Michael Jans on ‘The 5 Levels of the Modern Insurance Agency’ – Where do you stand?
Are you ready for the Modern Insurance Age? It’s not coming. It’s here. In this special 100th episode of the Connected Insurance Podcast, Agency Revolution Founder, Michael Jans reveals:
- The 5 big domains of change that will drive the industry in the next three years.
- The 5 Levels of the Modern Agency… designed to reveal both how prepared your agency is to dominate the market of your choice – and, show how to get to the next level up.
- The dangers of addressing change in the wrong way (like chasing the ‘Guru with a gimmick’ or the next shiny new thing the marketing world tosses your direction).
Wondering how prepared your agency is for tomorrow’s marketplace? (Or, today’s?!) If you’re a serious professional, don’t miss this chance to get a clear sense of direction – in an era that demands clarity, confidence and control.
What are other agents & brokers doing to thrive? What are the biggest trends affecting the retail insurance agent & broker? What are the most important strategies and tactics you need to grow faster? Find out here in the Connected Insurance Podcast, where Michael Jans discusses the biggest issues affecting the independent insurance agent and broker with the industries leading figures.
One More Thing! What do you think? How will you and your peers use this to grow your agency or brokerage? Share your thoughts in the comment section below, subscribe to get updates delivered to you, and *please share this if you found it informative.
[Transcript] The 5 Levels of the Modern Insurance Agency
Michael Jans: Hello everybody, this is Michael Jans, co-founder of Agency Revolution. I want to welcome you to the Connected Insurance podcast, presented by Agency Revolution, creators of the most powerful marketing and communication software built specifically to meet the needs of insurance agencies and brokerages.
If you believe, and I’m sure you do, that the relationship you have with your clients is the heart of your business, then you need to see how Agency Revolution can make those relationships stronger and longer, visit www.agencyrevolution.com to receive a free demo of their award-winning software today.
Again, I really do want to welcome you to, what I hope is a special edition, if only for the reason that this is the 100th episode of the Connected Insurance podcast. Somebody pointed that out to me and asked me, “What was that like?” I’m going to share with you a summary of my reflections of what everybody said, but more specifically, what we have to do about it. I have, in part, in response to the conversations, clearly, in part in response to the changes, and forces, and trends that are affecting the industry right now, I have developed a model that I call The Five Levels of the Modern Insurance Agency.
They are intended, one, to be a little bit of a diagnostic for you so you can see where are you positioned, how do you stack up in today’s fast-changing industry, and then what do you need to do to get to the next level. That is the essence of this conversation with you about The Five Levels of the Modern Insurance Agency.
I do mention, at some point, that I have developed a little bit of a workbook and overview of the five levels. If you’d like a copy, hang with me. I know at the end of the conversation, I tell you how you can get a copy, I will email to you, of a very brief eBook, but hopefully very useful on The Five Levels of the Modern Insurance Agency. Without further ado, I will invite you to this conversation. Thank you.
Hello everybody, Michael Jans. I want to welcome you to what I hope is a special episode of the Connected Insurance podcast, special for only the reason that this is the 100th episode. Somebody pointed that out to me recently. First of all, I went, “Wow.” Secondly, they asked me, “Did you learn anything?” The answer for me is an absolutely resounding yes, hopefully, for you too.
In my case, how could I not? I get to have in-depth, hopefully interesting, always interesting conversations about things that I think matter a lot with- think about it – 100 CEOs in the insurance industry, thought leaders in short tech startups, usually agent, friendly ensure tech startup, super successful agencies and agency owners, technologists, marketers, and on and on. Yes, of course, I have had a great privilege.
It has given me an opportunity to hear from some of the very smartest people in the industry, people who have unique seats, unique positions in the industry so they see things that perhaps others don’t. Just like, in some cases, I see things because of the unique position that I play in the industry. While most of you are busy most of the time running, operating, and making decisions about your agency, I spend virtually all my time like some raised, obsessive stalker thinking about you, [chuckles] and thinking about this industry, and observing it, and hopefully providing some solutions.
In this episode, I want to reshare some key reflections on what this all means, this change. Yes, it has been an interesting two years in the last two years. Probably interesting for you, certainly interesting for me. [chuckles] In the last two years, I did successfully negotiate the sale of Agency Revolution to FMG, who, by the way, is doing a terrific job. First of all, I have the opportunity, because I’m still engaged, I still host this podcast, and I still have friends that are active. I have some active relationship with FMG.
First of all, the growth of the company is terrific to see, and because I am very close to the technology team that designs the Agency Revolution products, I get to see what’s up there, and it’s really exciting stuff. Yes, had an opportunity to sell a company to a private equity firm, had the opportunity to leave beautiful Bend, Oregon and move to the outskirts of the Tonto National Forest, in the foothills in Arizona, and basically change everything, change the way I think about my life, change the way I think about my business. [chuckles]
No more running around the country, no more airplanes, no more keynotes, no more speeches, no more visiting clients, but have now begun the conversion of the casita to a world-class conference room, and have a group meeting here in a few weeks, and clients coming here, several clients in the next month. Things have changed a lot for me, but I also suspect that they’re changing for you. If you’re in this industry, I don’t suspect it, I know it.
