The Oregon Agent, Winter 2014 by Blue Water Publishers, LLC

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Winter 2014 â&#x20AC;˘ The Oregon Agent

IIABO Office 5550 SW Macadam Suite 305 Portland, OR 97239 Phone: 503-274-4000 Fax: 503-274-0062 Toll Free: 866-774-4226

IIABO Staff Directory Executive Vice President Jim Perucca jimp@insureoregon.org

Vice President Marketing & Communications Barb Demings barbd@insureoregon.org Assistant Vice President Education & Finance Tyra Dressel tyra@insureoregon.org Director Agency Products & Services Abby Kahl abbyk@insureoregon.org IIABO Lobbyist Roger Beyer roger@rwbeyer.com

WINTER 2014

INSIDE THIS ISSUE: 6

Letter from the President, Steve Wilson

IIABO 2013-2014 Leadership

10 The Value of Making Mistakes 12 How Sharp is Your Sales Structure? 14 Why Customers Leave 15 A New Approach to Continuing Education - Live Video Webcasts 16 2014 MidWinter Education Symposium Information and Registration 18 Five Ways Agency Principals Can Seize the Future

For more information on advertising, contact Jim Aitkins Blue Water Publishers 22727 - 161st Avenue SE Monroe, WA 98272 360-805-6474 fax: 360-805-6475 jima@bluewaterpublishers.com The Oregon Agent is the official magazine of the Independent Insurance Agents and Brokers of Oregon and is published four times yearly. IIABO does not necessarily endorse any of the companies advertising in this publication or the views of its writers.

21 2014 Portland Law & Ethics Classes 22 Perpetuating Agencies 24 Should CSRs Sell? 26 Coaching Sales People 28 Perpetuation or Succession?

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The Oregon Agent â&#x20AC;˘ Winter 2014

Western National Ins Group

FROM THE PRESIDENT

hile there is a lot of negative news surrounding our industry as reflected in the chaos surrounding the federal health exchanges and Cover Oregon, the Big “I” in partnership with six insurance companies has been working on a very positive endeavor-creating the Company Agency Portal (CAP). When fully operational, CAP will take the collective internet presence of thousands of independent agents across the country to drive prospects to your website. CAP will promote the unique values of the independent agency system—choice of companies, customized products and local personal advocacy. Matt Nickerson, President Safeco Insurance (one of the partner companies) summed up this project in a memo to Safeco agents: “Safeco invested in Project CAP, an industry initiative supported by the Independent Insurance Agents and Brokers of America (IIABA) to help independent agencies recapture personal lines market share. If you have not signed up and loaded your agency’s full profile at www .trustedchoice.com now is the time to do so.” I’m looking forward to my 2014 term of office. The annual Forecast Breakfast is behind us, and that event continues to be the single largest gathering of independent agents in Oregon. Now, we are looking forward to the MidWinter Education Symposium, March 6 & 7, 2014 at the Inn

at Spanish Head, Lincoln City, Oregon. This is a great way to earn up to 12 hours CE, OR/WA while enjoying an Oregon Coast get away. Registration includes CE, breakfasts, lunches and a hosted reception. There is also a gourmet cooking demonstration and lunch for spouses at the Lincoln City Culinary Institute. Our instructor this year is Chris Amrhein. When you combine the great teaching style Chris brings with the most spectacular view ever from a classroom, the hours will fly. This event has it all---CE, exhibitors, and company partners. Sign up at www.iiabo.org Finally, reserve the date for our 2014 annual convention. The dates are August 24-26, 2014. This year the convention will be held at the Eagle Crest Resort, just outside Redmond, Oregon. It is a beautiful location that will bring attendees great value. Take a preview look at www.eagle-crest.com and watch for a special “members only” offer from the resort to take a sneak preview. I look forward to working with you. I’d also love to have your input as to how we can help build an organization that serves you even better.

lso i W e v e t S

Steve Wilson, President IIABO Ashland Insurance

Your association staff: Executive VP Marketing & Communications Education & Finance Products & Services Toll Free Numbers: 6

The Oregon Agent • Winter 2014

Jim Perucca Barb Demings Tyra Dressel Abby Kahl

1-866-77-IIABO or 1-866-774-4226

503-274-0583 503-274-4000 ext. 26 503-274-4000 ext. 31 503-274-4000 ext. 23

jimp@insureoregon.org barbd@insureoregon.org tyra@insureoregon.org abbyk@insureoregon.org

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2013 - 2014 IIABO LEADERSHIP Steve Wilson President Ashland Insurance, Inc. Ashland

