Playing Defense: Keeping Clients When Rates Keep Rising

Premiums keep climbing. Customers are tired. Agents are exhausted. So how do you keep client loyalty when everyone’s feeling the pressure? Shane and Tonya break down how to play defense for your book, turn frustration into understanding, and prove why the independent advisor still wins. 

Learn more at IntegraPartnerNetwork.com.

Transcript

Announcer: [00:00:00] This is IA Forward your Playbook for Success as an independent insurance agent. Here to help you knock it outta the ballpark are your host, Shane Tatum and Tonya Lied.  

Tonya: Welcome to IA Forward. Shane, we've been in this hard market for the last 11,682 days, and customers are really asking. Why should they stay loyal if they feel as though their insurer isn't staying loyal to them? 

And for us as an extension of that, they're kind of perceiving that we are not loyal to them either.  

Shane: It's a fair question. There's a little bit of unawareness. Maybe we just don't understand the client's side of things. Agents may take offense to that because they're feeling it on the front lines every day. 

But the thing that comes into my brain here immediately is if I've been with a carrier for 20 years and I've been with that [00:01:00] agency through that carrier for 20 years or 10 years or whatever it's been, I haven't had any claims. They keep going up on my premiums. At what point is there a breaking point? 

How many rate increases can I take? Some people are quick shoppers, some people are more loyal and understand from a consumer standpoint, there is exhaustion. There's also exhaustion in the agency space as well, but consumers are really exhausted and insurance is one of those things that they can't feel. 

It's not my new vehicle, it's not my new house. It's something that I haven't used In their minds. If they haven't had a claim, if they've had a claim, they they get it. If they have a claim, they get it. Depending on how that went, if they haven't had a claim, which is the majority of the people that are gonna be frustrated and question the loyalty. 

They are the ones at most risk from this question. How long do they stay loyal to someone they feel like is not being loyal in return? That is one of the [00:02:00] most important jobs of an agency and one of the most important things that we need to educate our customers about as advisors. There's a couple of different. 

Paths that can happen here with your customer that's exhausted, that feels like they're just not getting a return on this loyalty factor.  

Tonya: How can we, as agency owners, as producers, create that? Do you think explanations help? Do you think options help? What do we really need to be doing to make a difference? 

Shane: I think communication helps. I think education helps. The question is how do you do that? Do you educate on the mass? Do you educate one-to-one, like what's feasible? We are kind of looking at this topic from a recent insurance journal article that you pointed out to me, a JD Power article, and one of the things in there that [00:03:00] caught my attention was the percentage of homeowners that have seen a rate increase over the previous year. 

They cite 47%.  

Tonya: Those people don't live in Florida, Texas, or Louisiana. No, they  

Shane: don't. That number number one caught me off guard because it's extremely low based on my worldview right now. And that means they've mixed in non-Cat with cat states. Maybe it's just coast to coast, maybe it's north to south, everywhere throughout the US to get that number lower because I would say that number's a hundred percent. 

My view.  

Tonya: I mean, when you said 47% I heard across the country, everyone listening to this podcast go, that's stupid. Have they lost their mind?  

Shane: That's just not a, a serious number. I don't know which states haven't seen consistent increases over the last couple of years. Inflation has hit everybody. If you're not in a cat state, inflation's still got you. 

It is the [00:04:00] reality of the economy over the last two to three years. That is a big component of this in catastrophe states, coastal states, convective storm states. This is more prevalent in our retention software, easy Links, retention Center. We just lowered for the first time in two years, the high risk threshold. 

The high risk threshold has been set at 30% for the last 24 months to explain that, for those that don't use that product. If a customer's premium increased at renewal 20%, then we didn't look at it. We reacted to it. We didn't, you know, proactively look at it necessarily over 30%. We proactively looked at it, and the reason we had to do that, the why behind that was if we looked at everything under 30%, let's say we had that threshold set at 15%, we would've looked at every single renewal we had. 

[00:05:00] We would've looked at remarketing every single renewal we have. And we know as agency owners, that's not good. We know that's extremely unprofitable. We know that is extremely negative towards our carrier relationships, so we just can't do that, right? As agency owners, we can't do that. And so our threshold has been set at 30%, so it had to be above 30% for us to look at. 

