Michael: Hello everybody this is Michael Jans with Agency Revolution. We make it easy to automate your systems, to engage your customers and grow your agency or brokerage. I want to welcome everybody to this episode of the Connected Insurance Podcast where we examine the trends, innovations, challenges and the solutions to the biggest problems that are facing retail agents and brokers. Today, I want to welcome our special guest which this time is me, yours truly, Michael Jans. I am going to answer some questions that are going to be delivered to me by our good friend and Senior Vice President Rick Fox. Rick how are you?
Rick: Michael, great to be here. You ready to role?
Michael: I’m ready, but Ahh why don’t we start with a really quick introduction of who you are because you have been an important leader and player in this industry for a long time.
Rick: Ahh, yes so, I’ve been in the industry for about 25 years. Agency owner in the Pacific Northwest. I also worked for Vertafore Agency Management System Software, and now here, permanently, hopefully.
Rick: At [chuckles] Agency Revolution. Looking forward to working with you on this.
Michael: Alright, well let’s get started.
Rick: All right. First question, Michael I understand you’ve just published a new book. What inspired the book?
Michael: As you know Rick we’ve been looking into this industry for a long time, my sites have been on the retail, agent, broker for almost 25 years, and we’ve always been interested in fundamentally in one question. What makes some agents or brokers more successful than others? How can we identify those characteristics, how can we then package them and deliver them so that others can succeed just like that?
When I got into this industry over two decades ago, it was a very different world. It was a different business environment, the things that agents and brokers did to succeed were different. The Yellow Pages ads were different than they are now for example, the world that they operated in, it is just so different and so, we really very, very carefully examined. What’s making some people succeed in this environment more than others? What are the short cuts? Why is it that, some agents brokers seem to be able to thrive, in this fast changing environment others that don’t?
Essentially what we did, put it all in one book, and the book is called Connect. Now insurance agents, and insurance brokers are rapidly dominating their market, by connecting more deeply with their customers and prospects, delivering an ongoing stream of value, and marketing like modern day wizards, and that’s what it comes down to.
Rick: It sounds good Michael, let me ask you this question. What changes have you been seeing?
Michael: Some are slow and transitional, and some are dramatic and I think transformational. Unfortunately we’ve seen some slow market share erosion, especially personal lines, and of course we’re seeing some threats to Market Share Erosion in Small Commercial Lines. We’ve seen that over the years. I mean clearly, the direct marketers like IKO and Progressive Direct. Now companies like www.insurance.com, they’ve done a good job reaching out to the demographic of the customer base that wants their value proposition. Which is basically say 50%.
It’s a cheap insurance sort of commodity value proposition. There’s an element of the marketplace that that’s appropriate for. That’s a big change. We’ve also seen a change which, I think we’re just beginning to see the tip of the iceberg, and that is the emergence of a new digital channel, now we’ve known that, The internet and related technologies have really transformed a lot of industries like, on and on and on, the Travel Industry, Journalism, Photography, Publication, just so many industries have been transformed because of it.
Our industry has, in spite of Bill Gates and others saying that we’re going to be distant or mediated, they were saying that 20 years ago. It seems that we’ve been sort of a relatively safe harbor, but what we’ve seen happen. Recently is a major series of investments, in this industry to disrupt it. To take our customers away from the venture capital community. So, we’ve seen since 2011, we’ve seen four billion dollars invested into disruptive startups. Three billion since 2015, and some of that coming from all sorts of sources, Silicon Valley, but even some of it coming from our own carriers.
We’ve seen market share erosion. We see a new digital channel that is arising. But I think ultimately the most important change that we’ve seen again, that is technology related. Consumer Behavior is just flat out different, people are doing things, Rick that were unimaginable, when you and I got into this industry. That pace of change has not been linear it’s really been. It’s been on a very fast upward moving curve, now we see that consumers are online. They are online a lot, and they are even online before and during their insurance purchases, now we know — and these numbers even if they’re weeks old. They’re probably smaller than they are now, 81% of the consumer population researches insurance online before they purchase.
