Insurance agencies are facing the critical task of increasing conversion rates, reducing customer acquisition costs, and minimizing lead attrition. Achieving these goals hinges on enhancing agency productivity, which in turn drives sustainable business growth, optimizes resource utilization, and addresses the challenges posed by a shrinking specialist workforce.
The urgency to focus on agency productivity has never been greater. Agents have solidified their role as a crucial sales channel in recent years, as the notion that “Insurtech will kill the agent” is no longer relevant. Research by Simon-Kucher indicates that personalized advice remains highly valued despite the rise of digitalization, a preference particularly strong among Millennials and Gen Z consumers. However, the insurance industry faces a critical challenge as the agent workforce ages, with a significant portion set to retire in the next 5 to 10 years. This decline in the number of active agents is particularly concerning, given that even younger customers prefer purchasing insurance policies through agents.
Notably, agents account for nearly 50 percent of first-time insurance policy purchases. Comparison portals and insurers' websites trail significantly, with 36 percent and 15 percent, respectively. The primary reason is that young customers often choose the same agent their family uses for insurance. This trend underscores the critical role of agents and highlights the immense potential for increasing customer lifetime value through enhanced agency productivity.
However, agency productivity often falls short. Performance transparency and comparability between and within agencies is rare. Omnichannel strategies are frequently underdeveloped. Additionally, the disparity between aging agents and the valuable demographic of young customers is widening. There is also a significant need for improved processes in lead generation and conversion rate optimization.
The RACER Framework Maximizes Agency Productivity
It is no surprise that boosting agency productivity has become a top priority for insurers. With rising costs driven by inflation, insurers are seeking cost-effective ways to expand their business and optimize existing resources. Those who effectively utilize customer touchpoints and deploy resources wisely for agency advice and sales will secure long-term, sustainable profitability.
Drawing from extensive project work, we have identified five key drivers of agency productivity, encapsulated in our RACER framework.
R – Realign
Customer preferences and behaviors have evolved dramatically in recent years. Insurers must adapt their marketing and sales channels, products, and customer engagement strategies accordingly. Focus should be on what customers value, eliminating any elements that do not add value.
Many current customer segmentation models fail to capture the significant shifts in customer behavior over the past 5-7 years. Segmentation is now more crucial than ever, driven by the personalization trend permeating all customer journeys outside of insurance. Up-to-date segmentation is essential for understanding how to approach, sell, and cross-sell to different customers.
A state-of-the-art segmentation strategy must capture customer information-gathering and purchasing behaviors, the flow of the customer journey within the insurer’s ecosystem, and the distinct interactions customers have at each journey step. This includes the type of channels used (omnichannel), value proposition, and interaction quality.
Segmentation is meaningful only if it leads to well-targeted actions within a channel and clearly distinct actions between segments. Successful segmentation realigns the business to customer needs and requirements, resulting in a broader omnichannel landscape, a refreshed value proposition, and clear value narratives at every customer touchpoint.
A – Automate
There are three types of insurance demand:
- Created Demand: This arises from regulatory requirements or social norms. For example, car insurance. Here, the customer focus is on demand satisfaction, making digital channels effective due to their convenience.
- Derived Demand: This occurs when customers buy a product that can be complemented by insurance but does not require it. For example, travel insurance. These products are typically sold where the primary product is sold, not at the insurance agency.
- Sleeping Demand: Customers need to be educated to recognize their need for this type of insurance. Examples include life or long-term disability insurance. This is a prime opportunity for agency sales, particularly in markets where digital adoption has shifted much of the business online, leaving a gap for agencies to fill.
The key takeaway: Until sleeping demand is effectively addressed online, agencies hold a competitive advantage in capturing this market.
A New Division of Work and Technology Support Are Key
Personal lines sales in insurance are facing a fundamental challenge: a lack of discipline in execution. Are your agents consistently following up on all leads and proposals? Are they dedicating their time to the most valuable customers?
One of the primary reasons for leakage between lead generation and conversion is the inconsistent execution of sound plans. Many agencies have good strategies, but they falter in execution. The mantra should be: “Plan less, do more.”
Given that changing human nature to achieve disciplined execution is impractical, technology offers a viable solution.