It didn't necessarily mean that we were gonna remarket. It still might have been the best place. But we had to do that. And so to think about only 47% of homeowners have seen a rate increase in the last year. I just, I don't see that as a truthful number. To me, that number is a hundred percent. I don't wanna dismiss the JD Power survey altogether because I do think there's some validity to it. 

I do think consumers are exhausted. I do think consumers are questioning loyalty and whether they should stay with their current carrier or agent. Or whether they should shop around. I [00:06:00] think that portion of the survey is fair.  

Tonya: One of the things about the survey I did think was interesting was that high lifetime value customers, those with higher annual premiums and a higher proportion of product and services with one insurer, more of those have been handed rate increases. 

Those are the people that are really questioning whether or not. Their carriers are loyal to them.  

Shane: This is a more realistic thing, but also the reality of this is no one is immune. Even the high lifetime value customers, even the fully cross sold customers, I believe that we have gone down a path with homeowners insurance, with property insurance. 

We've gone down this path with homeowners insurance where it's become a quasi. Maintenance policy. It's not necessarily [00:07:00] the original product that it was intended to be. Competitive environment, maybe runaway product managers, maybe lots of different things that have gone into the last 20 years, 25 years. 

That has brought us into sort of a perfect storm scenario when you add a lot of bells and whistles. Package options into an insurance product. You're loading in lost cost. At some level, it's going to increase the price like it was presented 25 years ago when this really took off as a retention strategy. 

Some policies went down the path of cheap add-ons for. Maintenance things around air conditioning units. The newest one is personal cyber coverage, like personal identity theft or personal cyber type coverage that they're adding as a supplemental [00:08:00] cheap little endorsement. We can do this for only $7 a year. 

I'm just making that up, but it's crazy stuff like that. The reality is it's the insurance company's version of a loss leader, and you see this in the retail stores. You see this in the retail stores, they're gonna put Target or Walmart or whatever. They're gonna put the little thing in, in the little stand, and they're gonna put this little stuff up there. 

And, and I, I am blank on what, what we would talk about, but they're gonna sell it for less than cost. It's not exactly that. So if you're a product manager and you're listening, don't yell at me. I get it. It's not exactly that. But it's the closest thing we have. It's, it's this idea that we need to do something at the insurance company level. 

We need to have some kind of uniqueness in order to get customers to buy our product. My statement is, no, you do not. My claim is, no, [00:09:00] you do not. What you need is a fairly priced product that makes a promise, that pays claims on time accurately. And takes care of their agents. If you're in the independent agency space, your agent is going to take care of the uniqueness of the wrinkle. 

You need to think about this differently is my view, and yes, I'm biased, and yes, I'm gonna have an agency viewpoint. You're trying to do something that is unnecessary and then you're baking in costs. There's other people contributing to this problem, but that's front and center. That's the low one of the low hanging fruits. 

Is we've created maintenance features within our homeowners policies, and that is costing us now. We started this 20, 25 years ago, and now we don't know what to do with it because we've got all this stuff in order to start peeling it away. The competitive pressure of [00:10:00] the marketplace makes us nervous if we peel back diminishing deductible, if we peel back something else. 

The competitor's not gonna peel back. If we peel back replacement costs on roof and start doing scheduled or a CV on roof because roofs are depreciating pieces of our homes. If we do that and the market doesn't follow us, then what are we gonna get and how is that gonna work? And we have all these concerns from a product standpoint, from a carrier standpoint, my statement is we don't have a choice because. 

We're breaking our customers, we're breaking the loyalty. That's what the survey's saying. We're eroding trust that we've built 30, spent 30 years trying to build, and we've eroded that trust in the matter of a year or two, and so we can't keep going down that path.  

Tonya: Liberty Mutual has done a good job of the idea of you only pay for what you need. 

From a marketing [00:11:00] perspective, this looks like the challenge of you've got too many people in the marketing world that came from the retail world and not enough from a service based perspective. So we've tried to market our service in a retail way.  

Shane: There's a lot of truth to that. There's also the reality that we don't have the necessary components. 

