Change Gears to Write Larger Accounts

If you ask any highly successful Consultative Broker(TM) this question: "How did your book grow to the size it is today?" They will give you an answer that will surprise you. Most of the self-made successes will tell you this. "I began to be highly successful when I decided to change gears."

If you ask any highly successful Consultative Broker(TM) this question:  "How did your book grow to the size it is today?"  They will give you an answer that will surprise you.  Most of the self-made successes will tell you this.  "I began to be highly successful when I decided to change gears."

Many will go on to say, "I was moderately successful as a producer who mastered the commodity market.  But, I never reached my full potential until I learned how to attract and retain larger accounts."

Here is the lifecycle of a highly successful broker.  Many start as a commodity seller while learning the insurance business, markets and coverages.  They build a nice book of that type of business.  They are moderately successful ...then lightning strikes!

They work on a larger account, one with a high degree of expectations and (of course) income.  They succeed.  Now they have a taste of larger accounts and want more.  They quickly recognize several things:

  • There is less competition at the top, than the bottom.

  • The income generated on these accounts is much more profitable to them.
  • They need to develop a whole new skill set that goes well beyond just the risk financing.

So, they make a conscious decision to work primarily with larger accounts and build their practice around them.  Of course, this takes an entirely new skill set, but these successful brokers have embraced the challenge.  It pays them handsomely to do so.

The hardest part of this transition is the "Changing of Gears".  This is due to the fact that there are not many places to learn how to do this.  I was fortunate in my career to be surrounded by successful senior brokers at Willis that I could emulate.  But, how does a broker make this gear change and develop the skill set required inside of a regional brokerage?

If you want to begin a transition to a highly successful Consultative Broker in 2013, here are some things you must do:

  1. Understand where your bread is buttered.  Take a look at your current book.  Take the top 10% of your accounts.  How much of your book revenue is in this small number of accounts?  I will wager it to be close to 50% if you are like most.  These are your Franchise Accounts.

  2. Determine the common denominator.  There is a common denominator that ties all of these Franchise Accounts together.  It goes deeper than simply a shared industry type or coverage requirement.  Usually, these accounts have a common business style that resonates from each particular client.
  3. Replicate your Sales Style.  A highly successful Consultative Broker quickly learns the importance of this.  It allows the ability to cover a much larger patch of ground in the prospecting process.  This involves creating a much deeper perception of resource capabilities, client business operations and dialogue.
  4. Create Deliverables.  The bottom line to attracting and retaining larger accounts is the ability to create an outcome that actually has a benefit.  This benefit must be more than simply a checklist or a sales technique.  When you are able to do this, your reputation will precede you.

Changing gears is the key to becoming a highly successful Consultative Broker.  Once you do that, it is amazing what other impacts it will have on your business life.  Your clients, prospects, colleagues and competitors will see you differently.  Changing gears will allow you to cover a great deal of higher ground.  So, don't be left at the bottom of the hill, start changing gears today and see the whole panorama laid out at your feet!

Don't miss our next Consultative Broker Briefing entitled:  Building a Better Mousetrap.

Best Regards to Consultative Brokers,

-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!

Ready to learn more about Consultative Brokerage Sales Training? Visit the Consultative Brokerage Academy.

To learn more about C.R. Ekern & Company, please visit our website

Fees: Get Paid What You Are Worth

For years we have been saying this: There should be no correlation between your income and the commission paid by insurance carriers. The two just ain't the same thing. Now I know this sounds like sedition, but stay with me here.

As your clients have become more sophisticated, many of your firms have added internal resource capabilities.  Whether they be claims, risk control, client portals or financial analysis.  The commission structures that are developed and paid by insurance carriers just don't support the expense of these resource capabilities; and your producer compensation too.

So, the answer comes in 4 possibilities:
  1.  As producers you determine to give up part of your commission in order to support the resources required to stay in the game on larger accounts.  (A bad option)
  2.  Your firm requires you to pay for resources out of your pocket, thereby forcing you to select which clients get resources and who does not. (A worse option)
  3.  You decide as a firm to get out of the larger account arena and simply work on commodity transactions. (The worst option)
  4.  You learn and commit to developing ROI-Based Fees.  (YES!!!!)
There has long been a fallacy built into our business that no longer has legs.  This problem is around the calculation of a Fee and how we present it to clients. Now this edition of the Consultative Broker briefing will not be around the methods of fee calculations.  There are as many calculations as there are stars in the sky.

For today, we all need to accept one universal truth about fees.  At the end of the day, after calculating fees, most brokers then compare it to commissions.  If the fee is too low; they adjust up.  If too high; they adjust down.  So, eventually the fee becomes a function of commission benchmarks.