If there is, again, one theme that virtually every guest that I’ve spoken to, regardless of what corner of the industry that they’re coming from, it is that it has changed. In fact,
I usually look for what’s one really good quote from that person that I could put into the promotional material and use it. [chuckles] It often has to do with change, but lately, it’s not just change, it’s the speed of change.
As Jack Welch famously said when he was the CEO of General Electric, “If the rate of change on the outside exceeds the rate of change on the inside, then the end is near.” I think those are words that we do need to take very seriously in this industry. I’m going to share with you my insights on what to do about this change.
First of all, I also want to share some of the things that all of these conversations have inspired me to do. Number one, almost done with a document called The Five Levels of the Modern Insurance Agency. I’m going to share with you my insights about those levels. I’m also working on a project that I think might resonate with some of you. If you have thoughts, feel free to email me, firstname.lastname@example.org, because I’d like to hear your thoughts.
One of the issues that arises among agencies, and certainly arises among my own clients, is the desire to hire a marketer. That’s a shape change, that’s a shape-shifting of the independent insurance agency model. If you go back not that long ago, the model was agency principle with maybe producers or sales managers on one side, and the CSR is over here, and then the admin staff over there.
That model worked really well for generations, probably two, three or more generations, but now we are seeing, as the world has shifted, the opportunities that marketing can bring, the ability that you have as an agency to be present in a positive way, in an ongoing way to deliver both meaning and delight to your customers.
Those opportunities are available every day with the technologies that once scared us, and may in fact, to some extent, confound, confuse, even frighten some people. Those technologies, once reasonably mastered, present opportunities to be that positive presence, and to become the obvious agent in your marketplace.
Question that often arises is, what do I look forward in a marketer? The answer, of course, is what do you need, and what are you willing to invest in. In fact, there is no such thing as a marketer. If you look at the real world, like any skill, any career, there are levels of skill sets.
I’m beginning to develop a model that has four levels of skill in the marketing function. They, obviously, bring different return, require different investment, and require different skill sets. Regardless of what you call them, level one, two, three, or four, or what I’m currently contemplating, marketing coordinator who might have the ability to do some social posting, just some very basic functions, and a marketing director who has more skills able to develop a more strategic marketing calendar, can use some of the more advanced technologies and some of the more advanced skills.
Marketing manager, obviously, has a higher level of skills, strategic understanding, generally works more closely with revenue, has increasing responsibility, not just for being out there or generating leads, but really has an increasing responsibility for revenue itself. Then the CMO, chief marketing officer position, which most agencies can’t afford except for the maybe the very large nationals, but the CMO typically in any organization has responsibilities. At the very highest level, reports directly to the CEO and is ultimately clearly a critical part of the team that’s responsible for revenue generation, from soup to nuts. Has a broad understanding of the technologies that are available, the technologies that are needed and also the content that is most effective.
In any case, developing a model that I hope will answer that question, I know that in the coming months, I’ll be interviewing Chuck Blondino from Safeco. Because it’s my understanding they’re coming out with their next agency survey.
The last time that I interviewed Chuck at Safeco, he’d indicated the 56% of the agencies that they surveyed hired marketers. Of course, I think being an agency principal doesn’t necessarily mean that you’re a master at marketing nor that you have the skills to hire and direct that marketer. I want to want to continue to clarify solutions to that problem, and that emerging position and that emerging need in the industry.
I’m working on that. I’m developing a strategic analysis of the major forces and trends that are impacting the independent insurance agent today in five different domains. Also, I’m putting finishing touches on what I call the 10x principles of the modern insurance agency. These are 10 principles that are designed to help agencies scale. Then ultimately, this is a ways down the road, maybe my final book to the industry, The Manifesto Of The Modern Insurance Agency.
I want to dive into today’s topic, the five levels of modern insurance agency. So in response, to these changes, agencies are either responding well, or maybe not responding that well, but I think most agencies have a sense that, gosh the world is changing out there.
In some of the work that I’m doing, I’ve begun to analyze those changes in five domains. So tell me if you can relate to this. Number one, changes in consumer behavior. For those of you who are maybe not millennials, and those of you who are millennials, you can look at your parents or you can look at the older generation and laugh, but you’ll certainly notice that what consumers do and the way that they interact with this industry, the way they interact with commerce in general, it’s just really different than the way it was before, the way they expect to be communicated to. Those things are changing rapidly and I know that that’s an area of confusion for a lot of people.
Number two, changes in the workplace itself. Of course, millennials aren’t just changing the way we communicate, but they’re also taking over the workplace. This is of critical importance because this is an aging industry and millennials are filling, if not all, a lot of the positions that previously perhaps were filled by somebody else. They do come to the workplace with their own skills, expectations, and attitude. That’s number two.