Gary Githens Past President Beecher Carlson Bend

Trish Fulwiler Board Member J.D. Fulwiler & Co. Portland

Ed Davis Vice President/Legislative Chair MaPS Insurance Services, LLC Salem

Keith Blackerby Board Member Bisnett Insurance, Inc. Lake Oswego

Jim Ginger Board Member KPD Insurance, Inc. Springfield

Adam Harris Board Member LaPorte & Associates, Inc. Portland

Greg Horner Board Member Insurance Partners, LLC Portland

Kay Hunkapillar Board Member Wheatland Ins. Ctr., Inc. Pendleton

Marty Kantola Board Member Chet Hill Insurance Portland

Debbie Krambeal Board Member CAL/OR Insurance Specialists, Inc. Harbor

Ryan Miller Finance Chair Miller Insurance Tualatin

Matthew Pidcock Board Member Valley Insurance LaGrande

Steve Smelley Board Member PayneWest Insurance Beaverton

Brett Slater Board Member Slater & Assoc. Insurance, Inc. Tualatin

John Timm Board Member Timmco Insurance, Inc. Portland

Brian Wilbur National Director Pacific Insurance Partners Forest Grove

The Oregon Agent â&#x20AC;˘ Winter 2014

Steve Fitzwalter Board Member Rogers, Fitzwalter & Powell Portland

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The Value of

Making Mi$take$

By Chris Burand

hat’s the best thing you can do to make your customers happy? Screw up! Yep, that’s right, make a mistake...then fix it. According to one study, customers who had experienced a problem that was then quickly resolved to their satisfaction were happier than customers who never experienced a problem. Here’s how you can capitalize on this premise.... In the December 24, 2001 Fortune magazine, Michael Schrage wrote a very interesting article titled “Make no mistake?” He wrote about how customers are more satisfied by companies that fix mistakes than by companies that make no mistakes at all. His example was that of a hotel. The hotel discovered that its guests enjoyed everything going well, but that when something went wrong, they were even happier to see the hotel make things right, quickly and efficiently. He wrote, “Guests who had experienced a problem that was quickly and politely resolved rated the hotel service higher than guests who had no problems at all. What’s more, guests with happy resolution of their hassle said they were likely to recommend the hotel than did the trouble free guests.” The hotel is now trying to identify what kinds of problems they can inflict upon their guests (provided they can fix the problem immediately). This is an incredibly enlightening discovery! Mr. Schrage explained the situation extremely well. Customers do not want hassles. They want everything perfect but they realize they do not live in a perfect world. Therefore, customers give high marks to companies that handle mistakes in a prompt, courteous manner. 10

The Oregon Agent • Winter 2014

In many situations people expect problems so a company’s ability to handle those problems is often even more omnipotent than total quality. In other situations, total quality prevails. For example, people prefer their new cars never breakdown because getting them repaired is a major inconvenience. Therefore, original quality is key because the expectation is that new cars should not break. I am not suggesting to purposely sell customers the wrong coverage only to pay losses out of our own pocket when a claim occurs (though many agencies occasionally do this). This is one

area though where insurance agents have an advantage over most all other businesses–not because insurance companies make so many mistakes issuing policies–but because customers often do not pay attention to their insurance until a claim occurs and then, the claim can serve as a proxy for a mistake. Are customers who never have a claim, never have a billing problem, and therefore never get to enjoy an agency’s great service likely to rate the agency as high as customers who have a claim and receive first class service? If you service your own claims, this is a great opportunity to shine and make a long-lasting, positive impression on your customers. This option though is not available to all agencies because many agencies do little with claims. They turn over all claims to their companies. In many cases, customers contact the carriers directly. This makes a lot of financial sense but it means agents must find alternative ways to impress their customers. Fortunately, most insurance customers do not expect much from their insurance agent (in this area), so the opportunities to exceed expectations are ample. Here are some ideas that firms, other than agencies, have already implemented. 1. One accounting firm offers a service for helping homeowners recover from losses, rebuild, collect claims, and get emergency housing and clothes. They do this on their own initiative. They do not depend on the insurance company to take action. Do you lead or follow the insurance companies when taking care of your customers? 2. Another firm sends flowers to their personal lines clients that have auto accidents resulting in injury. What do you do for your clients whom experience a loss? 3. Other firms have arranged contingency plans with professionals such as grief counselors, public relations firms, and disaster recovery experts to help their commercial clients when they have employee deaths, public relation issues, and other disasters. These types of perks are cheap and some are free. Yet almost no agencies do anything like this. We know customers want to feel special, we know they want to be cared for when claims arise, and we know they are likely to refer more people after expertly fixing a problem than if nothing happens. What are you waiting for? Copyright 2002-2013 by Chris Burand. Used with permission.

Winter 2014 • The Oregon Agent

How Sharp is Your Sales Structure ? Selling may be simple but consulting is hard -- and it’s different! You’re kidding yourself if you think you can hire a “sales trainer” to teach your sales people how to be consultants -- No way! We’re talking about a completely different set of skills. It’s not about “Selling skills.” Let’s back up. What is consultative selling and why do you need it now? To find out, keep reading... By Bob Ayrer

ave you been thinking about more sales training? Maybe you blew a bundle a while back on some snappy program that promised the latest “secret” of selling -- and the results were less than spectacular? First rule: Don’t get caught up in the hype and think that claims of “consultative selling” or “relationship selling” are the answer-all programs of the day. Slow down, take a deep breath, and take a skeptical look at what’s being offered -- and by whom. Is it the slick talking sales trainer who’s trying to sell you the latest version of the same old song and dance? Here’s the dirty little secret that sales trainers don’t want you to know: their goal is to get you to hire them, not to improve your sales program, but to improve their income! When they pitch “consultative” selling, they talk a good story but they’re way off the mark. Wasn’t it Zig Ziglar who said selling is simple, “Just get in front of your prospect and tell your story?” Yeah, right! Maybe in the late ‘80s -- maybe. Here’s the real message: Selling may be simple but consulting is hard -- and it’s different! You’re kidding yourself if you think you can hire a “sales trainer” to teach your sales people how to be consultants -- No way! We’re talking about a completely different set of skills. It’s not about “Selling skills.” 12

