Shopping for insurance, whether for my business or personally, is one of my least favourite things to do.
First, the product isn't very exciting. It costs a lot and it's difficult to appreciate its value unless something goes really wrong and you need to file a claim. Of course there's tremendous core value in having insurance, including peace of mind. It's also on the top of the list when it comes to the ways you need to manage risk in your business. Yet, buying insurance just can't compete with the thrill of specking out a new piece of equipment, vehicle for your fleet or trade show booth, for example.
Second, it's expensive, on the surface. If you have ever filed a claim, you are grateful to have it, to be sure. But on the flip side, the many years of insurance premium payments across all the areas of your life that you need or should have insurance, add up to significant expense.
Third, it's time consuming. Insurance companies understandably need intimate knowledge and details of all aspects of your business to provide accurate coverage and appropriate pricing. That is a big investment of time for both you and the insurance broker.
Given all of the above, you may be surprised to find out that I switch insurance providers routinely. Sometimes, annually.
What would motivate me to do so? It has a lot more to do with customer service than price.
I believe in spending my money as close to home as possible, so I always prefer doing business with local agents. They need to be competitive on price, of course, but I place value in doing business with someone with whom I am on a first name basis and I can call or meet with questions. Buying insurance online, which I have done, is a last resort for me, reserved for material gaps in pricing.
The problems I have with customer service don't occur with the initial sale, but once the policy is in place and activated.
Invariably, ten months after the policy takes effect, a form letter comes in the mail reminding me of the fact that the policy is about to renew and, by the way, the premiums are going up. There's no sign of – or contact from – the broker who bent over backward to get my business in the first place. Just a form letter.
Yet, if I'm not mistaken, insurance brokers get commissions on insurance renewals as well as the initial policy sale. So where's the customer service? For the premiums we pay, I would have thought that a courtesy call and explanation of the price increase would precede the form letter. No such contact.
The pessimist in me thinks that brokers understand the time investment involved in establishing a new policy with a new provider and hope that the process, in itself, is enough to keep customers loyal and deter them from shopping around.
Recurring revenue and customer retention is a huge asset when building or selling a business. Yet in my experience, it's rarely acknowledged by insurance brokers (and I've dealt with dozens over the years). They seem to ignore the well-known fact that selling more to a customer you already have is significantly cheaper than finding a new customer. Sure, their commission goes down when they save me money, but there is zero commission when they lose my business altogether.
So, while I pride myself in being loyal with my suppliers, I consider the relationship a two-way street. If you, my broker, are satisfied to see my rates go up without a fight, re-quote or even a courtesy call, I'm going shopping.
It seems to me that shopping for a replacement provider for an existing policy is a lot easier than establishing the policy the first time around. I simply take my insurance policy, block out the pricing and e-mail it around to other brokers to quote. This process takes about 15 minutes and I have saved thousands of dollars.
Whether you are in the insurance business or not, there is much to be learned from these experiences. Paying attention to and keeping existing customers happy is a daily routine that needs to be positioned as a proactive system in your sales and customer service systems. Customers who jump ship are not only lost recurring revenue, they are also a lost source of future referrals. Instead of sending more business your way, a lost customer, like me, is more likely to share the reasons for leaving your business and highlight why and where they went instead.
In this extremely competitive world, small business cannot afford to be passive or reactive when it comes to our treatment and investments in existing customers. This is especially true for businesses, like insurance brokers and other subscription based revenue models where the renewal of the sales cycles is predictable 12 months in advance.
If you don't pay attention to your existing customers, maybe your competition will. That will be a serious loss for your business for which no insurance policy can cover.
Chris Griffiths is the Toronto-based director of fine tune consulting, a boutique management consulting practice. Over the past 20 years, he has started or acquired and exited seven businesses.