The key here is that they ultimately peg their income to what the market will bear.  Then, pray to god that another broker doesn't undercut them in a competitive situation!
But what about their quantifiable impact to the client?  Doesn't that count for something?  What about the ROI the client has received from their ability to deploy resources and achieve a consultants goal of improving the client's business model?  What about the impact your client has received in reduced costs, improved efficiencies, competitiveness and productivity?  What about that?  Shouldn't that be factored in the Fee as an ROI?  What about that?  Huh? Huh? Huh?

Now before you scoff at me.  Let me tell you a true story that recently occurred with one of our broker clients.  Over the past several years the broker and firm did a tremendous job of reducing this client's losses and premiums.  So good in fact, that the premium reduced from $550,000 to $300,000.  The fee on the renewal was $50,000 and the client was asking for a reduction.

Here was the problem our intrepid Consultative Broker faced.  He could either lower his fee and therefore not get fully compensated for the firm's efforts.  Or, he could present the client with a complete ValueReport based upon the calculations of our Major Account Development System.  He chose to present the ValueReport prepared by MADs.

So, what happened?  The client fully accepted the $50,000 fee based upon the evidence and proof of the ROI the broker had provided the client.  It approached seven figures over the course of the past 3 years.  Not only that, but the client acknowledged it would be fruitless to entertain any other broker proposals.

So, it is time for you and your firm to get with it.  ROI-based selling is the only way that you can stay in the game and compete for profits.  Remember commissions paid by carriers and under-priced fees should have no correlation to your income.  Hey, we have a vested interest in this.  Our goal is to help firms like yours to prosper and grow, no matter what.

If you keep reading, we will keep writing.

- Rob Ekern

The Truths of TCOR

Total Cost of Risk is one of the most misunderstood methodologies inside the insurance brokerage and risk management community. This observation is based upon over 35 years of experience as both a successful working broker and brokerage consultant. In fact, I was there when TCOR was first conceived. (Unlike Al Gore who did not invent the internet!)

Total Cost of Risk is one of the most misunderstood methodologies inside the insurance brokerage and risk management community. This observation is based upon over 35 years of experience as both a successful working broker and brokerage consultant. In fact, I was there when TCOR was first conceived. (Unlike Al Gore who did not invent the internet!)

By being there, I mean being in the industry as a working broker when TCOR was first introduced by Risk Managers. Why did they create it? It allowed them to have some deeper discussion with their bosses and financial management of their respective firms. Now, known as the C-Suite.

Since then, Total Cost of Risk has stood the test of time. The acronym TCOR is well known and established. As many of you know, our firm has built its reputation on helping successful brokerage firms create a quantifiable value proposition for large clients, based upon developing a TCOR business model.

Over the past 15 years, since the inception of Consultative Brokerage™ the TCOR delivery system; we have been fortunate to work with many of the top brokerage firms in North America. In that capacity, we have run the gambit of firms, producers and buyers who are all espousing their version of TCOR.

In many cases, each TCOR advocate shows their various adaptation of Total Cost of Risk and claims it to be the Holy Grail of TCOR. So, let’s separate the wheat from the chaff regarding the truth of TCOR.

  1. TCOR is made up of 4 distinctive parts. They are Risk Financing Costs, Loss Costs (Direct and Indirect), Administrative Costs and Taxes/Fees. A TCOR calculation that does not include all of these is not Total Cost of Risk. In many cases, they are not provided because the broker is not in a position to capture and demonstrate each section. Therefore, they rely upon simply converting the insurance costs. Or, in many cases, they make up new words and lump them under the banner of Value Added Services. Without being able to demonstrate the Value!

  2. Total Cost of Risk is not an enthralling topic. Yeah, I know, this sounds like blasphemy from the guy who is credited for bringing TCOR to upper middle market brokers and clients. But, ask yourself this question; “When was the last time you witnessed a group of C-Suite executives sitting around a table and swapping tales of their TCOR accomplishments?” What makes it an enthralling topic is the outcome it provides clients as regards profitability, productivity, competitiveness, human capital expense and owners equity impact. This brings up the next point.

  3. Total Cost of Risk impact is the only way a broker has to actually create a Value Proposition. The Value Proposition is created by the impact of resources and client projects as they relate to demonstrable, evidence based, quantifiable cost reduction to clients. Everything else simply revolves around the marketing and placement of the insurance products. Here is a little secret: Many of the brokerage firms all represent the same markets and products . . .

  4. Total Cost of Risk leads clients to REAL Metrics. Now, stay tuned for an upcoming briefing on this subject alone. But for today it is enough to know this. The term metrics and analytics are becoming a huge buzzword in our industry. In most cases, when these metrics are evaluated, you will find them to be simply variations of comparing prices of insurance carriers and risk financing placements. These pricing comparisons and placement and Metrics are very narrow and simply show the buyer a product comparison. Of course we all know that the product is only 20% of the buyers cost structure!

