’re writing new policies, a good portion of your profits policies, a good portion of your profits will be eaten up by low retention.will be eaten up by low retention.


The odds of selling a policy to a The odds of selling a policy to a new customer are a challenging new customer are a challenging 15%, but they improve to 50% if 15%, but they improve to 50% if you are selling an additional policy you are selling an additional policy to an existing customer. If your to an existing customer. If your business plan concentrates on new business plan concentrates on new customers without relying on customers without relying on existing customers, it’s going to be existing customers, it’s going to be very difficult to grow.very difficult to grow.

Retention Fundamentals Retention Fundamentals WorkshopWorkshop On the average, the customers you On the average, the customers you

retain provide a much more retain provide a much more consistent and predictable cash flow consistent and predictable cash flow than that generated from new than that generated from new business. Relying on just new business. Relying on just new customers to grow your agency, customers to grow your agency, while allowing established customers while allowing established customers to slip away, results in income that to slip away, results in income that bounces up and down every month - bounces up and down every month - it is difficult to plan, grow and be it is difficult to plan, grow and be successful if you can’t count on an successful if you can’t count on an even cash flow.even cash flow.


Findings have also shown that the Findings have also shown that the practice of building loyalty in practice of building loyalty in customers is the most important customers is the most important factor to keeping policies in a factor to keeping policies in a company or agency. Time and company or agency. Time and again, industry-related surveys again, industry-related surveys have come to the same have come to the same conclusions.conclusions.


Businesses focused on loyalty Businesses focused on loyalty outperformed their competition outperformed their competition when measured on earnings or when measured on earnings or profitability. A large number of profitability. A large number of longtime customers simply means longtime customers simply means more money coming into the more money coming into the business on a regular basis.business on a regular basis.


Building successful relationships Building successful relationships can actually generate positive can actually generate positive behavior from your customers. behavior from your customers. Faithful, satisfied customers are Faithful, satisfied customers are more likely to be repeat customers more likely to be repeat customers who take less time to service, will who take less time to service, will produce more referrals and are less produce more referrals and are less sensitive to price level changes.sensitive to price level changes.


These are important factors to These are important factors to consider and can certainly be applied consider and can certainly be applied to running your agency. to running your agency. Understanding that loyalty can Understanding that loyalty can ultimately lead to more profits for you ultimately lead to more profits for you plus less time and energy expended plus less time and energy expended looking for new customers should be looking for new customers should be excellent motivation for starting a excellent motivation for starting a retention program.retention program.


Exhibit Three: Exhibit Three:

In the past, you may have asked yourself In the past, you may have asked yourself why a customer left only after being why a customer left only after being

with your agency for a short period of with your agency for a short period of time. Also, what about those long-time. Also, what about those long-

established customers who take their established customers who take their business elsewhere without giving you business elsewhere without giving you much, if any warning? Recent and on-much, if any warning? Recent and on-going surveys have provided us with going surveys have provided us with

some answers to these questions.some answers to these questions.


Exhibit Three: Exhibit Three:

Here are some proven warning Here are some proven warning signals, based on statistical data, signals, based on statistical data, that can help you determine when that can help you determine when a policyholder is about to desert a policyholder is about to desert

your agency.your agency.


Exhibit Three: “Attrition Signals”Exhibit Three: “Attrition Signals” Resistance to renew a policy because of Resistance to renew a policy because of

seemingly unjustified rate increases.seemingly unjustified rate increases. Dissatisfaction due to the way claims were Dissatisfaction due to the way claims were

handledhandled.. Lack of communication between the agent Lack of communication between the agent

and policyholder.and policyholder. Customers who send in late premium Customers who send in late premium

payment.payment. Customers who formally complain.Customers who formally complain.


Do these sound familiar? I’m sure Do these sound familiar? I’m sure anyone who’s ever wondered about anyone who’s ever wondered about why a policyholder left has recalled why a policyholder left has recalled

complaints about unexplained changes complaints about unexplained changes in premiums, unclear claims in premiums, unclear claims

settlements and a lack of ongoing settlements and a lack of ongoing customer service. If you think about customer service. If you think about these factors, several are controllable these factors, several are controllable

and if reacted upon in time, could have and if reacted upon in time, could have saved some valuable business. More saved some valuable business. More

about the solutions later.about the solutions later.