Partnering with us in order to do this. For instance, just my real life example, I just traded my wife's car. We went from the same car, older year model, newer year model, same finance source. I can only have a thousand dollars deductible if I'm gonna have a lien on that car. The lenders are not up to speed with us protecting themselves. 

I can afford a higher deductible. We're trying to deal with the masses. It's really not that long ago. That a lender would allow you to go above $500 deductible. So I will give them little bit of [00:12:00] credit. They've increased that. But if we're gonna give insurance rates based on credit scores, then we should be able to look at what is the threshold that we're comfortable with from customer to customer. 

If I could take a $5,000 deductible on that vehicle, a $25,000 deductible on my home, which at a 2% deductible, maybe I could. If I could take a bigger deductible and self-insure that with a CD over here in the bank, if a customer could do that and we would allow them to have some self-insurance components a little more than what we're giving, then we could rate for that and lower this threshold. 

We could do something that really contributed to the marketplace versus an extra $7 a year, and we'll give you some cyber coverage. That doesn't solve my problem. As a property owner who's paying a lot of money for insurance, [00:13:00] what solves my problem is allowing me to, to have some participation in that by self-insuring the first layer by having a higher deductible. 

We've seen this in the health insurance industry with high deductible plans and health savings accounts. We saw what happened. That led us down the path of the Affordable Care Act. We created these maintenance policies, and then we started this race to the bottom where you paid a premium and then you didn't pay any deductible. 

You didn't pay any copays. There were, there was a lot of this in the early two thousands, late nineties, early two thousands in the health insurance space where we had these huge maintenance policies that got created. We created the HMO. We created the PPO, we did all kinds of things. What we didn't do is think about what was gonna happen to the premium side of this, the cost side of this. 

Maybe that was the intent that led us [00:14:00] down. Government funded health insurance. That is my concern about property insurance. That is my concern about the homeowner's insurance, is that we're sort of racing to the bottom here with all this bells and whistles, Cadillac type coverage. We're inflating the premiums because we don't have that layer of self-insurance. 

We don't have the right coverage in place that people are comfortable taking, and that's gonna lead to this congressional movement that's gonna lead to lawmakers deciding they need to step in. And because once the consumers have had enough, once the complaints get loud enough. That's when it starts happening, and that's what happened with health insurance. 

Once we allowed the consumers to taste no copay and we didn't reflect the right rates, then it was just a race to the bottom from there. And that is my fear here. That is the thing that I see as the potential. If we don't give [00:15:00] participation back to the consumer, if we don't give higher deductibles, if we don't get our lending. 

Partners on board with what we need to do, then we're going to end up in a really bad spot.  

Tonya: When you look at the fact that it's around 13 point a 5% of people that have over $10,000 in savings that they can get to, that's scary and obviously that's the reason for a great deal of this. While self-insurance sounds fantastic. 

People spend more than they make. They do.  

Shane: This is true. You can't necessarily legislate or mandate that differently. You can't make up for the fact that people aren't responsible to me, that's the lie that has led us down this path. That's what the lender fear is, and I think that should be [00:16:00] solvable. If you can give me. 

A 4.99% interest rate, and you can give the next guy a 7.99% interest rate based on our credit score. If customer A has an 800 credit score and customer B has a six 50 credit score, then one of them can afford a deductible over the other. Getting to the place where someone can either have the cash investment, the extra savings. 

Or equity to get the money in an emergency are things that I think should be predicated by some scoring. This feels like a solvable problem because if we can underwrite a risk in seconds based on existing debt, credit card debt based on cons, all the various things based on our mortgage, based on income, based on credit score, if we can input that stuff.[00:17:00]  

Shoot out an interest rate that's very rarely adjustable at that point, because we've put so much energy into underwriting, we can solve who's capable of self-insuring more and who's not. This is an easy fix to me because. It's not going to require huge amounts of product change and we can go with a higher deductible. 

It puts pressure back on the agency side, and I think it's a mental pressure. I'm comfortable selling my customer a higher deductible option if that's something the customer wants, getting the customer to sign off on that. So that's my get Outta jail free card. That's my e and o protection. I'm comfortable with that. 