Consultative Brokerage™ was born 15 years ago. The Consultative Brokerage Methodology is based upon the development and delivery of Total Cost of Risk by brokers like you who are striving to make a quantifiable impact for your clients. During the course of that time, C. R. & Company has worked with successful brokerage firms who control over $3 Billion in revenues and fees.

By the way, if you intend to be in the agency/brokerage business over the next decade, it would be best to learn it now. The ship is sailing and the “me too” TCOR players will begin to fall of the vine.

But don’t worry, if you feel like you might be beginning to fall . . . we are here to help catch you!

-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!

Ready to learn more about Consultative Brokerage Sales Training? Visit the Consultative Brokerage Academy.

To learn more about C.R. Ekern & Company, please visit our website

Paul's Death or Real Truths of Indirect Loss Costs

I can tell you for certain, that very large organizations have a very good handle on what their indirect loss costs are inside their firms. These more sophisticated business entities have gone so far as to price these “real” costs inside of their expense loads. But, just because you may be dealing with a much smaller firm, does that make the costs any less real?

Some of you, who have a little grey hair, will remember the very first Urban Legend: the rumored death of Paul McCartney.  Those of you who have not heard about this should ask your Baby Booming Parents!

Simply put, there was a rumor that started in college campuses and spread around the world in the days before the internet (1969 to be exact). The rumor claimed Paul McCartney had died and that the Beatles were playing a hoax on the rest of us.  So, many of us who were college students at the time, spent literally dozens or in some cases hundreds of hours investigating this disturbing report concerning Paul. We played records (yeah records) backwards listening for the clues, we interpreted truths from album covers (yeah albums) and read everything we could find on the subject.  Frankly, if we had spent that time studying, a whole generation might have become the doctors our parents always wanted!

We believed Paul was dead.  Many of us spent significant amount of time and energy in order to prove this “truth.”  No one had to convince us, we all knew it to be a truth.

You probably know how that one ended (think, Sir Paul).

Why is it then, that in today’s business world, we have so much trouble in believing and communicating to clients the “truth” of Indirect Loss Costs?  Why do so many brokers resist this conversation or have no confidence in the discussion? 

Any of you who represent clients from the Baby Boomer generation are probably speaking with someone who believed in the death of Paul (or know someone who did). If they believed in the death of Paul, chances are they are capable of grasping a “Factual Truth” regarding the impact of indirect loss costs and their quantifiable expenses.

I can tell you for certain, that very large organizations have a very good handle on what their indirect loss costs are inside their firms.  These more sophisticated business entities have gone so far as to price these “real” costs inside of their expense loads.  But, just because you may be dealing with a much smaller firm, does that make the costs any less real?

When speaking about indirect loss costs, many brokers exclaim, “Yes I do believe that indirect loss costs are real!”  Then in the next sentence they state their real problem.  “Where do I go to find out what that exact number is?”  Or, “What source do I use to prove this to my client or prospect?”  At that point the indirect loss cost discussion loses steam because they move off into the deep weeds.

Let’s get to the heart of the matter.

  1. In order to actually demonstrate a value proposition, it is critical that clients acknowledge the impact of Indirect Loss Costs.  Much of your value is the reduction of these costs through application of resources.
  2. The source material on indirect loss costs is obsolete.  Yeah, that’s right.  The original material that many use was developed in 1926 by a fellow named Heinrich. All other studies are simply variations of the same material.  By the way, the OSHA statistics many use are derived from a study done at Stanford by college students in 1981.

So, if demonstrating the impact of indirect loss costs are critical and the data is obsolete; how does a Consultative Broker™ prove the FACTS?

  1. They do not try and sell the client/prospect on the concept of Indirect Loss Costs.  They simply walk them through the absorbed expenses or lost revenue of a recent loss or losses, having the client or prospect re-experience the facts of these costs.  That is a fact to them.
  2. They understand that the client perception is the client reality.  Just as some believed that Paul was dead, others believe their own experiences. That is real to them!

Now here is the very important piece that Consultative Brokers™ know and practice.  Costs by themselves have no meaning.  They must be attached to an outcome either pro or con.  The outcome that Indirect Loss Costs and TCOR are attached to is the concept of Business Risk.  When you have that discussion with a prospect or client, remember what they want.  They focus on profits, productivity, competitiveness and human capital expense.

So the next time you determine to discuss the reality of indirect loss costs, ask yourself this:  if an entire generation could believe a foolish rumor about Paul McCartney’s death, shouldn't today’s generation of business people accept the “real” facts of indirect loss costs?  (You don’t even have to play an album backwards to get to the truth!).

P.S. The rumor of Paul’s demise was finally put to rest by a cover story in Life Magazine in November of 1969.

- 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!

Ready to learn more about Consultative Brokerage Sales Training? Visit the Consultative Brokerage Academy.   

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