Boosting growth and profitability is a goal for all U.S. insurance agents and brokers, but until recently that has been easier to assert than to achieve consistently. Booking organic growth is difficult, even for firms with strong sales cultures, and competition for attractive merger and acquisition targets is fierce. Many firms may wonder, is there another option to build and sustain growth and profitability? There is.
U.S. insurance intermediaries have an innovative, alternative route to sustainable growth, and they needn’t abandon M&A and organic growth strategies to follow it. That alternate pathway runs parallel to and can augment traditional growth activities. It is placement optimization.
Optimizing placement is the key to maximizing revenue opportunities in a broker’s book of business. Simply, placement optimization matches a client’s coverage requirements with suitable insurers that have an appetite for the client’s risks, in ways that increase the firm’s compensation.
Don’t agents and brokers already do that? In their core task of placing business, most agents and brokers are unable to observe how many opportunities they are missing to maximize their firm’s commissions and contingent compensation, while also meeting clients’ needs.
Why agents and brokers miss these growth opportunities comes down to a limited field of vision into their insurance company relationships. Many regional and national brokers have dozens or even hundreds of carrier relationships. As brokers add carriers to expand market access, the process of managing these relationships becomes more difficult and less efficient.
Technology already in place is not solving this challenge. Agency management systems are adept at organizing operational workflows, tracking customer accounts and facilitating connections with insurers, but they are ill-suited to making strategic decisions necessary to optimize placements. Agency management applications and customer relationship management software, effective as they are in their core functions, do not enable insurance producers to see growth opportunities across entire books of business.
Advantages of placement optimization
Insurance brokers all seek profitable growth by expanding the spread between revenue and expenses. Revenue growth is easier to achieve in the currently hard market, but that has a downside too: brokers must prepare clients for higher rates and tighter terms and conditions at renewal. In some lines, carrier appetites are changing, resulting in less capacity, higher retentions, and more exclusions.
In this landscape, brokers face several challenges in meeting their business objectives:
Client retention. Retaining clients is a top priority for brokers, as it’s easier and less expensive than acquiring new ones.
Organic growth. Brokers also desire organic growth, whether that occurs by selling more services to existing clients or getting “new new business.”
Productivity. Managing existing client relationships and developing new ones is a full-time job for producers, and brokers want to keep productivity high.
Customer experience. Heightened service expectations from customers require brokers to deliver a consistent experience to their clients. Carriers realize this, too, as more of them seek efficiencies and improvements in their own customer experience. More insurers are giving digital access and automation tools to brokers to achieve this.
Placement optimization is an innovation that allows brokers to address all the above challenges. Better serving clients’ coverage needs improves retention and paves the way for growth. A placement optimization platform:
- Gives brokers the ability to visualize their client and carrier relationships, to shape placement strategies to achieve revenue goals.
- Empowers brokers to spot cross-sell opportunities with new and existing clients, boosting organic growth and lucrative partnerships with insurers.
- Enhances service capabilities and improves client satisfaction through more efficient placements, matching carriers’ risk appetites with customer needs.
- Integrates easily with existing systems. Brokers already have technology investments and workflows that fit those systems. A web-based placement optimization platform complements existing systems and processes, with no need for costly workarounds or retooling to implement and integrate.
Four pillars support placement optimization. These pillars enable brokers to clearly see the opportunities in their books and take advantage of them:
Explore: Inform brokers of opportunities within their account portfolio.
Simulate: Construct what-if scenarios using brokers’ data to understand the financial impact of placement decisions.
Act: Drive producers to follow placement strategies.
Monitor: Track how the firm is executing against its chosen strategy.
When brokers and insurers collaborate more closely to serve policyholders, all parties in the insurance relationship win. Placement optimization is an innovation that serves the needs of brokers, carriers and policyholders.
Topics Profit Loss Agencies InsurTech
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