The Oregon Agent • Winter 2014

Let’s back up. What is consultative selling and why do you need it now? When we came to the end of the “Total Quality” era, all products were good and channels of distribution were everywhere. It became clear that the old focus on product differentiation was not working any more. Consultative selling was recognized as the new effective tactic in the marketplace when virtually all products had become commodities. Today it has become impossible to get any market advantage with just product. As fast as the turnaround time is today, even if you have a smart innovation your competition will have a knock-off on the street within 90 days. So much for product advantage. To be successful, sales people had to come up with a way to “get an edge” so they began to sell up to the next level of need -- selling the application, instead of the product itself. To discover the value of their product application, they had to learn markedly better inquiry and listening skills as opposed to the old “Show up and throw up” sales routine. It takes a different mindset to be a consultant. For one thing, the new consultant sales person must mentally move to the buyer’s side of the desk -- working toward sensible, longer-range solutions from the client’s point of view, not selling products. Ah, but the income-hungry sales training companies

quickly jumped on the bandwagon and began preaching their skills. To teach your people this new skill set, the training version of “consultative selling” as though it was the answer source you want is a company that knows consulting and to this changing marketplace. Giving them their due, they have teaches consultative selling at the next level -- that is, using half the answer masquerading as THE answer. the value of information to earn the sale. Forget the old “box Sales training companies still teach people to sell stuff close”, the presumptive close and those hackneyed tricks all -- but, they don’t know how to teach people to sell their professional buyers recognize today. knowledge -- and take the product-sale as payment. The days Consider the positioning of your product in your of simply re-teaching selling skills has passed. Sales trainers marketplace. Then consider adopting real consultative selling as haven’t yet learned how to sell knowledge -- the most valuable the right vehicle in this new Information trading world. “product” in today’s business. Better get moving -- the marketplace won’t wait for you to Why is that fine line distinction important? Here it is: What catch up! was once your “product” has become a commodity. Today’s “product” is information! Today the sale will go to the people Bob Ayrer is a successful survivor of corporate life who now who offer the most valuable information as a consultant -consults to organizations on building top performing sales and the payment will be the purchase of the “commoditized” programs. Bob is a popular speaker at conventions and sales product. rallies. Professional speaker, trainer and consultant -- Bob Buying those commodities has become the currency to get Ayrer can be reached through: the consultative information. To put it another way, ordering the REA Performance Consultants, Inc. commodity products will purchase the information judged most 9082 Bermuda Dr., Suite A profitable by the buyer. Today’s sales person must know how to Huntington Beach, CA 92646 consult to the client companies, and consulting is a whole other (714) 968-4136 Fax (714) 962-1889 set of skills. E-mail: perform@improvingsales.com Sales people consult to find an opportunity; consultants Web site: www.ImprovingSales.com consult to find solutions. When a sales person finds an opportunity, they go into a Copyright 2000-2013 by Bob Ayrer. Used with permission. “sell mode” and make the sale. The sale made at the first level of opportunity is of low-level value to the buyer and does not achieve the prime objective of a 90’s salesperson -- creating a customer who will support your company over a long period of time based upon a value relationship. Consultants, on the other hand, Imperial PFS, the leader in premium financing, know how to create long lasting continues to focus on the success of our agency partners. relationships, uncover the causal issues The relationships we have developed with our agency partners are a in the problem solving process and, critical element in the way we do business. These relationships have in the end, give greater value while enabled Imperial PFS to continually develop and improve programs building stronger relationships with and services. Customer focus is why we operate a nationwide network of local offices, each shaped by the region it serves. We clients. look forward to your continued partnership with Imperial PFS and The answer? Hire a consulting providing you the most comprehensive benefits in the industry. company to teach your sales people how to be consultants who sell, rather than hiring sales trainers to teach your people how to sell like consultants. What’s the difference? To a sales training company, consultative selling is a tactic and a strategy -- to a consulting company it’s a basic philosophy of problem solving ipfs.com marketing@ipfs.com and value building. Bothell: 800.888.2750 Spokane: 800.234.7373 Consulting is a different set of

TeamWork

Winter 2014 • The Oregon Agent

WHY

By Jack Fries

very agency loses customers from time to time, for many reasons. Sometimes they’re gone forever, for many reasons. However, in most cases, you can get them back IF you know for sure why they left, if you know for sure that you want them back, and if you have a standardized process for recapturing defecting customers Right now you are losing customers. How you react to these defections could be the difference between life and death for your business. The reason is simple: It costs about five times more to obtain a new customer than it does to retain an existing one. Yet, out of the multitude of companies spending thousands to create new customers, few care to know when their customers stop coming back. Instead of continuously pouring new customers into your agency, try spending some time plugging a few of the leaks with a standardized process for recapturing defecting customers. These five action points should make a difference: Identify defections when they happen. You must know when a customer has ended a relationship with your agency. For agency businesses, it’s a non-renewal. Transactional relationships require a little more work to follow. Knowing a customer’s average transaction size and frequency will let you identify behavior that deviates from the norm. Evaluate the value of a defection. Once a customer has left, you have to decide whether that customer is really worth keeping. Every agent will agree that some clients provide more value than others and that retention of those high-value consumers is crucial. At some point, every business needs to look at its clients not just from a standpoint of their potential value, but in terms of their impact on the cost of operations and marketing. Identify the cause. Regardless of your intent to keep or lose a customer, you must know why the customer is leaving. Conducting random exit interviews will give you advance warning of problems that, if left unresolved, could drive your customers to the competition in droves. Use a standard recapture process. Standard processes

The Oregon Agent • Winter 2014

E V EA

ensure that critical activities take place in a consistent manner. Create one method of contacting defected customers and make it a part of your daily marketing activities. An agency should always be focused on direct marketing. New customers are placed in the agency’s “person who buys’’ bucket. Then, based on the size of the account and the number of policies written for them, the agency sends out a series of targeted letters and phone calls designed to create the opportunity for account development. Measure the outcome of your efforts. Nothing improves unless it is measured. A good set of customer-recapture metrics should track the number of customers that defect in a given time period and the percentage that ultimately stayed. You’ll also want to quantify the revenue received from these retained customers–it will be an eye-popping figure! Copyright 2001 by Jack Fries. Used with permission.