Number three, changes in competition. Now, of course, the $10 billion venture capitalists and others have invested insurtech is certainly giving birth to some emerging competitors. Not all insurtech is bad of course. Agency Revolution, I consider to be insurtech company and they’re nothing but good. That $ 10 billion is seeking good returns and places that are somehow reliably enhanced through the use of technology. A lot of my guests have talked about that, and there’s no question, that’s one force that is changing the industry now.
I think depending on your strategic horizon, and what I mean by that is the time between now and when you intend to perpetuate it. If it’s short, then you’ve got different considerations; if it’s longer, you may have other more serious considerations that you need to think about.
Number four, changes in risk itself. By the way, in terms of competition, the industry within is changing as well. There’s a lot of money coming into the industry from private equity firms and other sources. Many of my guests have delivered terrific conversations that are there in that part of the game that’s where they play this game and very successfully. We are seeing not just the continued growth of network organizations, which Neil Stanley and I have talked about in this series, go back and listen to that one if you’re interested in networks, but more formal, nationals and not just aggregators, but mega agencies.
I think we’ll begin to see that at some point there will be a transition not just in the quantity that they bring, the size, the volume of the agency, but the quality. At some point the resources that they have available to them, I think will be deployed in creative and innovative ways, and that will provide a new level of competition into the smaller, medium, even larger independent agencies.
Changes in risk are something that also can’t be ignored, as again, technology drives lots of change, accelerates change often beyond our imagination. Clearly, we’re going to be seeing changes in risk itself, changes in the automobile market and other markets where technology simply, in some cases, it may significantly reduce the risk, it may transfer the risk from the agency force directly to the carrier in some cases bypassing the need for the agent.
That is changes in risk is also under my microscope and also change in the rate of change itself. I think what that means for the agent, is we need to learn to be comfortable, driving fast and navigating at the same time. With all of that change, we have to ask ourselves, how are we doing as an industry?
In my recent interview with Ken Kerr are the CEO of the Council of Insurance Agents and Brokers, I think you pointed out poignantly, this industry has always been good at change. That was his thesis. This industry’s been around, really since the modern economy has been around. Hundreds of years depending on where you want to measure it, or thousands of years if you want to be super historical about it. Yet here we are as the economy changes as new risks emerge, this industry is there.
That being said, I think you also could argue that in some cases we’re a little slow. As an industry, there’s some value in stability, and there’s value in the reliability and the stayed factor of this industry. For the entrepreneurs, the ones who run the independent insurance agencies of today, we need to move as fast as the consumer.
If we’re slower than the consumer, somebody else is going to be running side by side with them or in front of them leading them and guiding them, and so the learning to be comfortable with change moving at the speed of speed, that’s a skill. In times of turbulence, that itself is a skill.
I’ve identified and created a model that it called the Five Levels of the Modern Insurance Agency, and I’m going to walk you through my observations about each one of these. As I do this, you may find parts of one or more that resonate with you, that apply to you, I don’t mean to imply that guys you’ve got to fit neatly within one of these five. No, you’re probably fine. Yes, we’re a little bit like this a little bit like that.
The model, I think my clients have found it extremely useful to help them identify where they are now, where they stand, and where they can focus to get themselves up to the next level. Because at the top level what I call the innovator agency, those are the agencies that have a virtual monopoly. They’re so unique, they deliver such a meaningful delightful conversation, experience with their marketplace and their customer base, that essentially they really don’t have competitors, but they’ve mastered certain skills to get there.
Let’s start at the very beginning with this, which is what I call level one, the commodity broker. Commodity brokers, there are a lot of them. Here’s a brief description of them. Number one, they grow slowly and there are reasons for that and they tend to be stuck on price. It’s not that they have a price problem, they have a value problem.
In the absence of unique, innovative, inherent value, they sell product, and they try to sell product at the lowest possible price, that results in lots of problems. For those of you who do struggle with that, then what I’ll recommend to you [chuckles] is read my very, very short eBook, 4 Reasons Insurance Agents & Brokers Should Never Sell On Price. If you don’t have a copy of that, I have just rewritten it so you can ask me for a copy at Michaeljans.com. I’ll also tell you how you can get a copy of The 5 Levels of Modern Insurance Agency.
The commodity broker, this is the least profitable model and one reason is that they attempt to sell on price which destroys margins, obviously, and it tends to attract the very client that you don’t want. That high churn price shopping customer. There’s a place, the world has provided a wonderful place for high churn customers, and the world has provided a wonderful home for those price shoppers. It’s just not us.
Listen, folks, strategically speaking, let’s go to 30,000 feet and look at the industry. There are independent insurance agencies and insurance agencies, there are the direct marketers and there’s the digital channel and they all have strengths. Strategically, we need to be very clear on what we’re good at and what they’re good at. Well, clearly there are more efficient models than the independent insurance agency system. Efficiency is not the only business value that accelerates growth and creates margins.