EXHIBIT THREE: “Customer Trust EXHIBIT THREE: “Customer Trust Index”Index”

One of Farmers’ own surveys called One of Farmers’ own surveys called the Customer Trust Index examines the Customer Trust Index examines policyholder satisfaction and offers policyholder satisfaction and offers some reasons why customers may some reasons why customers may consider another auto insurance consider another auto insurance

carrier. If you have ever done follow-carrier. If you have ever done follow-up work with former customers, up work with former customers,

these reasons may be nothing new.these reasons may be nothing new.


EXHIBIT THREE: “Customer Trust Index”EXHIBIT THREE: “Customer Trust Index”

The rates on my policy were increased (25%)

My Agent was providing me poor service (15%) I moved to another address

(13%) Another company was recommended by a friend or

family member (10%)

I was getting poor customer service from Farmers (6%) Another agent or company contacted me (5%)



Rate increases account for the highest Rate increases account for the highest number of lost policies. However, it is number of lost policies. However, it is interesting to note that customers with interesting to note that customers with low premium policies, (single car, low low premium policies, (single car, low limits and/or liability coverage only), are limits and/or liability coverage only), are the most common defectors within this the most common defectors within this group group


EXHIBIT THREE: “Customer Trust Index”EXHIBIT THREE: “Customer Trust Index”

Notice that poor service is second most Notice that poor service is second most common reasons for leaving. You may have common reasons for leaving. You may have a retention plan that includes providing a retention plan that includes providing superior service, but if you spring to action superior service, but if you spring to action as customers are going out the door, you’re as customers are going out the door, you’re too late. Service is the foundation of our too late. Service is the foundation of our business and it begins with the first business and it begins with the first customer contact. Service to policyholders customer contact. Service to policyholders must continue at all levels if you expect must continue at all levels if you expect them to remain with your agency.them to remain with your agency.


EXHIBIT THREE: “Customer Trust Index”EXHIBIT THREE: “Customer Trust Index” You may be surprised to see that moving to a new You may be surprised to see that moving to a new

address is third on the list, but changing agents or address is third on the list, but changing agents or companies is almost a natural reaction when people companies is almost a natural reaction when people change residences. The average agency will see change residences. The average agency will see 17% of its customers move each year, so this should 17% of its customers move each year, so this should be thought of as a major defection factor. However, be thought of as a major defection factor. However, there is no reason for customers to be lost to there is no reason for customers to be lost to another agent or carrier if they are moving to a new another agent or carrier if they are moving to a new residence that’s still within your operating territory. residence that’s still within your operating territory. Be prepared to be pro-active and extra Be prepared to be pro-active and extra communicative with customers in this situation.communicative with customers in this situation.



Last on the list are customers who were Last on the list are customers who were lost simply because they were contacted lost simply because they were contacted by another agent or company. These by another agent or company. These customers represent your time and customers represent your time and efforts lost to another carrier. Were efforts lost to another carrier. Were these losses really due to someone these losses really due to someone coming along with a better deal or did coming along with a better deal or did we drive them away with neglect or we drive them away with neglect or indifference?indifference?


EXHIBIT THREE: “Accounts Most Likely EXHIBIT THREE: “Accounts Most Likely to Leave”to Leave”

Now, here’s more information that can be Now, here’s more information that can be applied to help you spot potential defectors applied to help you spot potential defectors among your own auto insurance customers. among your own auto insurance customers. This information, gathered from a survey This information, gathered from a survey

called the Farmers All-Territory Auto called the Farmers All-Territory Auto Retention Review, indicates characteristics Retention Review, indicates characteristics of customers who are likely to defect before of customers who are likely to defect before

their policy reaches the next renewal.their policy reaches the next renewal.