A New Approach to Continuing Education

From the Agents and Brokers Education Network & the Independent Insurance Agents & Brokers of Oregon

LIVE VIDEO WEBCASTS The next big thing in continuing education! The Agents and Brokers Education Network is an ever growing consortium of over thirty Independent Insurance Associations from across the country. ABEN’s unique webcast platform lets you skip the travel, and the hassle of traditional CE. ABEN offers E&O Risk Management: Meeting the Challenge of Change with two different options. You may attend a six hour course or you may take two three hour courses at different times. The six hour event and the two three hour events (once both are completed) will apply towards your agency’s requirement for the Swiss Re 10% E&O discount. And with ABEN, you can watch any course, from anywhere, and participate fully. With ABEN’s platform, you’ll be able to see the presentation via live streaming video, follow along with the presenter’s PowerPoint, submit questions, take notes, and get full access to written materials. Additionally, ABEN’s helpdesk is standing by 24/7 to assist you, should you encounter any difficulty with the technology. With ABEN courses you get the benefit of the best information out there, with the convenience of internet technology and the full educational experience you can only get through ABEN’s unique platform. That is the ABEN Difference.

To learn more, and view available courses, go to the Independent Insurance Agents & Brokers of Oregon’s catalog, at iiaor.aben.tv Winter 2014 • The Oregon Agent

The Oregon Agent â&#x20AC;˘ Winter 2014

Winter 2014 â&#x20AC;˘ The Oregon Agent

5Seize the Future By Peter van Aartrijk

Ways Agency Principals Can

Peter van Aartrijk provides great insights for the agency principal to consider in order to take his or her business to a higher level in the future, based upon the innovations the author is seeing both within and outside the insurance industry. There has been a lot of very fruitful idea sharing going on within ACT’s Agencies of the Future initiative, which Peter chairs, as well as in ACT meetings and other forums. Peter shares the ideas that have particularly resonated with him, along with providing links to several excellent resources that will provide agency leaders with additional food for thought and action.

t’s been about a year since ACT’s Agency of the Future Work Group produced a couple of thought pieces on the emerging consumer and how we believe agents should respond. Now we’re excited to release a video series to supplement our written work. The first video is entitled “Agency Perspectives on the Future” and focuses on leadership, the changing consumer and agency, and the outlook for the future. (Thank you Applied Systems for assisting ACT in producing the video.) Couple of points on the video: • Watch it at least twice; you’ll pick up new ideas each time. Our industry is blessed to have some incredibly bright, talented and expressive people. • Show it at agency staff meetings to encourage fresh thinking. • Carriers, associations and user groups can show it at employee and agency meetings. Our work group plans a second video, “Agency Strategies for Growth,” that will focus on using marketing, social media, metrics and automation for future success. 18

The Oregon Agent • Winter 2014

It’s been a year of excellent conversation. And, of course, it’s a cool topic—who doesn’t like envisioning such a bright future? In the original 2012 reports, we explored what we considered to be attributes of a successful agency of the future—the foreseeable future, to be specific. I’d like to comment on a few of these I find critical for principals to consider: 1. Brand Okay, I’ll admit it: I’m biased here. But a strong brand is the difference between winning and falling behind, period. Remember that the agency brand isn’t tangible; it is a set of expectations and memories that reside in the minds of your stakeholders (owners, employees, customers, prospects, business partners and opinion leaders). The objective is a clear/ consistent 360-degree understanding of the brand among all stakeholders. This will take a while if you haven’t started the process. The insurance industry creates products and services, but people buy brands. Thus, your agency’s brand is the most valuable asset. From the owner’s perspective, it will guide employee behavior. From the consumer perspective, the brand

will help them decide where to buy. That won’t change for the agency of the future. Strong brands build loyalty—reducing turnover and increasing revenue per customer. You attract talented people to work for you. You attract the best carriers. Your referrals increase. You can talk more about value than price with prospects. And you can go beyond clients to raving fans. Thus, it is important for the agency to go through the process of defining and codifying the agency’s brand attributes and personality. What are they today? What should they be? What could they be? More important, with the proper strategy and investment, what will they be? Agency owners must clearly understand, embrace and communicate a direction for their firms. A strong brand is something you earn, not something you receive. Smart firms realize that customer and prospect communications are an investment, not an expense, and they will build agency value. Best Practices agencies consistently are spending 1% to 3% of annual revenue on these activities (the larger the agency, the percentage typically drops). Some firms are redirecting more of the annual spend towards younger talent to handle social media initiatives; where in the past they might have directed more to paid media, for example. Refer to the Websites & Social Media page of the ACT website for more information. Are you just an agency name? Or a brand name? Could it be more crisp, clear, consistent and visible? 2. Leadership Our work group has talked a lot about leadership—specifically, the value of transformational vs. transactional leadership. Organizations need both to succeed, but agencies typically are lacking in transformational leadership. Such a leader: • Always seeks improvement and is more willing to shake things up. • Realizes that the world is dynamic and sees change as an opportunity, not a threat. • Builds a culture that drives customer and employee happiness. • Develops employees, at the right levels and in the right places, and allows them ability to grow. • Has effective listening and communications skills. • Inspires staff to work as a team toward a common goal—and inspires the team to take its own initiative to accomplish goals without management’s handholding. For an agency, leadership means managing a business, not just being an insurance technician. Smart agency principals never seem satisfied—they always strive to get better. They have a voracious appetite to learn.