Clearly, you can imagine if there was one [chuckles] company, representing one company with one set of business disciplines, and one set of scripts, it would be a highly efficient model. Well, it is. That’s the direct or the mass marketers or the direct marketers, efficiency is the name of the game. All the analysis will reveal that it’s a cheaper system to run, and it’s really very, very effective at attracting customers. The customer that what their message is which is, save, Save money.
We can see this when we watch TV and look at the Internet and see, who’s saying, “Save money, save money.” It’s the direct marketers because that’s what they’re relatively good at. They’re not good at the things that we do in the relationship building that we do. The commodity brokers tend to compete against the people and the marketers that they shouldn’t compete against. They tend to attract the clients that they shouldn’t be attracting, results in slow growth, high churn.
By the way, the direct marketers, they do have high churn and they can sustain it. You don’t want the level of churn they have. They have a model that’s designed to do what it does really, really well. These commodity brokers, they are the agency of the past, we’re moving on. They don’t have a comprehensive customer relationship strategy. They tend not to have a cohesive, compelling business strategy.
Look, I know a lot of these people, I have met a lot of these people. They don’t tend to be my clients, but I know a lot of these people. They’re good people, and they work hard. They just have they have pointed their strategy in the wrong direction. The owner in this case, and the commodity brokers, the owner spends most of their time “on insurance”. They’re usually working in the business, not on the business.
For the commodity broker to get to the next level, I would say this. One, it’s never too soon to market. [chuckles] It’s never too soon to be present, but they also, generally have some other things to take care of as well, which is getting clear on the most effective strategy. It’s not just marketing. A lot of people think marketing is tactics and techniques and tricks. I’ve taught, I’ve been at this 25 years. Probably more tactics, techniques, and tricks than anybody in the industry, but that’s not the game changer.
The game changer is strategy, the game changer is having a crystal clear as best as we can, understanding of the forces that are out there in the world, and understanding which ones will lift us up so we can ride those and which ones will tend to pull us down, so we can find ways to navigate around those. If you look at them carefully, the insurance agency owner in this case really doesn’t have so much a business as a job and they spend all of their time working on their job.
Again, never too early to market, but also in this case, really important just to get really clear on strategy and to begin to work on the business, not just in the business, so we can get to the next level, which is level two, what I call the professional broker.
Well, the professional broker, that sounds pretty good and really it is. Again, if we look at the industry historically, which is easy for me to do. I have been in it 25 years [chuckles] and kind of go back far enough. This industry went through a tremendous transformation, a generation or a generation and a half ago.
I recall when I was the executive vice president of the Trade Association on the west coast. We’re going back a bunch of years here. I had organized a conference about this new mysterious technology called Agency Management Systems. I had a room full, big conference room full of agency principals, they were listening to the speakers that I had organized. They were speakers from, four or five, six different Agency Management Systems, you can imagine what the names of them were, what they were back then. I was listening to my members, the insurance agency principles and they were saying, “Gosh. Are you going to get one of these things? Do you have one of these things? Do you have computers in your office?”
That was indicative of the transformation that the industry went through. It wasn’t caused by the agency management systems, but that certainly accelerated and facilitated the change from the old style commodity broker to the newer professional agency as so many small businesses in industries across the board went through this transformation, weeded to, we became more professional and we cultivated systems, internal systems, human resource systems, and recruitment systems, and maybe some sales systems, and computer systems and so on and so forth.
Those agencies did become more efficient, they did become more effective. Between these two; the commodity broker and the professional agency, that is the majority of the agencies today. While I would say the commodity broker is in trouble soon, if not in trouble now, with a professional agency, the difference is that everything is fine now, but [laughs] what I’ve discovered is that there’s a nagging doubt in the back of the mind of a lot of these agencies that, “Gosh, the world is changing and we’re not keeping up.” That’s the distinction. This is the well-run agency of 1995. It’s even the well run agency of 2005, but this is not the agency that is staying current with or staying ahead of the consumer of today.
Good agencies tend to good margins. These are the agencies with a nice comfortable 20% margin. They’re growing industry averages. I know Tom Durant, from Reagan Associates just told me the other day what the average growth rate was for Q3 last year, but it was above what it was before which I think was 4.6%, it was a little bit higher than that but these are the agencies that are clipping along at a kind of a plodding 5% to 10% growth rate. Well organized, they tend to use some modern technologies at least internally like Agency Management Systems. They’ll probably have a website, maybe it’s a decent website, they might even do some social posting, but clearly and by their own admission, they lack genuine marketing expertise and they are absent a compelling marketing strategy.
They usually have great staff, they probably have CICs and CISRs and other designations within their staff. Staff takes really good care of their clients, they might have producers and again this is a model. We’re making some generalizations.
