I'm fairly certain you've heard of "leaky bucket syndrome", so I'll be brief with the explanation.
When working to grow their agencies, sometimes insurance agents focus so much on new business that they let their existing customers and opportunities from those customers slip through the cracks.
Despite all the new business they're writing, they're still not growing - because their existing customers are leaving.
This is what we call leaky bucket syndrome.
In this blog post, you'll find statistics and research that show you why and how a focus on your existing book of business will generate more agency growth than a focus on *acquisition through cold calling and other marketing methods.
*None of this is to say that writing new business isn't important for growth - it's just that growth is more attainable and lasting when you don't have to make up for lost business with new sales.*
Insurance Client Acquisition Costs
As you've probably heard/read a million times, the insurance industry is notorious for having the highest acquisition costs. (IIA Dallas)
When you sell a policy to a new customer (found by marketing or cold calling), typically, the acquisition costs are so high that you won't see much monetary growth until the renewal. (ROI Solutions)
And according to Talage,
"Your profits are in the renewals. . . As a result, learning how to retain clients in insurance is one of the most effective strategies for building your agency."
A surefire way to grow your agency is by working your current book of business for cross-selling, multi-lining, and asking for referrals!
All of those lead types have higher closing AND retention rates than leads found through traditional marketing methods.
Prospects found through your book of business have lower acquisition costs AND they'll have a higher lifetime value.
TLDR: you'll spend less and earn more.
Improved Retention & Customer Lifetime Length
According to Ido Deutsch (agentero.com), improving your agency's customer retention rate by 5% can double your profits within 5 years.
"Churn rate is at its highest one year after a customer purchases their first policy, and it decreases significantly after 4 years." (Agency Nation)
IMPORTANT NOTE: Your retention rate isn't the only indicator of growth.
Think about it this way: You could sell 100 new customers and lose 100 existing customers in the same time frame. The numbers would tell the story that you've retained your customers when in reality, you've just replaced your cancels with new clients whose churn will likely be within the year.
Being mindful of how long your customers stay with your agency is vital for growth.
There are many steps you can take to increase your customer's lifetime value and average time as a customer.
One of those is multi-lining and cross-selling your customers.
The chance of losing a client decreases significantly when they have more than one policy with you.
"Increasing average policies per customer to 1.8 (policies/client) reduces annual churn rates to 5%." (Agency Nation)
These are also relatively easy sales when you're holding annual insurance reviews with your current customers each year.
Are you hesitant to push new sales in the review meeting?
All of this is to say that focusing on opportunities from your existing book of business will generate long-term, sustainable growth through cross-selling, multi-lining, increased retention, and quality referrals.
You'll spend less on acquisition costs and still see growth.
Your customers will stay with you for the long haul.
If you take away nothing else from this blog post, I hope you'll remember the following:
Don't underestimate the value of your current customers.
Don't let your agency become the leaky bucket.
And if it already is, it's time for you to allocate more time and resources to your existing customers.