72% of them, trust online reviews as much as they trust recommendation from their friends and family. 91% check their e-mail every day. 71% of adults are on Facebook every single day, and it’s not just millennial. In fact a recent report that I read said that, the Boomer generation is actually online a little bit more 15 hours a week. Little bit more than Millennials, and as I said earlier, while we tend to think that personal lines is what the Internet might be about.
A lot of the investments that are being made or are being made to disrupt commercial lines, and the Deloitte report that said, 84% of small business owners, would be willing to purchase online, in other words, “throw their broker off the boat” if they could save some money. We’ve seen a lot of change, and that’s really inspired us to give the best short cuts we can to agents and brokers today.
Rick: Those numbers are staggering, some of those numbers are very big, but I also think, the economy has righted itself, and things are right in their world, for the most part day to day. So how do you see, or how do you feel that agents and brokers are reacting to some of these changes?
Michael: That’s really well put. Because if Friday feels like Thursday, and Thursday feels like Wednesday, Wednesday [chuckles] feels like Tuesday. It’s like, “Oh you know this is kind of okay, but it’s sort of like, it is a little bit like the slow boil all of a sudden it’s 212 degrees.” We do see agents and brokers reacting. I would say three different ways. One is complacency, and that’s been around for a long time. Even 20 years ago Rick, when we were talking about changes in the industry. We were we were saying that, the industry’s changing and the dinosaurs are the ones who are not, if they’re not adopting something.
At that point what we felt were some really necessary marketing strategies. I think when things go well like you said, the Economy’s in pretty good shape. People are selling insurance, lifestyles are pretty good. So number one is complacency, and I think that’s extremely dangerous. Number two, sometimes people really do look squarely at this change and they wonder, “How am I going to grow this thing, when there are so many threats, and so much new competition and some people they just don’t get what their consumers are doing?”
Anxiety is another issue. We did a poll of our readers of our e-mail newsletter, and virtually every single respondent said that they’re anxious, that our channel as a channel is falling behind. The third way that we’ve seen people respond, which is what we want people to do. Is simply to address it with strategy, is to recognize that the consumer — The reason we pull the call the book Connect, is because the consumer is connected and we’re simply saying that, Agent-Broker channel has to catch up and has to connect. The third way we’ve seen people respond is by making a conscious strategic decision, to connect with their marketplace where their marketplace is.
Rick: You mentioned the consumer is changing, or has changed and I’m guessing will also continue to change. What can agents and brokers do to earn their business in today’s world?
Michael: Those are great questions. And fundamentally, we have to recognize that there is. There’s more than one reason that people buy insurance. Some people buy insurance because of price, and I think unfortunately some people are making the wrong decision, but it’s really not our job to judge the consumer.
Consumers make their decisions and we need to respect that. Some people buy it on price. Bain did some fascinating research, came out a couple of years ago on loyalty in the property casualty industry, and they discovered that there are a couple of other reasons people buy insurance. One which is the third in line, is convenience. We’re not good at that.
Two as I mentioned, price and as a channel we’re frankly, we are more expensive than the direct channel so, selling on price is not a great idea. The third reason that people purchase insurance is because they want protection. They actually care about peace of mind.
Rick: It’s actually lost in the shuffle a little bit Michael. The people are so used to Amazon and those kinds of ways of shopping today that does that. Value that the agent provides is that sometime with today’s consumers get lost in the shuffle.
Michael: Here’s what the research is showing, and this is clearly what we’re discovering in our own field research, is that for those who really do care about having protection for their business, having protection for their family, for themselves as an individual, or for their organization. We are a tribal species. We thrive when we have relationships, if the agent or broker can deliver some sense, that there is a real person. They’re present in their life.
They’re going to connect and try to provide a deep relationship, where they are present in somebody’s life, and delivering ongoing value that matters. I think to some extent, there is this sense that the product is commoditized. There are an awful lot of people that don’t just want a commodity. There are a lot of things. Every industry is commoditized, right? There’s no better example than water. That’s a pure commodity and yet sitting on my desk right now, it’s a two dollar bottle of water that I got because it served my needs at this point in time.