I’ve seen agencies that are like this and they’re growing faster, they’ve a lot of producers but they still have that nagging doubt that they’re not attracting the client of today. They generally don’t have a comprehensive customer relationship strategy. If you ask them, “How do you, in the ACOR model, convert, optimize and retain clients? How do you attract clients?” Well, it’s usually producers are responsible for generating their own leads, or gosh, most people give us referrals and that’s really pretty good and so we answer the phone. Maybe they even have a referral program where they give away a Starbucks card, yada, yada, yada, but they don’t have marketing engines in place, they don’t have marketing funnels that are clearly established.
They are not using the most contemporary technologies to assist them in that part of it, conversion might be okay. They may or may not be providing training for their CSRs or their producers to help them increase their conversion rate.
Once we get into the post sale aspect of the relationship, where somebody goes from being Joe prospect to Joe customer, the response is passive reactive. When Joe calls, we take really good care of him and we insist that we’re going to resolve the problem within 24 hours, but that’s it. It’s reactive waiting for the customer to make the inbound call, they’re generally not doing much delivering meaning and delight in an ongoing way throughout the year. By the way that’s my formula. Is that today’s agency needs to one, they need to be in communication on an ongoing manner. That’s first, it’s got to be ongoing.
No magic answer on how many times should I be communicating with them because I’ve seen some of the communications; if they’re irritating, I don’t want any of them, but there are two qualities. There are two kinds of communications that people love and that will make them love your marketing and one of them is to deliver meaning. In other words make their life better, add more value to their life itself and the other one is delight; to connect with them. Human to human and make them feel good or make them feel confident, maybe make them smile because you’ve delivered some delight.
So for these agencies to get to the next level, they know that they’re falling behind and they may be looking at– Another sort of slightly interesting observation you may know that I’ve interviewed some terrific agencies in this podcast. A lot of them, they are the millennials for whom the modern world is really the only world they know and the technologies are something that they’re super comfortable with.
So while they may be small, their growth rate exceeds that of the professional agencies and so to get to the next level, they’ve got to be proactive. They have to invest in the future, they have to invest in the customer relationship and marketing strategies, they have to invest in the tools and training that strengthens their relationship with their customer and their marketplace.
That gets to what the next level is, level three which is what I call the strategic agency which means that they have added at least some element of strategy, that’s appropriate to the modern insurance era. Let me say a word or two about strategy. Number one, fundamental to my philosophy in this space, it’s strategy first. That’s the one big decision that you can have 10,000 tactics and you can grab a tactic here, grab a tactic there and it’ll probably help. Just doing something is better than doing nothing, you’re doing it the old way.
The real game changers are the ones who make that one big decision. Which answers two questions, where are we going to play and how we’re going to win? How are we going to be worthy to win, why do we deserve to win? First, we have to figure out where we’re going to play, who is our ideal client, what’s the marketplace, and so on and so forth and then what gives us the right to win?
The strategic agency has begun to move in that direction recognizing that ultimately for the independent agency– The independent agency channel, if you want to know where the money is, the money’s in the relationship. Those high churn customers that we talked about earlier, that’s not relationship, the money’s in the relationship.
When I got into this industry 25 years ago, the thing that stuck with me was everybody said, “Mike you’re going to love it. It’s a relationship business, and as I got to know the industry better, I realized that’s the promise but that’s not the delivery. The promise is, oh, here’s what’s different between having an agent and calling an 800 number a cubicle in South Dakota somewhere. We deliver a relationship.
I’ve seen so many instances where that’s not true. True story, we’re standing in line at – this was few years ago – favorite restaurant, nice long line, this was in Bend and listening to these two friends, two female friends and one was saying, “My insurance agent must have the greatest job in the world, we’ve got a home and the auto. I said I’m like $2,000 a year and I never hear from them until the end of the year when they say, “Hey, I want your money again.” That is a way too common perception that we’re taking, we’re not giving. The strategic agency recognizes, boom. I never want people to say that.
Deloitte did some terrific research on this a few years ago where they indicated that 6 out of 10 small business customers feel that the insurance agent doesn’t deliver anything except a product, period. Nothing after that. Well ,it’s thin ice and so the strategic agency recognizes, one, I need deeper relationships. Now here’s the payoff from that and this comes from research that was performed by Bain a few years ago. I’ve cited one million times because I think it’s so incredibly powerful. Ultimately, this is what should drive strategy itself, it’s that when you can earn the loyalty of a customer and PS score.
If your customers answer the question on a scale of 1 to 10 what’s the likelihood that you’ll refer my agency to a friend or colleague, something like that. It’s really on a scale of 0 to 10. If they’re are 9 or 10, they’re highly loyal. Well, if you’ve earned that, then what’s the big so what? Here’s the big so what, is that those people retain at 97%, how do you stack up against that? They refer 250% more colleagues and friends and referrals than a neutral client, and of course, the low level negative clients. They don’t give you referrals, they give you complaints and then they post them on social media. You don’t even want them in your universe.