EXHIBIT THREE: “Accounts Most Likely to EXHIBIT THREE: “Accounts Most Likely to Leave”Leave”

Customers insured with Farmers less than Customers insured with Farmers less than three years.three years.

Customers with single car auto account and Customers with single car auto account and who do not carry their property insurance with who do not carry their property insurance with Farmers.Farmers.

Customers who have Mid-Century or Farmers Customers who have Mid-Century or Farmers Standard Auto policies.Standard Auto policies.

Customers who carry minimum liability limits.Customers who carry minimum liability limits. Customers who do not carry full coverage on Customers who do not carry full coverage on

their policies.their policies.


EXHIBIT THREE: “Accounts Most EXHIBIT THREE: “Accounts Most Likely to Leave”Likely to Leave”

I don’t think these categories will be unfamiliar to I don’t think these categories will be unfamiliar to those of you who have spent time dealing with those of you who have spent time dealing with customers who have left your agency. You’ve customers who have left your agency. You’ve

encountered these people before. But it is encountered these people before. But it is important to be familiar with and constantly important to be familiar with and constantly

remind yourself and your staff of the factors on remind yourself and your staff of the factors on this list with regards to future solicitation of this list with regards to future solicitation of

new customers and cross-selling with current new customers and cross-selling with current customers.customers.


EXHIBIT FOUR: EXHIBIT FOUR:

“ “Working With Customers at Working With Customers at Different Profit/Retention Levels.”Different Profit/Retention Levels.”

Farmers has developed this retention and policy Farmers has developed this retention and policy characteristics matrix to provide even more characteristics matrix to provide even more

help. It identifies types of customers who will help. It identifies types of customers who will remain longtime customers with your agency remain longtime customers with your agency

or, better yet, who will be the most worthwhile or, better yet, who will be the most worthwhile one’s to save. The matrix is based on territory-one’s to save. The matrix is based on territory-wide figures for a current three-year period so wide figures for a current three-year period so

the information is up-to-date and should be the information is up-to-date and should be applicable to any group of customers.applicable to any group of customers.


EXHIBIT FOUR: EXHIBIT FOUR:

“ “Working With Customers at Working With Customers at Different Profit/Retention Levels.”Different Profit/Retention Levels.”

In the matrix, we have categorized customers In the matrix, we have categorized customers based on both profit level and degree of based on both profit level and degree of

retention; the highest dollar generators are at retention; the highest dollar generators are at the top and those least likely to defect are on the top and those least likely to defect are on

the right. Looking at the matrix as the basis of the right. Looking at the matrix as the basis of a retention action plan, those customers at the a retention action plan, those customers at the upper left of the chart would of course receive upper left of the chart would of course receive

the most attention since they represent the the most attention since they represent the highest potential for profits.highest potential for profits.


EXHIBIT FOUR: EXHIBIT FOUR: “Working With “Working With Customers at Different Profit/Retention Customers at Different Profit/Retention Levels.”Levels.”

HIGH PROFIT/LOW RETENTION•Driver age 20-24 and 35-39

•Rate Classes 1B-1 and 1B-3

•Car Value $35,000 to $50,000

•Standard Billing

Strategy

Aggressively retain these customers. Provide them special recognition, a high level of access and special attention in solving problems. Encourage dialog. Cross-sell complementary products and services.



HIGH PROFIT/HIGH RETENTION

Mid-Century

Rate Class: 1A,1B,1C,6A,6B, 6C,8, & 3

Auto/Home

Driver Age 40 - 85

Tenure Greater than Four Years

Car Value $15,000 to $35,000

•Strategy - Aggressively attract these customers. Secure referrals. Cross-sell complementary products and services.



LOW PROFIT/LOW RETENTION

TFIC & TCM Driver Age 19 and Under

No Auto/Home Driver Age 25 - 29 Rate Classes 2A1,2C1,2D, & 1B2 Monthly Pay Plan

Car Value under $15,000 Tenure Between 1 - 3 Years

Strategy

Maintain Minimum service levels. Cross-sell complementary products and services to improve profitability and retention.



