The Oldest (And Dumbest) Trick in the Book

As many of you know, I do have just a little grey hair. With over 30 years of experience in the agency, mega brokerage and now consulting business, I have seen quite a bit. There are very few “new” tricks when it comes to beating the soft market cycle when you focus on the “price” of the policies. In fact, I am sad to report that I am beginning to hear about the resurgence of perhaps the worst and dumbest soft market strategy ever utilized in our industry. But first, a little personal history lesson . . . .

As many of you know, I do have just a little grey hair.  With over 30 years of experience in the agency, mega brokerage and now consulting business, I have seen quite a bit.  There are very few “new” tricks when it comes to beating the soft market cycle when you focus on the “price” of the policies.  In fact, I am sad to report that I am beginning to hear about the resurgence of perhaps the worst and dumbest soft market strategy ever utilized in our industry.  But first, a little personal history lesson . . . .

I remember as a fresh faced agent in my early 20’s sitting at the desk of a seasoned co-worker.   His dilemma was not unique in the “soft market” of the early 70’s.  Competitive pressure had forced him seek a further decrease in price from an underwriter in order to save one of his accounts.  "Watch and learn," he whispered to me as he waited for the underwriter to answer his phone.

“Say Bill,” he greeted the hapless underwriter, “I have a problem on this account and I hope you will help me out.  I need to find about 10% additional savings and wonder if you would agree to reduce your price by 5% if we reduce our commissions by 5% also.”

Well, in the flash of an eye, the underwriter agreed to this plan of saving the account.  Grinning like the Cheshire Cat, my intrepid mentor hung up the phone and proudly crowed, “See, Rob, that is how you do it!”

That is how you do it!!!  Are you joshin’ me?  That is exactly how you put yourself out of this business in one big hurry.  If I give up 5% will you give up 5%!  That is not what happened.  Here is what happened.  The agent gave up 33% of his income and the underwriter 0.  Not exactly an equal trade.

Notice how while telling the story I used the term “agent.”  As most of you know, we developed the term “Consultative Broker” to describe an entirely different way of retaining an account during the last devastating soft market.  Thank goodness that many of you have evolved in the past decade. 

So, when faced with the same dilemma as our agent friend in the early 70’s, here is how a Successful Consultative Broker would have handled the situation:

  1. A Consultative Broker never focuses a buyer on the price.  Once that occurs, they know that they will be unable to recapture the buyer’s attention.
  2. They focus the buyer on results.  They demonstrate the ability to impact a client’s balance sheet and embed themselves inside the “Business Risk” of the buyer.
  3. THEY NEVER GIVE UP REVENUE!!!  They understand that if they give up commissions, they will eventually be unable to pay their own bills.  They are not willing to jeopardize the financial future of their families and business.
  4. They understand how to sell fees.  We have said for a long time that there is no correlation between the commission structure and your compensation system.  The 2 are mutually exclusive and should not be tied to a product whose price, you do not control.
  5. They are always looking for the next client project.  A successful Consultative Broker knows that if the only project they tackle annually is a client renewal, eventually they will get fired.
  6. They don’t apologize for making a living.  They work with clients who understand the importance of margins in their own businesses.  These clients accept the fact that if they don’t allow their business partners to make a profit, they will get what they pay for!

Here are my final words on the subject of cutting your income to retain clients.  If you need to do it . . . .YOU HAVE THE WRONG CLIENTS!  A successful business person places themselves in a position to prosper.  A successful Consultative Broker surrounds themselves with successful business people!  The two feed upon each other.

Oh, and one last thought.  The concept of cutting commissions to negotiate with carriers has been around for about a century.  Has your income requirements increased since 1900?

- Rob Ekern

For more information on how to quantify TCOR, manage projects, build a value proposition, and consistently deliver stewardship reports and new business presentations to your customers, check out the Major Account Development System (MADS), an on-line consultative broker's toolkit. Available now!

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