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Insurance Agents Need to Know This Secret About Client Retention

by Precise Leads

March 30, 2017

If your clients are leaving you after just one or two years, it’s time to develop a strategy to keep them on board for as long as possible.

Too often, insurance agents imagine that losing clients to churn is an inevitable consequence of their profession. Clients come and go, right? According to conventional wisdom, when you lose one client, you simply prospect for a few more to replenish your coffers.

This attitude is partially correct, but not entirely. It’s reasonable to expect that some of your clients will move on each year — and it’s absolutely a smart move to establish a solid prospecting plan in case they do — but at the same time, it’s crucial to avoid complacency. In order to retain as many clients as you possibly can, you should develop an organized retention strategy.

Before you can begin, however, you need to understand a few basic facts about why clients leave when they do.

The Client-Agent Honeymoon Period

A recent study by PriceMetrix documented the likelihood of your clients leaving the fold based on a number of factors, including the number of years they’ve been with you and how many assets you manage for them. This research provides actionable information to ensure you never have to break up with another client.

The PriceMetrix report analyzed advisors’ client retention data from 2010 to 2013 and determined that there is a definite “honeymoon” period in the client-advisor relationship. During the first year, client retention held at 95%. But as the relationship progressed from 12 to 48 months, the retention rate dropped to 75% before stabilizing after 48 months. This finding led the PriceMetrix researchers to conclude that this 12-48 month period is when “clients determine whether the advisor relationship meets their needs, and if not, they decide to leave.”

Accordingly, you should segment your book of business based on the number of years a client has been with you. Next, you’ll be able to focus your outreach and marketing efforts on clients in the one-to four-year range, because they are most likely to bolt. You should also take care to practice good customer service by proactively contacting them to discuss their coverage and investment options.

If you put in the work, this effort ultimately pays off: PriceMetrix found that five-year clients typically convert to long-time clients, which means that they won’t leave you after the honeymoon is over.

Should You Prioritize Larger Accounts?

Interestingly, the PriceMetrix report also claims that clients with more wealth to invest chart higher retention rates: a client with $100,000 in assets has a 87% retention rate, whereas clients with $500,000 boast a 94% rate.

In light of those percentages, the PriceMetrix study recommends pinpointing wealthier households and pruning your smaller clients. But is that the best tactic for every advisor?

In a piece for PropertyCasualty360, Bill Good cautions against that strategy, which he alleges is unethical. “Book pruning generates tremendous ill will,” he writes. “No one wants to be sent to a call center. You can manage a large book of small clients if you get a junior advisor.”

Good also warns against rejecting a less wealthy prospect referred by one of your larger clients. If that small client happens to be a close relative or friend of your wealthier one, you risk alienating your current client. Referrals are like gold — they should never be ignored. “Refuse a referral to a small account and you will likely not get a referral to the next one,” Good says.

Build Trust First and More Accounts Will Follow

As you build trust with your current clients, persuade them to move more of their assets to your ledger. The PriceMetrix research underscores this point: clients with only one or two accounts showed retention rates of 86% and 89%, whereas clients with five accounts clocked in at 94%.

Good also emphasized that it’s only possible to manage more of a client’s assets and accounts if the relationship is well-founded. “The deeper the relationship, the greater the trust, the more willing the client is to put all his or her eggs in one basket,” he writes.

One easy way to grow your book of business is bundling policies. Clients prefer the convenience of dealing with one carrier and agent for all their insurance needs, but be aware that bundling does come with several caveats: clients are wary of adding new, pricey features to the bundle and may sour on the whole package if one of the policy fails to deliver.

No matter which path you take, however, you should begin your client retention efforts as soon as possible — instead of prospecting to make up for client churn, you should be prospecting purely to grow your business.

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