Leaders are willing to gain new information and insights from any source—employees, clients, other industries and industry meetings. To that point, “Leaders are readers,” according to author/speaker David Nour. Improving just 1% per day in knowledge and skill means that in 70 days you’re twice as good as today, he says. Does your firm have a good dose of transformational leadership? 3. Staffing Over the next 10 years, 50% of current agency workers will have retired. But the next generation of leaders are ready to get involved now—don’t stand in their way. Smart agency owners invest in people and training. Some of your new hires may come from outside the industry—a great way to generate new ideas and also get strategic help, which agencies often lack. Many firms have a couple of family generations on board. But now these successful owners are handing over the reins to professional managers who are not part of the family. And if you’re looking for the best talent, be prepared to pay the best salaries—but it’s an investment in your future. Another trend of which to be very aware: Who works at your firm, what is work, where we work, when we work, how we work—even why we work—is all evolving. It’s an exciting time. Be flexible. Some of your best talent of the future won’t commute to the office 9 to 5 every day. Some will be consultants, some employees; some will work full time, and some part time, and some remotely. And some of those highly talented would-be retirees I mention above might continue to contribute to the firm under alternative circumstances. Flexible work arrangements backed up by slick, enabling technology— such as Internet phone systems—are becoming more prevalent at agencies. Do you offer a place where insurance professionals want to work? What’s your story to a new recruit? Will you earn your fair share of tomorrow’s talent? 4. Social The successful agency of the foreseeable future isn’t going to dabble in social media marketing—it will be a social business. Sitting on the sidelines of this incredible consumer revolution isn’t going to cut it. Nor is looking at customer and prospect marketing as a series of projects. The future agency will be fully engaged, year round, in online and social networking activity. Social is not just an isolated initiative. It must be an integrated piece of your agency’s personality. It defines how the firm communicates and engages with customers and prospects. Agents say they struggle with creating (a) the time it takes to be a social business, and (b) ideas for content—the Winter 2014 • The Oregon Agent

11716 WA IIABA ad.pdf

“what” and the “how” to do this. It’s easier than you think if you approach it from an honest and authentic standpoint. For example, I find it interesting how every day agents literally “speak” dozens of potential blog entries when they help explain a coverage or handle a claim. Write them down! Or use voice-to-text software. You don’t have to make this up on your own. For good material on developing and implementing an online, mobile and social policy, go to the ACT website. The reports will help you guide employee behavior. Once you have a system in place to interact and respond to consumers, the rest will be easier. Relationships are key to the future of consumers and agencies. Everything you do should be about building relationships with employees, business partners, prospects and customers. Software and hardware and cloud technology and social media platforms can be distracting. Put your work into a strategy, setting goals and building relationships. The social media platforms—Twitter, Facebook, and more—that you use to communicate will be a secondary consideration. Are you building relationships online? Do you allow your employees to use these tools as well?

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5. Metrics Agencies that measure effectiveness of marketing and sales efforts tend to be much stronger, period. Knowing your numbers is a key differentiator between the growing agency and the one that is not. Key metrics to understand include new business, retention and revenue per client; number of policies per client, and from where the business comes. Are you measuring your success? If you’re falling short in some areas, how soon will you know? In summary, these five areas should be at the top of your list to create or improve your agency of the foreseeable future. What’s your plan? What’s your dream for the future? In the words of the late Walt Disney, “If you can dream it, you can do it.” Our work group will continue to explore this fertile area— considering both consumer expectations and agency responses. Stay tuned. We hope to see you at the IIABA Special Event & ACT meeting in San Antonio on September 27, when we will explore further effective agency strategies for the future. Peter van Aartrijk is CEO of Aartrijk, a marketingcommunications firm specializing in insurance. He also is principal at strategic branding firm Chromium and Channel Harvest Research , which conducts studies of independent agency preferences/views on their carriers. He chairs ACT’s Agencies of the Future Work Group. Peter produced this article for ACT; it reflects his views and should not be construed as an official statement of ACT. 20

The Oregon Agent • Winter 2014

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March 19:

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April 16:

9am – Noon, Oregon Property & Casualty Laws (3 Law CE Hours in OR & WA) 1pm – 4pm, Insurance Ethics (3 Ethics CE Hours in OR & WA)

May 21:

9am – Noon, Agents & the Oregon Insurance Code (3 Law CE Hours in OR & WA) 1pm – 4pm, Insurance Ethics (3 Ethics CE Hours in OR & WA)

June 18:

9am – Noon, Oregon Workers’ Compensation Laws (3 Law CE Hours in OR & WA) 1pm – 4pm, Insurance Ethics (3 Ethics CE Hours in OR & WA)

July 16:

9am – Noon, Oregon Property & Casualty Laws (3 Law CE Hours in OR & WA) 1pm – 4pm, Insurance Ethics (3 Ethics CE Hours in OR & WA)

August 20:

9am – Noon, Agents & the Oregon Insurance Code (3 Law CE Hours in OR & WA) 1pm – 4pm, Insurance Ethics (3 Ethics CE Hours in OR & WA)

September 17: 9am – Noon, Oregon Workers’ Compensation Laws (3 Law CE Hours in OR & WA) 1pm – 4pm, Insurance Ethics (3 Ethics CE Hours in OR & WA) October 15:

9am – Noon, Oregon Property & Casualty Laws (3 Law CE Hours in OR & WA) 1pm – 4pm, Insurance Ethics (3 Ethics CE Hours in OR & WA)

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December 17:

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For more information or to register go to www.iiabo.org click on the education tab and then “online registration”. You may also contact Tyra Dressel: tyra@insureoregon.org or 503-274-4000 x31. Winter 2014 • The Oregon Agent

Perpetuating

Agencies

The difference between a merger for perpetuation and an acquisition in disguise

..............................................................................

e often hear of agencies ‘merging’ as a form of perpetuation planning for an owner. When we analyze most of these ‘mergers’, we find that they were acquisitions in disguise to protect the ego of the selling owner or to keep the clients from believing that they had been “sold.” However, a merger for perpetuation can be an excellent tool that accomplishes the goals of both the seller and buyer IF IT’S DONE PROPERLY. The difference between a merger for perpetuation and an acquisition disguised as a merger is more than superficial. The difference involves a REAL merger in which both owners remain with the combined agency with one selling down and/ or retiring only after the combined agency has stabilized and realizes the benefits and economies of scale of the business combination. Some of these mergers occur when an owner realizes that (s)he needs to get the value from the asset that has been built but doesn’t necessarily want or need to retire. As I’ve often said, “RETIREMENT IS GREATLY OVER-RATED. THERE ARE ONLY TWO CONDITIONS UNDER WHICH ONE SHOULD RETIRE, 1) WHEN YOU LOSE YOUR HEALTH AND 2) WHEN YOU LOSE YOUR HEART AND PASSION FOR THE GAME.” 22

