Every agent understands the importance of customer retention and the value of cross-selling multiple products. Failure to create a successful cross-selling culture is not unique to life agencies or property/casualty firms; however, I believe a great opportunity to build a cross-selling platform lies in partnering with a P/C agency.
Many P/C agencies find it difficult to generate significant life revenue. Significant life revenue could be defined differently by many people. Based on my experience with P/C firms, the average business-owner client represents a minimum of $20,000 in life commissions. Is this worth pursuing?
A P/C firm with 200 business-owner clients has $4 million of potential life revenue sitting on the sidelines. Is this revenue meaningful enough? More important, these clients face significant unfunded liabilities. As risk managers, P/C agents have a responsibility to identify these liabilities and look at ways of solving these complicated problems. If they do not build a strategy to approach these business owners, someone else will.
With such an opportunity, why is there such a struggle to build successful cross-selling platforms? To answer this question, we need to better understand some of the challenges preventing success.
The Sales Psychology
The dynamics of the sale are uniquely different, and the approach by the producer is remarkably different. P/C insurance is generally a needs purchase. P/C agents are selling a product that clients generally agree they must have. Clients processing information from the position of “need” take on an entirely different perspective. While service, experience and reputation always matter, the sale to a new customer is heavily price-driven. In fact, the renewal can be generally price-driven as well.
Life insurance is a voluntary purchase, which requires a different approach. The purchase is very personal, sensitive and generally for the benefit of everyone but the insured. The process is much longer and requires constant attention along the way. Not only do you have medical and financial underwriting hurdles, but the client may require some tax and legal work to finalize the transaction.
Successful life insurance agents do not sell life insurance. Rather, they identify problems that businesses or families have and offer solutions to fix those problems. The life agent must move the client from a voluntary position to a needs mindset. Until the client believes this requires attention, nothing will be done.
This is why a majority of life insurance sold within a P/C firm is what I call “ticket taking.” Clients determined somewhere along the way that they “require” $5 million of term insurance. They call looking for options, and the agent ends up filling that ticket order.
P/C agents can face a number of difficulties in selling life insurance, including a lack of knowledge about life insurance products, their uses, funding methods and design methods. This lack of understanding and overall insecurity will prevent P/C agents from approaching their clients about life insurance.
The risk of losing their core business is far too great for some P/C agents to begin approaching clients about other services; therefore, avoidance is at times the most common tactic. Ironically, this eventually exposes their business to outside advisors who eventually will discuss life insurance solutions with their clients.
I have not met an insurance advisor unwilling or uncommitted to building their practice. The fact is that everyone would like to experience organic growth. The lack of commitment has less to do with desire and more to do with trust. The P/C agent must trust the life insurance advisor to complement the work the P/C agent already does for their clients. The life advisor must be able to work within the P/C agent’s company culture. The P/C agent must be sure that the life advisor is competent to present solutions to the P/C clients.
These issues must be addressed and confidence must be established before implementing a cross-selling plan.
Whether a P/C agent engages with a life insurance advisory firm or hires their own independent life producer, it is critical that all parties understand the P/C agent’s company culture. If you decide that working with a P/C agent to build a new revenue model is important to your practice’s future, the new business model should get the same attention and concern as your core business. It should never be treated as a hobby.
Creating a Successful Partnership
Life insurance advisors and P/C advisors have unique skill sets and approaches to selling insurance. Unlike the P/C sale, leading with product and price never leads to a life sale. Unless mandated by a bank, divorce decree or some other directive, a life insurance purchase is a voluntary one. As a result, agents will not find success in pushing product without exposing the need. The following suggestions will provide some guidance on how to create a meaningful life revenue model.
1. Create dynamic customer profiles. The first step in the life and P/C agent partnership is to build dynamic customer profiles for the P/C agent’s new and existing customers. These profiles are the cornerstone for engaging clients in a meaningful way.
Information needed from the P/C agent’s new and existing customers includes:
· Type of entity.
· Number/ages of owners.
· Gross revenue.
· Current income.
· Personal real estate holdings.
· Inventory of in-force life, disability and long-term care insurance (business and personal).
· Copies of wills and trusts.
· Copies of buy/sell agreements.
· Family information (married, divorced, remarried, children, stepchildren, grandchildren).
· Advisors’ names (CPA, attorney).
2. Identify opportunity. With the P/C agent, categorize the P/C agent’s clients (partnerships, C corporations, limited liability corporations, etc.) and organize them for identification. Once you have this information organized, you can begin discussions about a particular group and work together to build a plan to identify strategies that can help those types of business owners.
The life agent should be looking at how the P/C agent engages the client and should discuss how they may approach the client in a meaningful way. Look at “case study” email campaigns. These campaigns should target specific client types, with specific problems and unique solutions designed specifically for them.
In addition, this focused approach not only educates the P/C agent’s client, but also allows you to improve your implementation of client-specific strategies. Clients also may be ranked according to earnings, creditworthiness or size. This all depends on the information you have available.
3. Create/manage a plan. Now that you have decided to make this happen, it is time to build the business plan and establish roles and responsibilities.
First, identify a P/C firm you wish to partner with. Next, build a business plan consistent with your current company culture and a compensation model proportionate to the work provided. The compensation model should be created in a manner that incentivizes the behaviors you need from all parties involved.
The P/C firm should compile a list of one group of clients to approach first. After that, a designated number of clients should be approached over the next 12 months.
In preparing to approach clients, be sure to create your content, method of communication and engagement process. Don’t forget to communicate the broader message with your staff.
Both the life agent and the P/C agent should define the rules of engagement. Hold regular sales meetings where you share successes and deconstruct losses. Create a process for dispute resolution over compensation, communication and overall client engagement.
This information is simply a starting point. Each firm is unique and should adjust according to market conditions, client profiles and staff limitations. When you begin working with P/C agents or firms, I recommend both parties complete a feasibility study. Come up with an overview of services provided and a revenue forecast based on a sample of client analytics.
Appropriate vetting of the agent or firm you partner with will serve you well.
Dan Stanley is chief underwriter, IPS Advisors, Dallas. Dan may be contacted at [email protected]