In today’s insurance world, insurance agencies are growing. They are not growing in the old-fashioned way, however. Today they are growing by buying other agencies.
There are insurance agencies everywhere you look these days. Some are exclusive or can only write with one company/carrier, like State Farm and Allstate.
Then you have independent agents that can write with a large variety of companies/carriers. In the independent agent world, it has become popular to buy out agencies to grow your business. Buying an insurance agency takes strategy.
You have to first determine if the agency is a good purchase and then do all of the leg work to actually create contracts and make agreements.
Once all of that is complete however what happens to the clientele of the agency that was purchased?
Agencies have to be very careful to make sure that they have:
- Great Relationships with Clients (prior to being purchased)
- A Clear Plan with Staff about what will and will not be communicated with the clientele
- Clear expectations of the transition and how it will affect everyone involved
Oftentimes agencies think of the staff but forget about the client. You don’t want your client receiving an email or snail mail with the name of a different agent or insurance company name on it.
That will cause misunderstanding, miscommunications, disconnects, and may even spark shopping.
What 10 things MUST you have before purchasing an insurance agency? Today we will focus on 2 of these in reference to avoiding client deflection when Buying An Existing Insurance Agency if you already own one currently
- Financial Preparedness– Buying An Existing Insurance Agency typically involves a significant financial commitment. You should have sufficient funds to cover the purchase price, operating expenses, potential marketing costs, and any unforeseen circumstances that may arise during the initial stages of ownership.
- Business Plan– Develop a comprehensive business plan outlining your goals, strategies, target market, competitive analysis, and financial projections. A well-thought-out plan will help you stay focused, identify potential challenges, and demonstrate your preparedness to lenders or investors.
- Strong Industry Network– Having a robust network within the insurance industry can be highly advantageous. Connections with carriers, agents, and other professionals can provide valuable insights, potential partnership opportunities, and referrals.
- Agency Valuation–Obtain a proper valuation of the insurance agency you intend to purchase when Buying An Existing Insurance Agency. Understanding the agency’s current and potential value will help you negotiate a fair price and evaluate the return on your investment.
- Due Diligence– Conduct thorough due diligence when Buying An Existing Insurance Agency. This process involves analyzing the agency’s financial records, customer base, policies in force, potential liabilities, and any legal issues.
- Marketing and Growth Strategies–Develop a plan to attract new customers and retain existing ones. A well-defined marketing and growth strategy will be essential for the continued success of the agency.
- Transition Plan– Outline a detailed plan for the transition of ownership. This plan should address how you will communicate the change to customers, retain key staff, and smoothly integrate your management style and systems.
Stability is the name of the game. A stable client base ensures a smooth transition and long-term success for the newly acquired agency.
If the agency being purchased has done business correctly they will have a large clientele base and relationships with those clients.
This relationship can and will make the transition much smoother when Buying An Existing Insurance Agency. I have worked with several that bought agencies, but then also turned around and were purchased by other agents or large private equity firms.
One agency did not inform their clients in any way and “reacted” to the situation when clients got letters with a different agency name.
The others communicated with their clients beforehand. Which one do you think went smoother? This all truly depends on the different clientele and the demographic you’re in.
That is why you have to have a strategy that everyone follows on what you will do when Buying An Existing Insurance Agency.
Conducting Due Diligence
Before Buying An Existing Insurance Agency you want to do your due diligence and make sure the agency has good finances and a great reputation.
You want to understand the demographics and their performance. These key elements will help you determine the steps you need to take in communicating the transition. There may be an agency that is extremely local to their community.
They are active and well-known in the community. If this is the case you want to make sure that the transition is communicated quickly and that the agent and staff members announce the transition in a positive manner.
They need to tell the clients before the clients find out.
What is the retention rates of the agency? We know you love a challenge but pick your battles wisely. You would not want to purchase an agency that is failing.
There are some struggles you can turn around, but be open and mindful of challenges that may be impossible to face. What patterns or issues do you see in the agency that you know how to fix?
Set a goal and a plan on how and when they will be fixed and stick to those plans. In purchasing an agency you are not only exchanging finances, but you are also taking on employees/staff, clients, and any headaches that the agency may already have.
How do the existing clients of that agency like to be communicated to? Is there clear constant communication? How often does the agency call them? How long has it been since they reached out to the client?
These are all very important questions to ask, so you know what the future holds and what tasks will need to happen after the purchase.
All agencies are different and will have different strengths and weaknesses. You need to be prepared to adjust and mold the plan of how you will take on the challenge and how you will communicate it to staff and clients.
Building a Transition Strategy When Buying An Existing Insurance Agency
What are the client relationships the agency that is being purchased have? Is it a small, local suburban town? Is it a large city?
All of these factors will need to be taken into account. Different demographics will change the scenery and view of the client relationships. The primary agent/owner of a small local agency in the suburbs will need to make the announcement to their clients directly.
Whether that be in a letter or in a local meeting, he/she will need to do it in person. If it is a little bit bigger agency closer to town the staff may need to send emails or letters.