Then they also buy 25% more insurance and they are 10% more likely to consolidate almost all of their insurance with one provider. In terms of lifetime customer value, Bain’s findings determine that they deliver seven times the lifetime value of a low loyal client three times the lifetime value of a neutral client, so boom. Like I said, you want to jump into the pool, it’s the deep end of the relationship pool that delivers the money to the Independent Insurance Agency.
Number one, the strategic agency recognizes that; number two, they do something about that which means that these are the agencies that are beginning to reach out. They’re beginning to touch. They’re beginning to deliver value. They’re delivering meaning and delight a little bit more. They’re investing. They probably have invested in some marketing. They probably have invested in more sophisticated website, making sure that it’s current, technologies like Agency Revolution that strengthen the bond between the agency and the marketplace, so they’re growing faster. There’s absolutely no question about it. These are agencies they grow faster than 10%. Their retention, their referrals, their policy per customer account is higher than average. They usually have clearly defined target markets. They know who their ideal and perfect clients are.
They’re proactively reaching out to not just their customers but also to the marketplace in general with modern technologies. They probably have begun to craft what marketers call personas, maybe begun to develop editorial calendars and using some more advanced communication strategies, and the life of the principle is beginning to change. The principle is beginning to feel like, “I’m going to belong in the future. I’m not just going to belong in the past”. That level of confidence goes up, and the team begins to wake up to the new behaviors of the insurance consumer and the new behaviors that are taking place within the agency itself.
In general, you’ll discover that these are agencies who embrace technology. They may make mistakes with technology. I don’t know anybody who hasn’t, but they embrace technology, and they’re willing to use it. That gets us to, what do they need to do? It sounds they’re the perfect agency. My sense of this agency is they’re moving in the right direction, but they’re not masters, so that gets us to the next level. These are agencies who usually feel like, “Hey. We’re going in the right direction but maybe a little bit behind the customer of today”.
The agency principles that I’ve run into here generally fired up with a level of healthy ambition or want to get to the next level. How do they do it? They want to continue to master the skills and capabilities of contemporary marketing and make that transition between strategic and what I call aligned, which really it’s a phase change. This is where getting better at something ultimately isn’t just incremental, but it’s exponential. The aligned agency is level number four. In some ways, they look like the strategic agency, but at the most advanced level, you can see the difference.
Here’s one way to think about the aligned agency. I call it aligned because at this point, they don’t just have a strategy, but all of the behaviors, all of the scripts that are used by producers and CSRs, all of the technologies, all of the content is aligned. It’s all. It’s moving in the same direction, and they’re very clear what that direction is going to the target markets of their choice, and then delivering a unique experience to that target market. Moving them along, first of all, marketing engines clearly in place, a well defined marketing funnel for attractions so that they know how to generate leads, and move that lead through that funnel so they go from their initial awareness, to interest, to evaluation and decision making, and then poof, they will frequently–
These are the customers who they don’t call the agency and say, “Give me a quote”. Or may I have a quote please?” These are the ones who are thinking like, “Can I do business with that agency? What would it take for me to do business with you because you’ve already proven yourself to me?” Let’s say a few words about these guys.
Like I said, every department and every team member is clearly aligned on the achievement of the ultimate strategy which you could say– I will often refer to this as MCLV, maximum customer lifetime value. Let me say a word about that. Think about your agency like a conveyor belt, and on one end, you’re putting the raw material of a lead. Maybe they don’t know much about you when they first get on that conveyor belt. They move on the conveyor belt, and at some point, they go through this step and that step. Then they become interested. Then they begin to do some evaluative thinking and decision making, and they choose to become a customer. They want to become a customer. That’s the beginning.
For a lot of agencies, they feel like, “We’ve delivered the end product. We sold the policy”. That’s the beginning of the relationship, this other stuff, really important stuff, attracting people onto the conveyor belt, but it doesn’t pay you anything. It cost you money, so you want to have that stuff lined up so, number one, you’re getting the right people on. If your conversion ratio isn’t what you want it to be, there are a couple of reasons for that. Number one, you might be just getting the wrong people on the conveyor belt. Number two, you might be saying the wrong things to them as they move through the conveyor belt and then ultimately when they get on the phone or when you have a face to face meeting. Then what happens after that?
In my world, what I want at the end of the conveyor belt is what Bane calls the highly loyal insurance customer. I want that period, nothing less. I want somebody who’s going to renew at 97%, give me 250% more referrals, buy 25% more insurance. I want somebody that’s going to deliver to the agency seven times the lifetime value. Unfortunately, what happens is when I look at the conveyor belt, the average agency, people are falling. The wrong people are getting on. Too many people are falling off at the beginning, or whoever’s trying to convert them into customers, closing ratio is too low. People are falling off there. Boom, first year rolls around, a few people fall off.