The Oregon Agent • Winter 2014

If you can find another agent young enough to be your successor with whom you can merge, the two of you can use your experience and his exuberance to create a bigger, more efficient, more profitable entity. Only when those goals are reached do you sell down your stock and either retire or not. The merged entity will likely become more valuable as an entity than the combined values of the individual agencies, giving you more for your asset than would otherwise have occurred. If you wish, or need to retire, the transition period would make your staff and clients feel comfortable with the continuity of the organization. Two rules exist, without which the merged organization will be uncomfortable and very temporary for experience agents who have owned their businesses for many years. First, both owners must stay with the combined agency for a period of time until certain goals are achieved. These goals should be at least revenue or value growth and stability of the combined organization in terms of employee stability and client stability. This means that the original owners must stay long enough to experience and lessen any real or imagined emotional stress caused to employees from the merger. It’s also ultimately important for the older owner to be with the younger owner for a few renewal cycles of the agency’s major accounts to assure them of the continuity and competence of the agency ownership, regardless of whether the older or younger owner is their contact point. The second rule is that each owner MUST have different roles in the agency.

“THERE CAN’T BE TWO KINGS IN THE SAME KINGDOM” Remember, the ‘old dog’ has probably run his own business for several decades and is now ready to slow down or cash in his asset value. However, the younger owner is also feeling in control of his business. The older owner will assume that his word will continue to be law while the younger owners’ needs to feel “in charge” regardless of how much he respects the older owner. The best way to eliminate most sources of friction in a merger for perpetuation is for each owner to assume control over different aspects of the agency with full authority and responsibility for those roles, staff, or departments. This should NEVER be a situation where each owner continues to manage exactly who and what he had previously. The reason for this is that the merger will lose all economies of scale and profit potential. We have seen situations of a merger for perpetuation where each agent manages exactly what he previously managed for ten years after the merger. This turns out to be a cluster group, merged only for markets, which isn’t a bad thing – but not what a 65 year old owner was expecting when he conducted the merger in the first place. Now, at 75, he still feels alone and doing everything he did when he was 50. If one owner becomes “Mr. Inside” and the other “Mr.

Outside” (the most prevalent break-out of responsibilities we’ve seen) they don’t get in each other’s way, they can support each other for mutual benefit and they show a combined front to both clients and staff. The staff members sometimes try to break up a merger when they enjoyed their previous situation more than the changed entity. But, please remember, if YOU own the agency you should be in control of your business and your future – not your employees. Please call us (800-779-2430) if you wish help or more information about Merging for Perpetuation. We can guide you through the process and make it painless to cash out your most valuable asset while you’re still young enough to enjoy it. We can show you how to make your agency more valuable before you sell or retire. And we can show you how to finally get to do the things in the agency that you enjoy most instead of all those responsibilities that you hate but have to endure as the sole owner of your business. Reprinted from The PIPELINE, the national newsletter for agency principals. The PIPELINE is published by Agency Consulting Group, Inc., a leading consulting firm for independent agents in the U.S. for over 30 years. Call 800-779-2430, E-mail info@ agencyconsulting.com, or visit www.agencyconsulting.com for information about the content of this article or PIPELINE subscription information.

Winter 2014 • The Oregon Agent

Should

By JoAnna Brandi

CSRs Sell Most customer service reps do not like to sell. However, I find that CSRs love to help, they love to be useful. If you ask them if they would feel good if they could provide their customers with more ease, more convenience, more peace of mind, or more value, they will enthusiastically respond, “Yes!” Here are several steps you can take to create the right environment for maximum selling results....

ustomers love to buy. We love when someone helps us solve a problem, meet a need, satisfy a desire, or do something nice for ourselves. If that’s true, why aren’t your customers buying more? Perhaps you are not asking them to. Many organizations take the position that customer service “shouldn’t” sell. They believe CSR’s are to take orders, answer inquires, or deal with complaints. Smart organizations realize the amazing potential in designing scenarios where customers have more opportunities to buy and the reps have more opportunities to create customer happiness by being astute enough to know what those customers need. My experience with CSR’s over the years tells me that most service reps do not like to sell. In fact, many of them have less than glowing opinions of “salespeople.” On further inquiry, I find that CSR’s love to help, they love to be useful. If you ask them if they would feel good if they could provide their customers with more ease, more convenience, more peace of mind, more value, more variety, more satisfaction or more delight, they will enthusiastically respond, “Yes!” Here are several steps you can take to create the right environment for maximum selling results: REFRAME THE ACTIVITY Help CSR’s see that by offering the “premiere” upgraded service, the maintenance contract or the matching accessories, they are indeed creating more value for the customer. As a customer I want a rep to be astute enough to recommend the right glue for the glue gun I am buying, the best insurance product for my small business or the fertilizer that will make my new roses thrive. 24