LOW PROFIT/HIGH RETENTION

TFIC

Driver Age 85 Plus

Tenure Four Years

Strategy

Maintain expected service levels. Attention to re-underwriting these customers



LOW PROFIT/HIGH RETENTION

FIE Non-Smoker

Driver Age 85 Plus

Tenure Four Years

Strategy

Maintain expected service levels. Attention to re-underwriting these customers



If you take some time to review the matrix, you’ll begin to see how almost any group of auto policyholders could be placed within the grid. The next step, the actions you might take to prevent lost policies, involves the strategies listed within the squares.


EXHIBIT FOUR: EXHIBIT FOUR: “Working With Customers “Working With Customers at Different Profit/Retention Levels.”at Different Profit/Retention Levels.”

Strategies include the types of activity and level of action that, when applied to the specific type of customer described in the grid, are what’s needed to get the optimum value from policy retention activities. You should consider these strategies as very basic, providing focus to help you become more effective in your retention efforts.



Of course, it will be important to concentrate your efforts on high profit/low retention

households. You will also want to transition customers from the low profit/low retention category into the high profit/high retention category. But remember - every qualified and quality customer should be considered

important to your business!



To provide more direction, I’ll briefly expand on some of the basic strategies

shown in the grid. These activities, applicable to prospects, new customers or your base of longtime customers, all

have the same objective; keeping policies in-force and in your agency.



Cross selling to existing customers should be considered one of the key policy

conservation strategies - a great way to produce high profit/high retention

customers. For a number of years and most recently in the Customer-Focused Marketing

program, Farmers has been saying that writing other policies in the household can do much to improve customer retention.



The necessity and advantages of cross-selling cannot be overstated. You have heard this before, but the reasons are

worth repeating!



Selling more than one line of coverage, not just an Selling more than one line of coverage, not just an additional auto policy, (although two autos is better than additional auto policy, (although two autos is better than one!) builds on your position as the household insurance one!) builds on your position as the household insurance advisor. Statistically, it has been shown that more than advisor. Statistically, it has been shown that more than one policy in a household cements the business one policy in a household cements the business relationship and prevents all policies from lapsing. Your relationship and prevents all policies from lapsing. Your customers will be less likely to accept the advice of other customers will be less likely to accept the advice of other agents from other carriers who try to replace policies or agents from other carriers who try to replace policies or sell different coverages.sell different coverages.



It is not only less expensive to sell additional policies as It is not only less expensive to sell additional policies as statistics show, but also easier. An existing customer statistics show, but also easier. An existing customer already believes in insurance so they know the value of already believes in insurance so they know the value of the concept and do not have to be resold. In addition, the concept and do not have to be resold. In addition, they already trust in your word since the original policy they already trust in your word since the original policy has been beneficial. Studies show that you know well has been beneficial. Studies show that you know well over half of your customers by name! Leverage this over half of your customers by name! Leverage this unique relationship is the key to account selling.unique relationship is the key to account selling.



The Customer Management sheet, the Statement The Customer Management sheet, the Statement of Operation’s new second page, contains of Operation’s new second page, contains

information on an agency’s one, two and three - information on an agency’s one, two and three - plus policy households. This data can clearly plus policy households. This data can clearly point out the need for an agent to increase point out the need for an agent to increase

cross-selling activities. cross-selling activities.

See example Statement of Operations - second See example Statement of Operations - second page.page.



Closely associated with the cross-selling strategy Closely associated with the cross-selling strategy is communication with your customers. Often, is communication with your customers. Often,

the statement that an agent was providing poor the statement that an agent was providing poor service could be interpreted to mean that the service could be interpreted to mean that the

agent was not adequately communicating with agent was not adequately communicating with the policyholder. Or even worse, the policyholder. Or even worse,

communication ceased with the insured when communication ceased with the insured when the policy was sold.the policy was sold.