They’re not be given enough opportunities to feel good about buying more insurance and to get more protection for their business or their family or themselves. They’re not given great reasons and opportunities to make more referrals. Maybe they retain at whatever, 84%, 88%. Doesn’t matter. It’s not 97%. Ultimately, when I talk about alignment, that’s what I want to see. Every activity, every conversation, every email, every word on the website, every posting in social media make somebody feel like, “I feel so good to be on this conveyor belt. I feel safe. I feel protected. I feel loved. I feel taken care of. Occasionally, I feel surprised or delighted with something that’s really, really good”.
These are agencies that they’ve mastered at a relatively high-level things like Google Analytics and search engine optimization. They design and monitor the performance of individual campaigns, marketing campaigns. They’re monitoring things like click through rates, cost per lead per event, cost per sale per event. They clearly have professional level marketing, highly skilled marketing on the team itself. More than likely, the agency principles have a more profound understanding of it.
If they have professional marketing that’s not them, which is usually the case, they’re still capable of having intelligent professional conversations about marketing and about revenue and about how we make that happen. Of course, they’re running campaigns throughout the year, cross-selling and account rounding, doing more for retention, delivering value about items like disaster preparedness and so on and so forth. They’re nurturing that customer. They’re not many of these agencies.
Here’s one way you could think about this. There’s been an emergence of a sub-industry in the advertising industry, a very sub-industry in the advertising industry. They’re called agencies, not insurance agencies, marketing agencies. A lot of businesses go. Small and medium businesses will hire an agency to take care of the marketing for them, and it’s a very dynamic relationship with lots of consultation, deep level of understanding and then original content and technologies put in place. Marketing funnels are articulated. Marketing agency are installed. They may have 10 clients or 1,000 clients or more depending on the size of the marketing agency. The aligned agency is like a marketing agency that has one client: themselves, the insurance agency itself. These guys grow fast, usually 15%, 20% or more. They’ve got all the positive qualities of the strategic agency, all the positive qualities of professional agency obviously, well run systems. They’re just performing at a level of mastery. The principles tend not to work much in the business. They tend not to be working on insurance. They tend to be working on the business.
I usually call them insurepreneurs because they are insurance people who really think and act like entrepreneurs, and the entire team is aligned. The entire team is passionate about what they do and committed to what they do. They have an understanding what they do, and they know that it’s different. They know that the agency down the street is bush lake compared to the major lakes that they are in.
What more could you want than this? There’s one other level, level five. For the aligned agency to get to the next level, they have to make one transition. I want to talk about level five, the innovator agency. The innovator agency, as I mentioned, they are so unique that it’s as if they have a virtual monopoly. One way to think about the aligned agency– I’ll go back. The level number three, the strategic agency, they are investing in the future. The aligned agency owns the future. They know they will be there. The innovator agency, they’re creating the future. They are recreating this industry from the inside out.
Years ago, 10 years ago maybe, a former client of mine Umberto Fidelio, I know I’ve interviewed them in this series, who I think at that point, maybe still owned and owns the largest and perhaps fastest growing single-owner agency in the United States. I interviewed Umberto on stage at one of our boot camps when we ran those at insurance Profit Systems some years ago. There was one statement that he said that stood out, that a lot of my clients really latched on to as did I. The ones who acted on this saw how powerful it was, and the ones who didn’t, they probably didn’t. Essentially, what he said was– We’re going back. I think it was about 10 years. Maybe it was seven or eight. It was a bunch of years ago.
Essentially, what he said was that the insurance agency of today can’t act or look like an insurance agency. The less you’re like an insurance agency, the better off you are. Maybe to some extent, he was being a little bit critical of the industry which is fine. I think it deserves criticism from time to time. I think he was also saying, “It’s not just about that”. It’s not about selling policies. It’s not about throwing insureds, world’s worst word. Don’t ever let a real person here you call them an insured or even a policyholder. It’s not about selling policies and entering them into an agency management system.
At this level, it’s about the transformation of people’s businesses and people’s lives. It’s about being such an important part and such a unique part of their experience that they simply never want to go anywhere else. This is the agency that takes all the elements of advanced marketing that the aligned agency has, and they add one critical element, one critical element: innovation. Which reminds me of a quote from the brightest of the brightest, Peter Drucker, who said years ago– This is one of those quotes that will stand the test of time for ever.
I know marketing or management gurus come and go, but Drucker, in my mind, he never goes. He’s always delivers the truth. He said, “Because its purpose is to create a customer, the business enterprise has two and only these two basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs”. Essentially, Drucker’s definition of marketing is how you get and keep customers, and innovation was how you deliver value to customers.
The innovator agency doesn’t just deliver the value that’s passed on from the product, but finds ways to deliver value that as that product passes through the agency from the carrier to the consumer, they wrap that in meaning and delight. They wrap that in an experience that’s so unique, that understands the customer so well that the customer never wants to go anywhere. To their customer, the insurance product really it’s like one puzzle piece in a comprehensive relationship. They communicate their unique value in a way that the customer gets it. In other words, they usually have a sequential maturity model. In other words, they’ve really thought about how a customer’s life is changed by having a relationship with them.