And now I gotta. Customer that I'm showing loyalty back to, Hey, this is happening. Company A, company B, company C, whatever. Doesn't matter who we go with here. At the end of the day, if you don't take on more of this risk [00:18:00] because the inflation has made your house go from a $350,000 house to an $825,000 house, if you don't take on a little more of that from a self-insurance standpoint, you're gonna pay more premium. 

We're now insuring an $825,000 house instead of a 350,000 house. That's what we're seeing in lots of metro areas across the country. Lots of suburbia across the country. We're seeing that over the last three to four years. If you've had this house that you bought 10 years ago and it's a $350,000 house, you had a 1% deductible, and that's $3,500. 

Now, 10 years later, post COVID hyperinflation. Your house has a $825,000 replacement cost value. If you go from a 1% to a 2% deductible, you're now paying in excess of a $16,000 deductible. So you went from a $3,500 deductible to a 16,000 deductible. If you're still sitting at 1% or [00:19:00] worse, you happen to be in a state where carriers are still riding flat deductibles, meaning 2,500, 5,000, some flat number. 

Then you're paying more. Naturally you're paying more because you've got two and a half times coverage. You're going to pay more premium for that. But if you're willing to take more and you can afford to take more, you can afford to participate in the risk you've proven with your credit score, you've proven with your financial stability that you can do that well, then why not? 

I think that's the simple creative position that we need to be in as agents to say as advisors. This is what I can make available to you. Is this interesting to you? Let the consumer decide people are capable. People have jobs, people are smart. For the most part. Let's not communicate or advise them because we're afraid of E and O. 

No. Let's do the opposite of that. Let's really tell them, Hey, I know you're [00:20:00] paying $8,000 a year and if you don't wanna pay $15,000 a year, here's how you cannot do that. That. Feels a whole lot better than we've gotta do the same old thing. We've gotta have replacement costs on the roof. We've gotta have no more than a 1% deductible. 

We've gotta do all these things and we're just gonna see the premium. Keep climbing and climbing. That's where the loyalty question comes in. Agents. I know you're trying, but go the next step. Take that next step to full advisor consultant status. Really help them understand how they can prevent this from happening. 

And maybe the carrier that they're with will not do this. And you have to change the carrier, but you get to keep the customer, you get to keep the loyalty, and we do have to make sure that customers truly understand the difference between their agent advisor and their insurance carrier.  

Tonya: This is also one of [00:21:00] those places where you probably think differently. 

Than your producer. I can remember someone explaining to me years ago that my idea of a big sale would change as I start making more money if I got really excited about a $1,500 sale when I was 20. When I was 30, I didn't get nearly as excited about that sale. And people have a tendency to think that everyone is like them. 

So if your producer is thinking one way, because they're at a specific household income level, they may not have the same thought process as a higher income customer. This may be that we need to help our team members think through this.  

Shane: [00:22:00] Absolutely. And it's hard for our team members because they're on that front line getting hammered with the aggravation of the price increase. 

They need the counseling from you as an agency owner. They need the clarity. They may even need to hear you advice firsthand. How are you doing it? How are you speaking to your customers because you want them to speak to your customers, not the way they would speak to your customer, but the way you would speak to your customer. 

You do have to invest in your people around this topic. That's the whole point I gather from Tanya's comment. Your people need to understand how to communicate and you need to train your people how to communicate. And it, it's, it kind of cycles back to, you know, some very simple things like core values. 

Not how does Joe do it, but how does the agency do it? What does this mean? How do we communicate, what is our culture around how we're treating our clients, et cetera. I think that's [00:23:00] a big part of being a better advisor and being willing to take that extra step. Some of this centers around the policy per customer ratio, which is the full-time client. 

It's hard to do this for the client that you're only writing the home for because you let them keep their auto with the direct writer or with another agent. If you're writing everything in personal lines for this client, if you are their full-time agent, it's lot easier to stop and consult because you're generating more revenue. 

From every client. That's another big component here that I hear from agents. I don't have the time to stop and do that for every single client. Look at your book. Why don't you have the time to do that for every single client? I would bet that it's because your policy per customer ratio is a much lower than it should be. 