The Oregon Agent • Winter 2014

SET REASONABLE GOALS The art of the up or cross sell is in asking the right questions. To find out what else a customer needs or how they are planning to use your product, ask and then and listen for responses. This takes more time. Make sure a rep is not penalized for doing a good job at this probing activity. Set goals based on outcomes not just time spent on calls. Rushing a customer off the phone won’t get you where you need to go. Create incentives tied into goals. Some companies pay team incentives for selling activities and some pay the individuals. There is no “right” way. What works best for you, your reps and your customers? Making selling fun by tying it into contests and rewards makes it more enticing. After all, we are asking people to stretch outside their comfort zones. Train people how to sell. The more a rep knows about your product, the easier it will be to see the opportunity cues. Does your rep use your product or service, if not, could they? Can you get them out to customer sites to see your products in use and to talk to the people using them? Help them become specialists in using your product so they can easily make recommendations to customers. Teach them benefits not just features. The more rep understands, the easier it will be for them to sell. Remember, customers love to buy, now go sell ‘em something. Skillfully. JoAnna Brandi is the author of “Winning at Customer Retention - 101 Ways to Keep ‘em Happy, Keep ‘em Loyal, and Keep ‘em Coming Back” and “Building Customer Loyalty - 21 Essential Elements in ACTION.” A Speaker and consultant, she is publisher of the Customer Care Bulletin. To receive her bi-weekly Customer Care Lady Email tip go to the guest registry at www.customerretention.com

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Winter 2014 • The Oregon Agent

By Bob Ayrer

Coaching Sales People All the books you’ve read, all of the “rah-rah” rallies you’ve attended, all of the workshops you sat through don’t mean squat if you don’t convert the knowledge into skill. Take a lesson from the pros and get yourself a coach....

go has cost the average salesman more than all the fast cars and fancy clothes put together. It has been said that the worst enemy in sales is Arrogance - and boy, does that come through with some successful sales people! They ‘know-it-all’. Really? Then let’s take a look at the top performers in other Big Pay areas of life. In football the super pro’s have a coach - in fact, one for almost every position - a quarterback coach, line coach, defensive coach, offensive coach. I think the water boy has a coach! Watched world-class tennis stars - Agassi and Sampras hammering it out in center court at the U.S. Open. But…every two minutes the TV cameras went to the stands and did a close up of their coach. Athletes have coaches. Opera singers have 26

The Oregon Agent • Winter 2014

coaches. Actors have coaches. What about sales people? Naw, they already know it all! Wait a minute. If you’re one of the few that really wants to increase your income and your sales closes, think about hiring a coach. Here are some truths about us as sales people: We get away with all kinds of mistakes because there is no one watching us! What rare buyer will call a Company and say, “Boy, you’ve got some lousy sales rep calling on me. Get him/her outta here!” Unlikely. So we need a Watcher, a coach, an on-site critic - and the best one would be a competent sales person you know who will accompany you on sales calls. Oh, and tell you the truth. Here’s what to do: Recruit a coach that understands that selling is a process. You can’t coach chaos; you can’t develop selling skills without knowing and following the disciplines of selling. For real effectiveness, on each coaching call, first define your strategic objectives for your coach so you’re both on the same page. That is, clearly describe the strategy you plan to use and the techniques you intend to use to achieve your call objective.

When you arrive at the sales call, introduce your coach casually: “This is Jack Colligan, he’s working with me today” and then proceed to make your presentation. Chances are the client won’t give your “day visitor” a second look. Have your coach take a position out of the frame of vision where they can observe both you and the prospect/ customer. Have him remain silent throughout the sales call. After the call, do a complete “autopsy” of the call everything from the moment you entered the premises of the prospect through to the exit. Take it apart like a jeweler taking a watch apart - study every move. LISTEN to your coach. Don’t debate. Accept the comments and Learn. How do you think you did in achieving your objectives? What did you do well? What could you improve? Next, have your coach give you feedback on the two areas you agreed to be coached on - just those two areas. This autopsy will take you about 2 ½ times as long as the actual call. Now, go make the second call. The second time, repeat the process -- you either did or did not achieve your objective, etc. (It’s called Practice - like a football player or Agassi.) Move on to your next call and try again - repeat the process. Three coaching calls in any coaching day gives plenty to learn and think about! Plan to be coached on an ongoing basis. Like the Pro’s, you’re becoming a real student of selling, not just another doo-doo walking around day by day repeating the same small mistakes you are not even aware of. All Pro’s accept help. Just remember Peter Drucker’s line, “The greatest knowledge that doesn’t result in action is meaningless data!” All the books you’ve read; all of the “rah-rah” rallies you’ve attended; all of the workshops you sat through don’t mean squat if you don’t convert the knowledge into skill. Take a lesson from the pros and get yourself a coach. And for Heaven’s sake, lose the ego! Bob Ayrer is a successful survivor of corporate life who now consults to organizations on building top performing sales programs. Bob is a popular speaker at conventions and sales rallies. Professional speaker, trainer and consultant -- Bob Ayrer can be reached through: REA Performance Consultants, Inc. 9082 Bermuda Dr., Suite A Huntington Beach, CA 92646 (714) 968-4136 Fax (714) 962-1889 E-mail: perform@improvingsales.com Web site: www.ImprovingSales.com Copyright 2002-2011 by Bob Ayrer. Used with permission

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Winter 2014 • The Oregon Agent

By Al Diamond

Perpetuation Perpetuation or Perpetuation Succession? Succession? Succession?

lanning for succession can be very rewarding IF you have the right people behind you. It can be downright dangerous if you don’t. The emotional rewards of passing your agency to your next generation is very satisfying as long as that generation desires and shows talents to do the job. If not, you are committing an egregious blunder that will affect your children for their entire (hated) career. A number of years ago, we visited a family-owned agency in which both mother and father were involved. When we asked them of their perpetuation plan, they proudly pointed to their two daughters who were freshly involved in the family business. They planned the succession of their daughters into ownership. As with many such businesses, the owners presume and assume that their desires and expectations will become the reality of the future. As such, they simply do not consider other perpetuation possibilities, even to weigh their potential against the ‘plan’ that they consider most obvious. This denial often results in opportunities lost that could have benefited the owners, their families, the agency, and its customers more than the original ‘plan.’ In this case, over the years we had the opportunity to speak to the agency owners several times when mergers, sales poten-