Please understand that our discussion here will be Please understand that our discussion here will be in somewhat general terms. As I said earlier, I’ll in somewhat general terms. As I said earlier, I’ll

be providing a number of other retention be providing a number of other retention workshops in the coming months. Customer workshops in the coming months. Customer communication will be the subject of one of communication will be the subject of one of

those meetings and we will discuss that those meetings and we will discuss that strategy in detail.strategy in detail.



Communication with your customers on a regular Communication with your customers on a regular basis helps develop loyalty and a stronger basis helps develop loyalty and a stronger

business relationship. Customers who feel that business relationship. Customers who feel that they are getting ongoing, quality care from they are getting ongoing, quality care from their agent will be less reluctant to renew or their agent will be less reluctant to renew or

pay additional premium when an increase rolls pay additional premium when an increase rolls around.around.



Even though it’s an old idea, communication is a Even though it’s an old idea, communication is a concept that really works! There are numerous concept that really works! There are numerous ways to keep in touch with customers and some ways to keep in touch with customers and some

may require more than a little effort on your may require more than a little effort on your part. Here are a few suggestions that continue part. Here are a few suggestions that continue

to be successful.to be successful.


““The At Risk Program”The At Risk Program” Implement the At-Risk Retention Program in Implement the At-Risk Retention Program in

your agency. This program allows you to focus your agency. This program allows you to focus retention efforts on customers who are the retention efforts on customers who are the most likely to defect and on business that most likely to defect and on business that represents a strong potential for profit. Built represents a strong potential for profit. Built on the proven foundation of targeted and on the proven foundation of targeted and frequent communication, the At-Risk Retention frequent communication, the At-Risk Retention Program is easy to implement and is very cost Program is easy to implement and is very cost effective. Do not overlook this opportunity. effective. Do not overlook this opportunity. Since your time is valuable, a retention Since your time is valuable, a retention technique that generates the greatest return technique that generates the greatest return for the time you devote makes a lot of sense.for the time you devote makes a lot of sense.


““The At Risk Program”The At Risk Program” Publishing a newsletter, such as the Friendly Publishing a newsletter, such as the Friendly

Review, can help your customers remember Review, can help your customers remember your agency when they think of insurance. This your agency when they think of insurance. This does not have to be elaborate, one or two does not have to be elaborate, one or two pages are sufficient. It can announce changes pages are sufficient. It can announce changes in your agency to improve service, introduce in your agency to improve service, introduce new products or help soften the blow of a rate new products or help soften the blow of a rate increase. This provides a payoff in loyalty and increase. This provides a payoff in loyalty and leads to a better informed customer, which is a leads to a better informed customer, which is a step to smoother sales since an informed step to smoother sales since an informed prospect is in a better position to make a prospect is in a better position to make a buying decision.buying decision.


““The At Risk Program”The At Risk Program”

One of the newer capabilities for maintaining One of the newer capabilities for maintaining communication with your customers is through communication with your customers is through the creation of a page on Farmers website. The the creation of a page on Farmers website. The Farmers e-mail system will allow you to Farmers e-mail system will allow you to communicate with others on the Farmers communicate with others on the Farmers network. Your webpage will give your network. Your webpage will give your customers the opportunity to quickly learn customers the opportunity to quickly learn about your agency and products. In addition, about your agency and products. In addition, you’ll be able to send and receive messages to you’ll be able to send and receive messages to and from these customers.and from these customers.



Although a timeworn method, sending birthday Although a timeworn method, sending birthday or anniversary cards are an excellent way to or anniversary cards are an excellent way to keep your name in front of customers. With keep your name in front of customers. With computer technology, it is a relatively simple computer technology, it is a relatively simple task to set up a mailing procedure that not only task to set up a mailing procedure that not only extends congratulations, but instills loyalty and extends congratulations, but instills loyalty and helps generate extra business as well.helps generate extra business as well.



Build computer files on each of your customers Build computer files on each of your customers containing personal data, financial goals, containing personal data, financial goals, interests and needs that may warrant additional interests and needs that may warrant additional coverage or another policy. Technology allows coverage or another policy. Technology allows you instant access to these files when talking you instant access to these files when talking with your customer by telephone, which makes with your customer by telephone, which makes your communication more professional.your communication more professional.


