How to Create a Valuable Book of Business to Sell When You Retire

As continuous service providers, insurance agents have the unique opportunity to come into a large payout at the end of their career. After years of hard work, when an agent retires they are able to sell their book of business for anywhere from $100,000 to millions.

You can find many articles with a quick Google search about how the valuation of a book of business is calculated. This article won’t focus on how to calculate the value, but how to generate value over your career. If you want to sell your book of business for a large payout when you retire, this is how to do it.

Focus on the 3 Keys to Agency Success

If you haven’t read our article about the 3 keys to agency success, I’ll provide a summary for you here. There are 3 factors that should be focused on in your agency to create value over time.

  • Retention – Think of your book of business as a bucket you are trying to fill up with water. If 20% of your water leaks out the bottom of the bucket each year, you’ll have to put in a lot more water to get the bucket to fill up. When you can keep your existing customers in the bucket, your sales efforts make the biggest impact. Depending on the size of your agency, a 5% increase in customer retention can DOUBLE profits over a 5-year span for this reason.

    It costs 7-9 times more to attract a new customer than to retain an existing customer. There is no networking, marketing, or prospecting involved to keep your existing customers. Just keep them happy and you’ll reap recurring revenue.

    What should you actually do to improve retention? Here are a couple ideas.
      1. Get to know your customers. Send a card around the holidays and give them a birthday call. Go to their place of work when you require services that they can provide. People are much more willing to stay with an insurance agent (even when premiums rise) that they have a personal relationship with.
      2. Proactively review your clients’ policies. Give them a call when there is a discount they are eligible for or when there is a gap in their coverage that needs to be resolved. Knowing that you are doing your job gives people peace of mind.
      3. Sell the right policies. Many agents buy internet leads to look for a quick fix. These customers are price driven and are willing to move on to the next agent with low prices as soon as premiums rise. Sell to family and friends. Ask for referrals. Multiline your customers (monolined customers are much more likely to leave you). Selling to the right customers helps them stick around in the long run.
  • Referrals – Referrals are the best new policies to sell. Because you begin your relationship with an element of trust, referred customers generate an average of 5 TIMES more revenue over the first-year than a non-referred customer.

    Referred customers have high retention rates at 92% compared with 67% for all other marketing sources.

    Implement a referral program. It doesn’t matter much what incentive you offer, but make sure you have a formal program in place that you can tell all your clients about. Give away gift cards for each referral, do a grand prize raffle, etc. Make your referral program known.
  • Cross-Sell to Existing ClientsCross-sold leads have a n 85% close rate compared to just 5% for internet leads. There is also a direct correlation between retention rates and the number of policies a customer holds. A customer with 1 policy has a 45% chance of cancelling. A customer with 3 policies has a 21% chance of cancelling. A customer with 5 or more policies has an 11% chance of cancelling.

    Despite these benefits, the average insurance agency has an average of 1.4 policies per household. Go through your book of business and make a list of customers who might be prime for a new policy. Here are some examples to get you started:
    1. Any client with only 1 policy
    2. Married clients without life insurance
    3. High-net-worth clients who might be likely to make a large purchase like a pool or upgrade their home

Invite these clients in for a policy review meeting to make sure they are satisfied with where they are at.

Meet with All Clients Annually

Customer insurance reviews are one of the very best ways to build long-term value for your agency. They are not a quick fix, but build a valuable book of business. Meet with each client in your book of business each year and review all possible areas of insurance coverage. Don’t simply go over the policies they have with you, review their auto insurance, life insurance, home insurance, personal insurance, business insurance, and any other policies you can think of regardless of who their carrier is.

As you cover each policy, explain its function and give an example of when it would be needed. Review the coverage your client has and confirm that they are satisfied with where they are at. Doing this will naturally uncover areas where you can sell new policies. This process also allows you to get to know your clients and shows that you are proactively doing your job, leading to higher retention rates.

After 20 or 30 years of annual policy reviews, imagine the different attitude and relationship your book of business will have. Check out this article for specific instructions on conducting annual review meetings.

Utilize Your Office Staff

As your agency grows you will no longer be able to service your entire book of business on your own. Utilize your staff members to shoulder some of the load. Teach them the purpose of policy reviews. Have them help send out customer needs assessments, conduct customer meetings, and send follow-up material.

By focusing on these principles year after year, your book of business will become reliable and valuable. When you retire, you’ll be ready for a big pay day.