by Steve Anderson
Ask agency owners or sales managers what they think about small commercial accounts and you get a wide range of reactions. Executives with larger agencies view this class of business almost as an accommodation—generally not a part of the agency’s strategic growth plans. These agencies want to write accounts that generate higher commission income. Yet these larger agencies typically have a substantial book of business in “small accounts.”
For smaller agencies, these accounts frequently make up the bulk of their commercial business. Often located in smaller cities and towns, these agencies just don’t have access to that many large accounts. And unlike larger agencies, a smaller agency may also see these accounts as an important part of their growth.
For an agency to be successful with small commercial accounts, management thinking needs to change. Too often, small commercial accounts are treated like a stepchild in the agency. As with personal lines, there’s a feeling that small commercial is an area that the agency should pay attention to, but management does not want to spend any time managing this department. Producer involvement in these accounts is minimal at best with commissions generally not paid to a producer for this business.
So, whether small commercial accounts are viewed as an accommodation or the backbone of your agency, learning how to handle these accounts as efficiently as possible will lead to success. In this column we will talk about how to market and sell small commercial accounts more effectively. In a future column we will talk about how to efficiently service and retain these accounts.
Making small commercial profitable
There are several reasons why small commercial accounts can be unprofitable for your agency.
Compensation. Producer compensation must be in line with what you can afford to pay. If small commercial is not a part of your strategic plan then you probably shouldn’t pay producers for generating this business. What you may want to do, however, is pay some type of “bonus” to the staff that handles the account as an incentive to up-sell and cross-sell.
Dedicated staff. If your agency is large enough to have a separate department, you should staff it with people who know how to handle these types of accounts. If you use the same staff that handles larger accounts, they may feel compelled to provide the same level and extent of services as they would for an account generating a substantially larger amount of revenue.
Duplication of effort. Efficiency is the key to profitability. Reducing the number of keystrokes required to obtain and process the business is the key to efficiency and profitability. This requires cooperation with the companies you use to streamline the quoting and issuing process.
Too many carriers. Representing too many companies for this type of business increases the expenses associated with it. Your staff will have too many systems to learn and to use. The more companies you represent, the higher the cost to market and place the business.
Complete automation is key
Complete automation is a key part of profitably handling small commercial accounts. You need to make sure you take advantage of all the technology available to market and quote new business.
Here are some tools to help manage the marketing and sales process for small commercial accounts. These tools are necessary for you to be able to streamline the operation and make a profit with these accounts.
Carrier Web site quoting. Most carriers now provide a Web-based quoting process so that agencies can obtain a bindable quote. One of the keys in determining what carriers you should do business with is how easy they make this process. You should be able to quote a policy, receive an electronic version of the proposal, and then request that the policy be issued once the prospect gives the go-ahead. The final policy should be delivered as an electronic document that can be sent to the client within a short period of time. Make sure you thoroughly understand the number of steps required to actually quote. If it is a cumbersome process, you may want to use another company.
Aggregation quoting. There are several third-party organizations that provide the ability to quote small commercial accounts for several carriers from a single, completed application. These services should be used by an agency that is serious about this type of business. These services reduce one of the problems with using the carrier Web site to quote. Quoting with multiple carriers generally requires staff to enter the same information multiple times. Anything you can do to reduce the number of keystrokes helps you to become more productive.
Several of these services include:
• Agent Secure
• Insurance Noodle
• ProgramBusiness
• SuperiorAccess
We will look at each of the services in more detail in a future column.
Create a marketing system
The more you have to handle prospect information, the less profitable that prospect will be to you. If you create a marketing system for your small commercial business, you will have an automated process by which you can stay in touch with prospects and inform them about the insurance products you have available for them. When those prospects have a problem, they will think of you and call for advice.
To create this type of system, you can use either your agency management system, if it has the capability, or a stand-alone marketing system that has been designed specifically to help you stay in touch with prospects over a long period of time. We said earlier that you might not be able to afford to have a producer involved with these accounts. If you do have a producer involved, it should be only when you need to be face-to-face with the prospect closing the sale.
The potential
So the question remains: Can you make money in small commercial accounts? Many agencies are answering that question with a resounding yes. There is potential for profit in small commercial accounts. As personal lines accounts have been in the past, small commercial accounts can be the bread and butter revenue for an agency. While the premiums are smaller on each account, when you lose an account it doesn’t hurt nearly as much as losing a large account. Yet, like personal lines, small commercial accounts don’t require a lot of handling. The systems you put in place to make this happen will go a long way to making small commercial accounts profitable for your agency.
The author
Steve Anderson has been a licensed insurance agent for more than 25 years and is executive editor of The Automated Agency Report. He helps agents maximize productivity and profits using practical technology. He can be reached at (615) 599-0085; e-mails are welcome at Steve@SteveAnderson.com; or visit his Web site at www.SteveAnderson.com.