Insurers should automate lead forwarding processes, administrative tasks within agencies, and reporting functions. This allows agents to focus more on understanding customer needs and selling appropriate insurance policies. Artificial intelligence (AI) can boost efficiency, and is particularly transformative for agency sales channels, which are often costly for insurers.
Automation ensures consistency in execution, maintaining high-quality interactions at every customer touchpoint and enhancing cost efficiency.
C – Centralize
While it is crucial to leverage agents as decentralized sales units to meet the ongoing demand for personal advice, it is equally important to manage the customer journey centrally. This approach eliminates inefficiencies and redundancies.
Automation has its costs and risks, including potential inconsistencies in behavior. It is imperative that services provided centrally are uniformly applied across all agencies.
As insurers centralize some services, this is an opportune time to reassess the agency structure. Key considerations for this review include:
- The role of agencies in the future omnichannel setup.
- Implications for the location and size of the agency network.
- The potential for a central agency to handle personal sales via video conferencing.
- The division of responsibilities between agencies and central units.
- Governance structures and customer portfolio ownership clarity.
E – Enhance
A common issue is that agencies are creating their own sales pitches and materials, often due to existing resources being product-centric rather than customer- or sales-centric. This inefficiency results in a massive duplication of effort without positive guaranteed outcomes. Our extensive mystery shopping projects reveal that 20% of agent-customer interactions are good or great, 50% are borderline, and 30% are outright poor.
Insurers must provide agents with ready-to-use, customer- and sales-focused materials. Current materials may require a significant overhaul, incorporating the latest insights from Behavioral Economics and aligning with the insurer’s customer engagement strategy. Today's customer interacts through multiple channels, making it crucial to deliver a consistent message and experience across all touchpoints.
One effective method to ensure consistency across agencies is through comprehensive sales training, an approach worth revisiting. By addressing these aspects, insurers can significantly enhance agency productivity, ensuring a more efficient sales process.
Doubling Productivity: The Impact of our RACER Framework
Around 1880, Professor Ebbinghaus, a German psychiatrist, conducted pioneering research on human memory, revealing the "curve of forgetting." His findings showed that after three days, people forget 70% of what they have learned. This insight explains why traditional sales training often fails to achieve lasting behavioral change. Our most successful projects have integrated digital sales tools to address this issue, structuring agent-customer interactions and ensuring consistent, high-quality advice.
However, not all digital tools are created equal. Many are simply digitized forms rather than true digital sales aids. Effective tools must offer superior user experience, incorporating Behavioral Economics and gamification to make them engaging and easy to use. The complexity of the insurance product should be managed in the background. Crucially, these tools must also be channel-capable, allowing seamless interaction between agents—whether employed or freelance—and customers.
R – Rationalize
Today’s agency task lists are cluttered with non-sales-related activities. For years, the industry has focused on "freeing up sales time." It’s time to reassess what processes are currently handled locally within agencies, which can be centralized, and which must remain at the agent level. Advances in technology now offer opportunities far beyond what was available during the initial "freeing up sales time" initiatives, making a fresh look at agency complexity worthwhile.
Not all processes can be neatly categorized as either local or central; some require a division of work. Lead management is a prime example. In the past, leads were generated centrally and sent to agents, often leading to frustration when those leads were not pursued. Modern lead management involves both central and decentralized efforts, from generation to nurturing and closure.
Technology enables consistent and efficient client-agent interactions, but its benefits extend further. Today, leads must be tracked across the data ecosystem, ensuring transparency in lead transfers, including those within agencies. This creates new opportunities for performance measurement and management dashboards, essential for driving agency productivity.
The Impact
Execution of our RACER framework significantly boosts key performance indicators as our analysis shows:
- Sales time: +60%
- Leads per agent: +57%
- Lead leakage: -50%
- Conversion rates: +22%
- Customer acquisition cost (CAC): -33%
Total productivity impact: 2x – 4x
By harnessing the power of advanced digital tools and rethinking agency processes, insurers can dramatically improve productivity and achieve sustainable growth.
Unlock your agency’s full potential with our RACER framework. By integrating advanced digital tools and optimizing your processes, you can achieve unparalleled productivity gains and sustainable growth. Do not let outdated practices hold you back.
Contact Simon-Kucher today to learn how we can help you drive productivity, increase conversion rates, and reduce customer acquisition costs. Our experts are ready to partner with you to transform your agency’s performance and secure a competitive edge in the market.