The Oregon Agent • Winter 2014

tial, and association with financial institutions were available to them. Each time, the parents, from an emotional standpoint, resolved to pass the agency to their daughters -- to provide them a good living as it did to the parents. There is no way of knowing how the other offers would have played out since they were dismissed out-of-hand. We recently received a call from one of the daughters. It seems that the parents are ready to retire and want to pass the agency to the two daughters equally. We had not been involved in the agency operations and had never had the opportunity to know the daughters. The story that the daughter told us was as follows: “Neither my sister nor I had any desire to get into the agency business, but my parents insisted that they needed us when we graduated from college and the pay they offered us was good. My sister especially enjoyed the freedom she got from the position in the family business. She still has no particular love for the insurance business or for dealing with clients, but has developed a good grasp of automation in the office. Meanwhile, I was a CSR, producer, and backed up my mom and dad in the management of personnel and company relationships. I have achieved my CIC, CPCU, and will have my CLU this year. I have been active in the Association and know a lot of other agents. I have ideas about how to change the agency along with the times, but neither my parents nor sister want to hear about them. “The fact that we still have few local competitors has kept us profitable, and our loss ratio is always good, so we seem to financially do better each year. My sister calls me a workaholic, but that is because she likes coming in late and leaving early.

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Winter 2014 • The Oregon Agent

“Now my parents want to give us the business equally. I love my sister and my parents, but I have done much more to assure the success of the business than my sister has and I feel that, without my parents as arbiters, my sister will take advantage of me and the situation, leaving me with the majority of the workload and taking half of the proceeds. I do not know what to do. My parents will not accept my idea of buying out my sister. They think that I’m being greedy. They think my sister does more than she actually does and she feels that she should have half the agency because she has put in as much time as I have.” The sister called me because she felt that I had her parents trust and she wanted to know if she had any other way out besides leaving and going to another agency or starting her own agency. I won’t tell you the end of this story. Unfortunately, this wasn’t the first, and won’t be the last, time I have been contacted with similar situations. This type of agency succession problem resolves itself in a variety of ways, none of which satisfies all of the parties involved. Can you, for a moment, imagine your trusted family doctor bringing his child on to take over his practice in the future? What would happen if the child were found to have little or no interest or talent in the practice of medicine? Dad can put a great deal of pressure on offspring to follow in his footsteps. A college curriculum may point out this deficiency -- or it may not. I would not want to become the patient of one of these Succession Plans. The point is that your agency is a means of earning a living for you and is also an asset that should provide you a return when you retire or decide to sell. There is a big difference between treating a business as a way of supporting your family and lifestyle and becoming so emotionally involved that the business becomes the reason for living rather than as a good way of supporting your lifestyle. The parents in this example invested a revenue generating business with their dreams of the future for their children. They never considered the possibility that the children might not want to be in this business or that they might not be good in a service career. They could not accept that the equality that they had in the business might not fit their daughters’ situation and they were certainly not objective in their view of their daughters’ performance. The key to succession of a family business is to set and monitor objective, realistic and measurable goals for the next generation every year. Measure, note and discuss whether or not the goals have been accomplished and why or why not. If the next generation’s goals were being missed every year, why would you think that they could independently become more successful once they had control of the business? Setting, monitoring and discussing the goals and results every year will indicate the ability of the successors to manage objectives within the organization. Hopefully, this will prove that they are capable of managing when the parents are out of the picture. 30

The Oregon Agent • Winter 2014

However, owners and the next generation must learn to accept the fact that not all agents’ children are cut out to become insurance professionals. Of course, this “Goal Setting and Goal Getting” process is perfectly suited to any agency employees who expect to become owners. Not only will they prove their skills and successes to the owners and to themselves, but also any agency with annual objectives will naturally become more successful than the “seat-of-the-pants” agencies that still abound in our industry. The most difficult time in a ‘Succession vs. (outside) Perpetuation’ issue involves the regular investigation and analysis of alternatives to the generational succession plan. Alternatives: 1. Under certain circumstances an agency sale will bring more and more secure funds to the retiring owners than they may get from turning the agency over to a generation that may deteriorate, rather than grow the agency. 2. Regardless of asset value, many agents’ children would make very reasonable employees, but lousy owners. A merger or sale could accomplish the objective of cashing out the asset while still gainfully employing the children if those circumstances prevail. 3. Merger for Perpetuation - We have been involved in many mergers in which former competitors come together because one of the owners is the likely successor to the other, whether or not other offspring of either participant is involved. 4. Hiring your Successor - If you have no successors -- or if you recognize that your expected successors (family or not) will not be able to maintain the agency’s integrity -- acquiring a talented producer, manager or even a smaller agency that has talented owners makes sense to strengthen your perpetuation plan. 5. Investigate any and all acquisition and Association opportunities - Even if you and your successors agree on the future of the agency, look at every deal offered. You always have the right to say no, but you can’t evaluate your situation and value if your head is firmly buried in the sand whenever an offer passes by. Planning for succession can be very rewarding IF you have the right people behind you. It can be downright dangerous if you don’t. The emotional rewards of passing your agency to your next generation is very satisfying as long as that generation desires and shows talents to do the job. If not, you are committing an egregious blunder that will affect your children for their entire (hated) career. Copyright 2001 by Agency Consulting Group, Inc. Used with permission

Winter 2014 â&#x20AC;˘ The Oregon Agent

We’ve been creating insurance solutions and providing superior services for businesses in the Northwest since 1923. We know how important it is for our agents to have the right resources to support the needs of their clients, which is why we pride ourselves on strong agent relationships and local expertise. Your success is our success – we are proud to support the Independent Insurance Agents & Brokers of Oregon and Washington.