Over the years one of the most important thing I have learned is you CAN’T quote every account that comes in the door. As much as you would like to you just can’t. The logic that you have to quote an account in order to write it is flawed. If things worked this way, your hit ratio would be down in the low single digits.
So what do I mean by pre-qualifying an account? Ultimately I mean getting enough information about the account and the prospects expectations in order to determine the odds of quoting and writing the account. Since we don’t make money quoting, just writing an account, we would love to work on fewer accounts and write more of them. Sounds easy, right? It doesn’t seem to work out that way.
A couple of years ago we took a look at our “hit ratio” (the number accounts we logged into our system and the number we ended up writing). When we compared one year against the following year we found a significant jump in our “hit ratio”. So much so that we tilted our head (like a dog would when it hears a high pitched sound) and wondered what happened. In discussing this we found out that we spent more time qualifying an account UP FRONT to determine if we had a significant opportunity to write the account. If we didn’t feel we had a decent chance to write it, we relayed that information on to the producer and DIDN’T log the account in (to our agency management system). (By relaying information to the producer I meant we either declined the account, gave them a “ballpark indication” or let them know what minimum premiums we might be up against) If the producer didn’t think we were going to be competitive or wanted to go back to the prospect to run the potential premium range by them, we stored the submission and went on to the next one. When our industry (E&S) usually has hit ratios of 5% to 15%, getting a hit ratio over 20% was HUGE!
Some hints for pre-qualifying accounts:
- Don’t be afraid to ask the prospect if you are the first agent to be working on getting them a quote. It is OK if they have another agent working on it, especially if they haven’t heard back from that agent in a long time. That opens the door to “look great” in their eyes if you can get something quickly. Ask who, since it may let you know what markets have already been approached.
- Ask them if they have a premium range they are expecting. I just worked on a quote that came in originally at $5,000 and a second quote came in at $2,500. I was sure we would write it! I failed to ask up front what premium they were expecting and found out after I quoted it that they expected it to come in under $1,000. Had I known that I would have come back to them that my best potential quote would START at $2,500 and would have not spent the time working that particular account.
- Find out current carrier and premium. Some prospects may be reluctant to give you this information and just ask you to come in with “your best numbers”. At this point you have to ask if the account is worth spending your time. A prospect who does not want to give you this information does not yet “trust” you enough or you have not yet built enough of a relationship with them. This type of transaction hinges on pure price. Those are the type of customers that will also leave you on price. Also they don’t value your time since it will take you time to put together a competitive quote and your chances or writing it is low. Many times we ask this question and are told a “standard market” is on the account and they are NOT non-renewing. (just an FYI… the very first question I look at on an ACORD application is the one asking if they are being non-renewed. Second question is the expiring carrier). If the current carrier is willing to renew, then we ask why you are coming to the E&S market with the submission. We do very few “standard market” accounts and would have to have a good reason to try and work an account that is and have any chance of writing it.
- Learn minimum premiums for certain coverage lines. By this I mean many products liability markets start at $5,000 minimum premium. So if the insured has only $25,000 in expected sales first year, can they afford a $5,000 premium? Many times the sticker shock will sent the prospect moving on and you can spend your time working accounts you actually have a chance to write.
- Find out how quickly they need a quote. I have accounts that I worked on and turned around a fabulous quote, only to find out they needed one within 24 hours and I lost my chance to write it. Not to say something cannot be quoted quickly, but you need to know that up front so you can make the decision if you are going to drop what you are doing and pull out all the stops to get them something.
- Last of all if they currently have a quote (or renewal quote) ask them why they want to move their business to your agency. Their answer will be a great determining factor on how serious they are and will help you to pre-qualify the account.
The “holy grail” is to work fewer accounts and write them all (or a higher percentage of them). The only way you ever stand a chance of making that happen is to pre-qualify accounts that come in the door so you work fewer of them and write more of them. New producers will tend to work EVERY account they happen across and they need to be trained to be more discerning and work on only the ones they stand a chance of writing. The quicker they learn this the more successful they will be. This is a great New Years’ Resolution to make and keep in 2015. I know I am working on this one daily and after 29 years in the business still have a lot to learn.
With over 25 years of experience in the insurance industry, Ken Kukral has developed expertise in: Complex and larger accounts, Casualty Insurance, Property Insurance, Inland Marine Insurance, Professional Liability Insurance, Directors & Officers Liability Insurance, Employment Practices Liability Insurance, Products Liability Insurance, Product recall Insurance, Insurance Program Development, Surplus Lines Regulation, Coverage Analysis, Difficult Insurance Placements, Excess and Umbrella Insurance, Carrier Contract Acquisition, Unique or “one of a kind” insurance solutions, Association Leadership and Association Management, Insurance Sales and Marketing. For questions about this topic, or to have an exposure looked at, contact Ken directly at firstname.lastname@example.org