I remember doing some research on the water industry. There’re hundreds of companies that are selling water. They all have a little bit of distinctive packaging or messaging or something that makes them stand out, not only from water in the sink, but from everybody else. So, the Commodity Myth is really just a myth.
Rick: Okay, if it’s not price then what is it? How do we deliver on those other values?
Michael: Let me just settle on price for a moment. This is research that was delivered at the Act Conference. About a year and a half ago my friend Brady Polanski from Easy Links delivered the research, and this is what they found. Is that 50% of the consumers actually don’t take the lowest price that’s offered to them. 57% don’t take the lowest price.
They actually end of choosing a product that, between the second lowest price and third, fourth, and fifth. It is 19 to 53% higher. So, price matters. It’s in the equation, but for the demographic that’s most appropriate for our channel, it’s piece of mind that comes in front of that. So, I think your question is what do we do about that? If it’s not price, what are the other values?
Rick: Exactly, Exactly.
Michael: The first thing that I really encourage insurance agents and insurance brokers to do, is not just to think tactically. There is no marketing trick that solves this problem. There’s not a magic wand, I say this as a marketer with 25 years of experience in this industry. As somebody who’s, frankly over the years delivered every trick in the book.
Ultimately it’s not a tactic, it’s a strategy that solves the problem. And the strategy, it’s having that core value of making a commitment, to be real people delivering a real sense of presence and real value to consumers, then aligning every single tactic. Every behavior. Every phone call. Then, of course, using technology, every email or whatever communication is appropriate that delivers that sense of relationship and a value.
So, it really you’re stepping back and saying, “Here’s the question Rick that has to be answered. This is the question that the consumer silently asks, and our channel’s being challenged to answer, which is why do you matter? Why does your insurance agency matter? Whether you’re delivering personalized insurance in Salmon Creek Washington, or you delivering some middle-market insurance, or what have you in downtown Chicago.
Ultimately you’ve got to answer that question, why do you matter? And what the research shows, is if you can create a relationship with me and have some appropriate presence in my life. That doesn’t mean show up at the family barbecue unannounced, right? It means show up online. Show up in my inbox. When you talk to me that way. Say something that matters. Deliver some value. You can protect me.
Somebody said to me recently, “I don’t think that I should communicate with my customer for more than six times a year” and after some conversation I think that he got the idea. If all you’re doing six times a year is trying to suck money out of your customer’s wallets. If the essence of the relationship is how much can you take from them, then you probably shouldn’t show up in their inbox at all. The novices approach to marketing, novices understanding the magic of marketing is, marketing is how much can I get. The advanced marketer realizes that the magic of marketing is in the question, “How much can I give?”
Rick: Yes, that’s well put.
Michael: That’s how we deliver loyalty. I’ll share with you briefly how much loyalty is worth. This is based on Bain’s research. A loyal customer does things that other customers don’t. They measure loyalty on the net promoter score which is really common in our industry. I know that Safeco uses it, Aviva uses it, Traveler uses it, Hartford uses it, USA-A uses it. So, it’s a really standard benchmark for measuring the loyalty of customers.
There’re three kinds of customers. Highly loyal customers, mid-loyal customers, and low loyalty customers. Highly loyal customers retain at 97%. That’s really good retention. They generate two point five referrals per person compared to a mid-loyalty customer that generates one referral. They buy 25% more insurance. So, ultimately the lifetime value of a highly loyal insurance customer is seven times more than a low loyalty, and three times more than a mid-loyalty customer. If there’s an agent or broker who’s listening, I’m hoping that the light bulb just went off and you said, “I got my core strategy. My core strategy is building loyalty because that’s where the money is. It’s in the depth of the relationship”.
Rick: It sounds like that is the cornerstone of the strategy for the independent Agent-Broker channel right now is getting more of those highly loyal customers because they’re worth more. Is that correct?
Michael: Absolutely. In fact what further research shows, is that we can be good, our channel can be good at loyalty. GEICO doesn’t pretend to. The directs, they don’t pretend to. It’s a different business model and it works really well for them. And the emerging digital channel, first of all it’s new. They’ll probably be very good at convenience, which we’re not that good at, but nobody has the opportunity. Nobody can build on the strength of real people having real relationships with other real people like our channel does.