I’m going to take you from here, which is step, one to here, which is step five. When you’re here at step five, this is what you’re going to experience; this is how you’re going to be protected. Do you want to take that journey? Because the only people who come into this agency are people who really want to take that journey. It’s not just about the delivery of information. It’s about the delivery of transformation where you really are changing people’s lives in a positive way, and they know it. The presentation of this innovation, obviously, is critical. There’s usually a sequential step one, two, three, four, five whatever and a graphical way, where they take that wisdom. This is at the stage which we go beyond expertise.
Expertise is always a competitive advantage. At some point, today’s expertise becomes tomorrow’s ho-hum knowledge. Beyond expertise, there is wisdom, where the organization has performed its own analytical thinking, its own critical thinking, its own insights into the needs, maybe the suffering of the customer. They’ve done it so profoundly and in such an interesting way that nobody else can deliver it quite in that way. Then to that wisdom, they add– Forgive me for being high-level here, but they had beauty.
They present that in a way that the customer can go, “Wow”. I can call the other agency and say, “Hey, can you give me a quote?” They’ll say, “Yes, let me get back to you tomorrow and ask you 17 questions”. Or the innovator agency may still need the answer to the 17 questions, but from the beginning, even before they’re a customer, the prospect is saying, “I want to be in there. That’s where I want to be. There’s no place quite like that”.
These are rare. I think this is 1% of the agencies today. They’ll often exceed or have growth rates of 25% or 30% or more organic growth rate. I’m not talking about agency acquisition. They have the best characteristics of every other level. They’ve added an experience that’s so unique that they’ve a virtual monopoly on their marketplace.
Five levels of agency: commodity broker selling on price, stuck on price, low margin; professional agency, the very good, nice strong agency of yesterday. The strategic agency which begins to go in the right direction. They’re investing in the future. They’re proactively beginning to reach out to the marketplace. Level number four, the aligned agency, everything. They’re not just moving in the right direction. They’re masters of marketing. If I didn’t touch on this earlier, they are also masters of original content. The difference between original content and anybody else’s content is its exponential, not incremental quality, original content. They know how to communicate to their marketplace in such a way that that marketplace moves from where they are on that conveyor belt steadily, almost automatically until they become ultimately exactly what the aligned agency wants, which is maximum customer lifetime value, a highly loyal insurance client, and then ultimately the innovator agency, level number five, who can take that level of mastery and add unique innovation to it so that the customer has such a unique experience that they never want to go anywhere else.
By the way, I have almost finished my draft of a very short workbook called The Five Levels of the Modern Insurance Agency and if you’d like a copy– I’m sorry. I do apologize. I don’t have one easy place yet you can go online and you can get it and download it. I’m just a little bit ahead of myself, but I’ll send you a copy. I’ll make sure it goes out quickly now that I have a growing team with an assistant who could deal with this stuff because I apologize to people. When I made promises like this, I always fulfilled. It just sometimes took a few days or a week or so.
In this case, my assistant will get this out quickly. She manages my email. If you ask me for a copy, email me at michaeljans.com. I’ll be happy to send you a copy. In the subject line say five levels. Indeed I have interviewed about 100 thought-leaders, startups and insurtechs, CEOs, association leaders, marketers, and obviously really had to reflect on that. What is it? The conversations that I’ve had in the last two years, I would not have had these conversations 25 years ago, 15 years ago, 5 years ago. These are conversations that are taking place right now, and a lot of people that I’m talking about are reasonably optimistic.
That being said, there’s some who have a– I don’t know if it’s more realistic or just a more critical view that not everybody’s going to make it. Ellen Carney, in my first interview with Ellen the reason I brought her into the series– She’s at Forrester. The reason that I brought her in and asked her to be a guest is because she said in the New York Times that 25% of all agents and brokers will disappear in the United States, so I thought, “Here’s a conversation worth having”. There’s no Pollyanna about this. Sometimes I’ll ask my guests like, “Give me something piffy to say at the end”. I’ll try to sum it up.
This sums up what I think if you really dove into the heart of what all of my other guests have said, number one, this is an era of change. Number two, agents must embrace change, must, and the pace at which you embrace change probably needs to be much faster than the pace that your agency is used to. Number three, technology because technology multiplies speed. We need to embrace technologies and invest in technologies which allow us to invest in the future and that ultimately, yes, this is a relationship business, but the old school methodology relationship hanging out at the chamber, going to the Kiwanis or having a sign up at the little league is simply not enough. That’s not cutting it.
You can use contemporary technologies, from social to email marketing and marketing automation and more. You can use those technologies to have an ongoing relationship with your customers and to deliver those two things that they value: meaning and delight. I want to thank everybody for spending this time with me.
As always, if you’ve got questions, feel free to reach out to me, and if you’ve got comments we’d love to hear those as well. Want to wish you all a terrific day. Thank you so much.