Ours is an accidental industry in many ways. Most of us end up in the industry unintentionally; very few grew up with the aspiration of getting into insurance. Yet, once we discover the industry, most of us tend to stick around.
The accidentality of the industry doesn't stop with individual players; it expands into businesses. An accidental salesperson falls in love with the industry, finds success, goes out on their own, hires a couple of (most likely) "accidental" team members and wakes up one day with an accidental business.
Because their evolution into the industry and a business of their own is accidental, there isn't nearly enough thought given to the business model itself. They adopt the typical model they have witnessed along the way, other people's "accidental business model."
It’s like déjà vu all over again
Your business model is the foundation on which everything rests. It determines your ability to bring in new business. It determines your ability to hold onto the business once you have it. And it determines your profitability along the way.
As the industry evolves and becomes more complex, it’s more critical to rethink your business model to ensure it is healthy, sustainable, profitable and intentional. Because nothing is good or bad except by comparison, let’s think about the typical business model that we see in most agencies today.
What you sell
Whether you own the agency or not, what is it that you're selling? Before you answer this, how would your typical prospect and client answer this question on your behalf?
The answer is that the typical agency focuses entirely on selling insurance. Whether it's medical, dental, life, disability or any other type of insurance, too often the only thing being sold (different from the stuff you give away) to clients is an insurance policy.
The threat this poses – You have no control over the product you’re selling.
The adjustment to make – Sell your ability to solve problems. Instead of focusing on the product (insurance, benefits administration technology, compliance, etc.), focus on the problem you solve with those products.
See also: A Future-Proof Operating Model
How you sell
Now, think about how you earn new clients. What does your sales process look like?
Most agencies still fall into the trap of showing up at renewal, asking for a chance to quote, putting together a spreadsheet, going through a capabilities dump (the value-added services you give away) and praying the other guy/gal missed something. It comes down to competing with a spreadsheet.
The threat this poses – You are offering the same spreadsheet and list of additional services as everyone else, making you "just like everyone else."
The adjustment to make – Instead of showing up with pre-determined answers (aka spreadsheet and capabilities presentation), start your sales conversation by evaluating what problems a buyer may have that are hurting their business.
To whom you sell
Who are you targeting as you look to put opportunities in your pipeline and grow your business? Who are you willing to accept as a new client?
Way too often, the answer is, “anyone who can fog a mirror.” We tend to fall into the trap that any new client is a good one.
The threat this poses – You end up with too many clients who either can’t afford to pay you what you’re worth or who don’t appreciate what you offer.
The adjustment to make – Define your ideal client, both demographically and psychographically, then use that profile as a filter before allowing anyone in your pipeline.
How you get paid
Once you have a new client, how are you typically getting paid for the work you do on their behalf?
Your compensation is typically determined by the commission schedule the insurance carrier builds into the insurance policy.
The threat this poses – Someone else is determining how much you get paid.
The adjustment to make – Be sure you are the one determining how much you need to be paid on a client and add in fees if necessary.
How you protect revenue
We already talked about earning a new client, but how do you ensure you retain those clients? How do you renew their business?
I’m guessing you may say something about the level of service you provide. That’s funny.
It comes back to the spreadsheet. The way you earn a client is how you're going to retain them. Said another way, you will lose every client the same way you acquired them in the first place. Your sales process trains prospects and clients on how to buy your services.
If you've competed for that new client based on the spreadsheet, don’t be surprised when they invite your competitors to quote their business at renewal time. After all, you taught them that. You simply reinforced the accidental industry model.
The threat this poses – You become too vulnerable at renewal time, once again depending on something you don’t control.
The adjustment to make – Have a mid-year planning session with the client that focuses on the various problems you are helping solve. Of course, this follows the adjustment we suggested above in the “how you sell” section.
Ensuring profitability
Last business model question, going, literally, to the bottom line. How is it that you guarantee profitability on any particular account?
The typical response here is, “Huh?” Accidental agencies don’t think about profitability, at least at the individual client level. They go out and write as much business as possible without evaluating whether this is a client relationship that can be profitable.
The threat this poses – You are losing money on a significant percentage of your clients. In turn, your highest-paying clients are used to subsidize your least-paying clients.
The adjustment to make – Establish fair compensation for each client based on the services you provide to them.
See also: New Operating Model for Insurers (Part 2)
Is there really a choice?
As you think about your answers to these questions, does it make you a bit uneasy? Let’s put the answers to the questions into overall descriptions and see which is the right business model for you, an accidental business model or one that is more intentional.
With an accidental model, you . . .
- don’t control what you sell
- have no differentiation from your competition
- accept any new client, no matter how small or misaligned
- depend on someone else to determine your value, and
- are unprofitable on a sizable percentage of clients
Compared with an intentional model in which you . . .
- sell based on your ability to solve problems
- are differentiated (by process, focus and impact) from your competition
- are selective about who you are willing to work with
- establish your own level of compensation based on the value you deliver, and
- ensure profitability on every client.
At best, the accidental model is antiquated; we just don't recognize that fact until we break it down. It is a model that effectively leaves your business in someone else's hands.
If you feel as though everything about your business model needs to change, don’t allow yourself to be overwhelmed. At the same time, for the sake of your future business, commit to getting started.
Decide what is it about your current model that scares you the most and start there.