I have seen too many times that agencies are purchased and don’t even bother to tell their clients. I find this to be a lack of communication and respect for a client.
They are paying you to handle their insurance. They are not paying someone else. The least you can do is let them know that things are changing and that you still want to handle their insurance and that you will or will not still be there for them.
Obviously, if you will not be there you are going to have to understand some clients will leave. The purchasing agent/company needs to figure out how many clients may leave, so knowing the type of relationship the agency has with their clients is a must.
You also need to think “If I were a client, how would I like to receive this information?” What would their expectations be?
Work collaboratively with the existing staff to ensure a smooth handover process when Buying An Existing Insurance Agency
Each and every time this will be different, sometimes it is easy, and sometimes it is not. The existing staff may be your ONLY connection to your new clients, so it is best to keep them if you can.
Is your staff aware and on board? For some reason, agency owners tend to hide that they are planning on selling.
They sneak around. If you think your staff hasn’t figured it out, you are wrong. By the time the transaction happens, most staff members have already suspected that something is happening.
Engaging with agency staff and working collaboratively with the existing staff to ensure a smooth handover process is very important.
You may have new processes and procedures or technology to implement. You need the existing staff of both your agency and the agency you are purchasing to come together and collaborate.
For the agencies to run smoothly and efficiently you must have all staff on the same page. You need to set expectations and follow up that those expectations are being followed.
No matter how hard it may be, anyone not following these procedures will need to be warned and released if they cannot follow procedures. But you also need to do the opposite, if you have staff that are very cooperative and helpful and working together be sure to praise them, find incentives, and celebrate small wins.
Communication, communication, communication!!!!!!!!!!!!!!
You can’t ever have enough of it unless you talk too much and it isn’t about work. Develop a communication plan when Buying An Existing Insurance Agency.
Create a strategy that will keep your clients informed throughout the transition. This will help keep everyone informed and on the same team.
When you don’t communicate or stop communicating you may lose clients. Even a simple newsletter that is emailed and posted on social media may help. Keep it simple, but keep communicating.
Building Trust and Credibility
Address clients by their names and demonstrate a genuine interest in their needs. This has changed so much at some agencies.
We have found that some agencies sell a policy and never communicate with the customer again. Studies show that customers buy with someone who will build a relationship with them.
So building trust using simple tactics like using their name and knowing details about them can go a long way.
Highlight the agency’s positive track record and showcase success stories to build trust. Leverage what the agency has currently to increase and make it better.
If there was something they didn’t do well, change and improve it. Take advantage of this moment to make things better. Focus and use their strengths as assets with clients.
When it comes to your team, showcase them. Introduce them, give clients their background, and allow customers to get to know them.
You’d be surprised how much rapport you can build with customers through your story, your story may build a connection to yours and you may just get more customers for life. Try it!
3 Minute Video: Building Trust When You Buy An Insurance Agency
Retaining Clientele during the Transition
I can’t tell you how many times a client called after an agency was purchased and was concerned their coverage would change or be canceled.
They don’t know what happens when an agency is bought out. Just like using insurance lingo, we can’t assume anyone knows what we are talking about, we have to make the explanation simple and easy to understand.
You need to reassure them that nothing about the policy will change unless they want it to. You are only moving the policy, that is it. The policy will stay the same. If you don’t provide this simple, fundamental information to them, they may leave.
We cannot always offer bonuses and discounts in our industry. If possible offer them loyalty rewards for staying with the agency. You may want to tier your clients (existing and acquired) reach out to the top tiers and congratulate them on their status.
Little things like this go a long way. It builds trust and helps with credibility. It may make them feel more at ease with their insurance coverage and the fact that you are taking care of them.
Be prepared to address client concerns promptly and transparently after Buying An Existing Insurance Agency. You don’t want to be reacting to clients.
Reacting means uncontrolled, saying the first thing that comes to mind, etc. You want to respond and be in control. Have role plays with your staff about different questions customers may have.
Build a FAQ for your clients, and post it in your newsletter and on social media. It is always better to get ahead of these things instead of reacting in an uncontrolled manner. If staff already knows what to say it will help keep the client at ease.
Enhancing Customer Experience
Implement efficient communication channels, responsive support, and quick claim handling. Introducing new services and products, like technology and handling of insurance events can set you apart from the competition.
This will attract customers and retain others. Regularly solicit client feedback to identify areas for improvement and demonstrate your commitment to their satisfaction.
Ask for reviews and referrals. This will help you gauge how well you are doing and help the agency reflect on how to do better.
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Conclusion
It is important that we build a process for the transition when Buying An Existing Insurance Agency. If you try and wing it, you will just run into problems!
Have a plan of attack for both staff and customers. You want to retain as many customers as possible while demonstrating how the “merger” of the agency is beneficial for everyone involved.
Whether that be better processes, better technology, allowing someone who has worked hard to retire, but shining a light on all the benefits. The success of this transition hinges on whether or not you can maintain a loyal client base of both your current agency and the one(s) you acquire.
Nurturing strong client relationships will lead to long-term growth and success. Happy agency buying and/or selling, but have a transition plan in place!