Maybe it should be 2.4 and you're running a 1.5. That means [00:24:00] you have a lot of monoline business on your books. It means you're not getting full revenue, full share of wallet. From that client. If you were, you would have the ability to take care of your people, to pay your people to hire people. You would have more time yourself to do things to train your people. 

It just all connected here. I mean, it's kinda like taking scripture outta context. This all is connected. It's one story, and you have to be willing to say, okay, I gotta see the full spectrum of this. I can't just look at. Customers are upset with me because their homeowners is increasing. There's more to it than that. 

We have to dig deeper than that, and we have to reach the point of full advisor status. This happened in the commercial space before it happened in the personal space. We saw this with accounts like churches and school districts where they were having to take on a hundred thousand 250,000, $300,000 deductibles. 

At first, it was shocking. [00:25:00] Oh my gosh. This school district's gonna have a $300,000 deductible. That sounds shocking. Until you understand that that school district is ensuring $80 million worth of property. Now, it doesn't feel so bad. That's less than a 1% deductible 0.33 deductible or something like that. 

You're like, okay, wait a minute. This is different. Because we didn't take it outta context. We didn't look at it and go, oh my gosh, they got a $300,000 deductible. We looked at it and said. Can they afford to take a $300,000 deductible to cut their insurance premium by $30,000 by $40,000? Is it a good math equation? 

Is it something that the board is willing to take? Is it something that the district can handle financially? Is this gonna help them hire two more teachers? What are we doing? We had to move to counseling. We have to move to consulting. We have to move to advising.  

Tonya: Going back to this JD Power survey, one of the things that I [00:26:00] loved about it, as we know, communication is key and policy holders who felt that they understood the reasoning behind the rate increases and were presented with options, gave much higher overall satisfaction scores than those who didn't understand the reasons and get options. 

That's what we do as independent agents.  

Shane: That is a major difference between us and the exclusive agency system. It's a major difference between us and the call centers. The direct channel is this ability to truly understand our customers and provide the why. If people understand the why, they feel better. 

Things are better. If I understand why something's happened. Why did the price go up? Why is this happening? I feel better about it. I can understand what's going on if I do the winter maintenance on [00:27:00] my air conditioning units. If I do the summer maintenance, then I understand that my components of my heating and air conditioning system is going to last longer. 

I get that now. I'm willing, this is the really cool part. Now that I understand why we're doing it, I can make a decision of whether I wanna do it or not. Do I wanna roll the dice and not spend a couple of hundred bucks in the winter and a couple of hundred bucks in the summer? Do I not wanna do that? 

And then roll the dice and say, well, I don't think that's necessary, and I'll pay for a new unit if that happens to me. Now I have that capability, but when my air conditioning guy, who I've known for a long time. Who's also a client. When I ask the question, what are we doing? What are you actually doing each year that I'm paying for? 

And he explains it to me, then I'm like, okay. So it's like never getting my oils changed. I decide to get an oil change, or I decide not to get an oil change. Like, [00:28:00] okay, something's gonna happen. It's like rotating my tires or not rotating my tires. So it just becomes. A much more educated place and educating your customers will end in a better place for you versus having your customers at a place of ignorance. 

That is sort of a mindset shift for a lot of agencies. We do not need to continue with customers at a place of ignorance where. Continuing with those customers, understanding our why, understanding what we're doing, understanding why this is happening.  

Tonya: I'm gonna leave us today with this quote from Arthur Ash. 

Start where you are. Use what you have, do what you can.  

Shane: Attitude's a choice. Make a great one.  

Tonya: Bye y'all.  

Announcer: At the Integra Partner Network, we understand that carrier access is the key to your agency's success. That's why Integra offers direct access to top-rated personal and commercial carriers. Ensuring your agency thrives in today's challenging market. 

And with our comprehensive resources, [00:29:00] profit sharing and bonus opportunities, technology and peer support, all while you retain a hundred percent of your book with no penalties to exit Integra, it's ready to empower you and your agency To find sustained growth, find your way to Integra. Visit integra of partner network.com today. 

That's integra partner network.com.