““The At Risk Program”The At Risk Program” Of course, the most important means of Of course, the most important means of

communicating with your customers is through a communicating with your customers is through a regular customer review program. This systematic regular customer review program. This systematic method of re-contact really works. Your face-to-method of re-contact really works. Your face-to-face, regularly scheduled interaction with face, regularly scheduled interaction with customers addresses needs and shows you care.customers addresses needs and shows you care.

The personal interest and concern you show The personal interest and concern you show through communication will be rewarded in loyalty through communication will be rewarded in loyalty at renewal or when another agent attempts to at renewal or when another agent attempts to write business in your customer’s household.write business in your customer’s household.


““Quality Customer Service”Quality Customer Service”

Quality Customer Service is a major factor in Quality Customer Service is a major factor in building a loyal customer who will continue to building a loyal customer who will continue to renew their coverage year after year. The renew their coverage year after year. The Farmers method of distribution, its agency Farmers method of distribution, its agency system, can be valuable to customers only if it system, can be valuable to customers only if it provides a benefit beyond what is offered by the provides a benefit beyond what is offered by the product. This means providing the sort of product. This means providing the sort of service that is beyond what could be offered by a service that is beyond what could be offered by a customer service desk at a corporate office. customer service desk at a corporate office.

Could you easily act in the following manner when Could you easily act in the following manner when dealing with your current policyholders?dealing with your current policyholders?



Again, data from our own studies indicate that Again, data from our own studies indicate that customers will renew their policies for reasons customers will renew their policies for reasons other than the belief that they are getting the most other than the belief that they are getting the most value for their insurance premium. The Company value for their insurance premium. The Company found that 72% of survey respondents agreed with found that 72% of survey respondents agreed with this statement: “I choose to let Farmers handle my this statement: “I choose to let Farmers handle my insurance needs largely because of the service I insurance needs largely because of the service I got from my agent”. I’m sure you would agree that got from my agent”. I’m sure you would agree that service is highly prized by those people who service is highly prized by those people who continue to remain with their agent and Farmers continue to remain with their agent and Farmers following the original purchasing decision.following the original purchasing decision.



Make each of your customers feel like they are Make each of your customers feel like they are getting 100% of your time. Assume the getting 100% of your time. Assume the attitude considered ideal in the minds of most attitude considered ideal in the minds of most customers - the Agent should feel he or she customers - the Agent should feel he or she works for me and acts accordingly.works for me and acts accordingly.

Be cheerful and eager to help with any request, Be cheerful and eager to help with any request, problem or complaint.problem or complaint.



Do it right the first time. Missing Do it right the first time. Missing information or misquoted rates are both information or misquoted rates are both a reflection on your professionalism and a reflection on your professionalism and factors that delay policy issue.factors that delay policy issue.



Be competent when errors are made Be competent when errors are made since customers will usually forgive you since customers will usually forgive you for an honest mistake that’s fixed for an honest mistake that’s fixed immediately. However, punishment for immediately. However, punishment for errors in the form of non-renewal can errors in the form of non-renewal can usually be expected for excuses and usually be expected for excuses and failure for failure for not following up!not following up!



Do Do notnot keep a superior service attitude keep a superior service attitude to yourself! Work with your staff to to yourself! Work with your staff to assure they adopt the same habits of assure they adopt the same habits of topnotch customer service that you are topnotch customer service that you are using.using.


““Solicitation Techniques”Solicitation Techniques”

In addition to what’s just been presented, your In addition to what’s just been presented, your solicitation techniques can even be thought of as a solicitation techniques can even be thought of as a

retention strategy. Adjusting methods for retention strategy. Adjusting methods for obtaining business, which means being selective obtaining business, which means being selective

about the prospects you wish to insure, is probably about the prospects you wish to insure, is probably the most drastic measures you could take to guard the most drastic measures you could take to guard

against attrition. Though I’m only going to against attrition. Though I’m only going to mention two, the following factors could help mention two, the following factors could help

target prospects who are the most likely to remain target prospects who are the most likely to remain in your agency. in your agency.