Rick: That makes a lot of sense Michael. I think that as you move forward with this process, anyone out there listening, that that highly loyal customer becomes the absolute cornerstone of your strategy moving forward. Correct?
Michael: Absolutely. When people ask us, or me, often, “Where is the money? Is it in insurance? Is it in P&C, or life, or benefits, or commercial.” Etcetera, etcetera. Where the money is? The money is in the relationship. The bigger money is in the deeper relationship. So fundamentally we want to earn trust. We want to be present and be benevolent. In other words, there need to be some frequency of communications and the communications generally need to — you want to deliver value. People often want to know — They hear about our technology and they think, “Oh, so you got a technology that lets me suck more money out of everybody’s wallet?”
Michael: We usually have to slow them down. Let me share with you why. Agency A gets a terrific response. Maybe 11.2% response to a Cross-Sale Campaign. Agency B does the exact same thing and they get a lower response. They say, “Well, Agency A must be exaggerating their numbers”.
Here’s the difference, Agency A has a relationship to the list that’s getting the messages. Agency B has a weaker relationship. When I say we want to slow them down on the Cross Selling, for example, there is some healing that needs to take place between the agency and their customer, so that the customers feel like, “Ooh, Right, this isn’t just the brokers who’s always trying to rip me off. This is the person I trust. This is the person I can count on.” Now when account rounding is performed or requests for Google reviews, or referrals, or testimonials. When an agency asks for those things that’s when they get a terrific response. When they have a deep, loyal relationship with their customer base. (Read our blog post the 3 Levels of Insurance Marketing)
Rick: All right, put a bow on it. What’s the solution?
Michael: Yes, okay, right. When I got into this industry Rick, everybody was, well, they were excited for me and they welcomed me into the industry saying, “This is a relationship business.” About four or five years ago, McKenzie came out with the report that had everyone upside down and upset and all a flutter.
Essentially, one of the fundamental things that they said was, “It appears that now the Agent-Broker channel might be unraveling, the economics of the broker channel might be unraveling.” What I think they mean by that is that the average — let’s focus first on personal lines or small commercial lines. There’s not a lot commission that goes to support those relationships.
By the time you go back and forth with a couple of phone calls, you get all the information that you need, you enter them into your agency or broker management system. The two or three hundred bucks you got is gone. Where’s the money to create that relationship? Doing it the old school way does not work anymore. But it’s an old school problem and it’s an old school solution. The depth of relationship needs to be done with new school technology.
How to put a bow on it, if you want to be present in the lives of thousands of people. If you have a thousand or 5,000 or 10,000 or more customers, the only way you can do that is to multiply yourself and you do that with technology. Technology allows you the ability to scale relationship. It allows you the ability to communicate on an ongoing basis. Of course now, one of the problems in our industry it is with every vertical. Is when an emerging technology arises like Marketing Automation Technology.
In the horizontal world that can be fine. But in the vertical world you need to find a way to connect it with whatever technology currently runs the system. In our business what runs the agency or the brokerage is the Agent or Broker Management System. That’s an ongoing daily part of operations. That problem is now solved and I’m happy to say that we’ve solved that with our product Connect. It allows the connected insurance agency or insurance broker management system to connect with a marketing automation system, so that you can deliver the right message to the right person at the right time.
Rick: Yes. That makes sense Michael. It sounds good. Hey, let’s just go back to where we started. We mentioned — the first thing we talked about was the new book.
Michael: Right on. We are making that book available — before we go to Amazon, before we go to kindle. But really the book is — I just want to deliver this message to as many people as possible. The book is available — we’re making it available now for free. If you visit our website www.agencyrevolution.com and look under “Resources”, you’ll be able to find and download a copy of that book for free.
Rick: Thank you Michael. We appreciate your time today. We’ll see you on our next podcast.
Michael: Likewise Rick. Thanks for turning the tables and interviewing me. Again, thanks everybody for joining us today. I will remind you, check our blog out. We always have lots of resources available there for you. We update it at least once or twice a week.