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Coordination of Coverage
Analyzing the scope or nature of coverage under the various Liability policies of an insured in order to close up any gaps or eliminate overlaps.
Insurance Industry News from ProgramBusiness.comThe Follies of Cross-Selling
The Follies of Cross-Selling By Chris Burand
We all know how valuable cross-selling is to agencies. In fact, virtually every month I read in at least one trade publication about its critical value. Numbers I have read suggest profit margins on the second sale are two to three times higher than the first sale and retention is 60% higher. But the average number of policies per customer has not changed in independent agencies in twenty years. How can something so important, something preached constantly for year upon year, be so elusive? It is like we all know how to become millionaires but we just ignore the facts. The truth is cross-selling is a complicated process and it fails for many logical reasons.
One reason is too many producers sell price. When a salesperson sells price, they build fear into their own psyche. They fear someone else will offer a better price. Add to this the fact that, to most people, the loss of a dollar is psychologically twice as valuable as the gain of a dollar. Therefore, because so many producers sell price, they are constantly worried they will lose clients (dollars) to other agencies and because they value these potentially lost dollars twice as much as any potential gains, they spend all their time worrying about how not to lose sales rather than how to make more sales.
The fear of losing dollars counteracts cross-selling because once a producer makes one sale, they do not want any contact with a client that might cost them that sale. This includes trying to sell additional products because the client might perceive the producer as being greedy by trying to sell them more insurance than they need. I think this is a key reason so very few producers offer EPL insurance even though virtually every commercial client needs it and from an E&O perspective, producers should offer it to every commercial client. However, it is a relatively new product most clients have probably never been offered, so offering it might cast suspicion on the producer. Consequently, the producer does not offer it. Better to be happy with half a loaf than no bread at all and so goes an excellent cross-sell opportunity.
Another reason producers do not cross-sell is that the more policies a client purchases, the more likely clients are to have something go wrong. When I worked for an insurance company, many commercial marketing reps would not even mention the company=s personal lines products to their agents for this very reason. Our personal lines division did not have high error rates but a personal lines policy that went bad for an important commercial account (i.e. the business owner=s son gets a D.U.I. and the business owner does not understand why the company is canceling his son=s auto insurance) could jeopardize the bigger commercial account. K.I.S.S. was the philosophy. Not a bad philosophy either because one division can cost another division a sale even more easily than one division can cross-sell another division.
Therefore a key criteria to successful cross-selling is that the first division (if divisions or departments are involved) must have confidence that the second division will provide great service and products and reasonable prices. Because most independent agencies focus either on commercial or personal (smaller agencies tend to focus on personal lines while larger agencies tend to focus on commercial and a very few have producers that focus on health and life), their energy and efforts are focused on one or the other. The secondary product/division gets the scraps. For example, if a client already has a commercial policy and the agency is trying to sell them a health policy, the commercial producer must have complete confidence in the health department, which, as mentioned, is often staffed by lesser quality people. Similarly, when different departments are not involved, the producer may kClick for the whole story...