Apply them if you’re serious about retention!Apply them if you’re serious about retention!


““Solicitation Techniques”Solicitation Techniques” A key factor here is age. Older customers, A key factor here is age. Older customers,

even those over age 40, are the least even those over age 40, are the least likely to switch insurers. These older likely to switch insurers. These older individuals are more difficult to attract individuals are more difficult to attract from other companies. Since they are from other companies. Since they are more likely to stay with us, time and more likely to stay with us, time and money should be spent money should be spent attracting attracting them to them to your agency. Younger people need less your agency. Younger people need less incentive to switch. Therefore, resources incentive to switch. Therefore, resources should be allocated to help should be allocated to help retainretain them in them in your agency.your agency.


““Impact of Discounts on Retention in Impact of Discounts on Retention in 1996-97”1996-97”

All Territory by Book of BusinessAll Territory by Book of BusinessRetention of Policies With Auto/Home Retention of Policies With Auto/Home

DiscountDiscountPolicies with the Auto/Home Discount Have Higher Policies with the Auto/Home Discount Have Higher

RetentionRetention

TFICTFIC Mid CenturyMid CenturyTCMTCM

DISCOUNTDISCOUNT

NONO DISCOUNTDISCOUNT

66% 78%

NON-SMOKERNON-SMOKER

((N/AN/A To To TexasTexas))

85% 88%

47% 71% 78% 84%

EXHIBIT FIVE



All Territory by Book of BusinessAll Territory by Book of BusinessRetention of Policies With Multi-Car Retention of Policies With Multi-Car

DiscountDiscountPolicies with the Multi-Car Rating Factor Have Higher

Retention

TFICTFIC Mid CenturyMid CenturyTCMTCM

DISCOUNTDISCOUNT

NO NO DISCOUNTDISCOUNT

60% 75%


(N/A to Texas)(N/A to Texas)

82% 87%

42% 70% 78% 86%

EXHIBIT FIVE


““Impact of Discounts on Retention in 1996-97Impact of Discounts on Retention in 1996-97””All Territory by Book of BusinessAll Territory by Book of Business

Retention of Policies With Both Auto/Home & Multi-Car Retention of Policies With Both Auto/Home & Multi-Car DiscountsDiscounts

When the Multi-Car & Single-Car are Segmented by the Auto/Home Discount, Further Differences in Retention

May be NotedTFICTFIC Mid-CenturyMid-CenturyTCMTCM

Multi & A/HMulti & A/H

Single No A/HSingle No A/H

68% 78%


(N/A in Texas)(N/A in Texas)

85% 88%

49% 77% 84% 89%Single & A/HSingle & A/H

Multi No A/HMulti No A/H 53% 73% 79% 84%

42% 68% 76% 84%

EXHIBIT FIVE



As we close, here’s one final set of survey figures. A quick analysis of these charts showing the impact of the auto/home discount and multi-car rating, reveal even more facts that can be applied to retention programs. Policyholders receiving the discount or the rating exhibited retention, but when these are combined, even more success was enjoyed. Again, we’ll follow-up with another workshop devoted to this topic in the very near future.

EXHIBIT FIVE


What’s been presented today, the techniques, practices and survey findings, should provide

you with a sound understanding of what’s needed to combat attrition in your agency. By applying these fundamentals on a consistent

basis, you will save policies and put yourself on schedule for a major financial reward.


You will be receiving invitations to the other retention-based workshops being presented in

the future. These meetings will provide a detailed analysis of some of the factors I’ve only touched upon today. I look forward to continuing our work together. Let’s now see if I adequately

communicated these issues to you.Here is a booklet on today’s workshop to take with

you.Don’t forget to take your learning assessment on

the Phoenix System.

retention fundamentals workshop missy allen district 65

Documents

customer retention

policy retention

auto customers

loss of customers

current customers

precious customers

hardwon customers

loss of auto policies