Summer 2006 / No. 68
Accounts with superior
persistency are everyone’s goal, but results still vary
dramatically from case to case. And while hard persistency
data and analyses are hard to come by, our experience suggests
that there are four keys to achieving great performance. Persistent
(and hopefully profitable) accounts typically pass four tests.
Select Correctly
The process starts with account
approval and underwriting. Two areas in which carriers have recently
been drifting into troubled water involve broker underwriting
and takeover accounts.
Carriers need to
have clear and open discussions with brokers about business
quality and then set unambiguous rewards and penalties for
case submission quality. A broker who occasionally brings a
substandard case for consideration—and clearly identifies
it as such—is certainly welcome. A broker who routinely
brings bad cases, or tries to “sneak” the occasional
case through, is a liability. As a carrier, you need to examine
business by broker blocks, looking carefully at the profitability
of each broker. And unprofitable brokers need to be put on
a short leash (i.e., improve now or be set free). While business
can change and accounts evolve, these leopards rarely change
their spots.
Takeover business
is becoming much more common as group products and employee
benefit brokers grab larger shares of the business. Carriers
need to develop takeover guidelines and procedures, both of
which are different from, and tailored to, takeover business.
This type of business requires its own rules by account size,
industry, etc., starting from the premise that it is a different
business line from “virgin” case business. Our
July 2006 report, Takeover Business in the Worksite/Voluntary
Market, outlines current practices and rules used by carriers
in the industry.
Enroll Correctly
Experienced people using tested
tools have typically enrolled persistent business. The pre-enrollment
education and marketing campaign of quality enrollers is usually
standardized and well thought out, and the results are predictable
in terms of participation as well as ultimate profitability.
Conversely, neophytes, trainees, sloppy or poorly structured
processes, enrollment experiments, and last-minute enrollments
are all predictors of future persistency problems.
Sell Correctly
As explained in a companion
article in this issue, we expect improved persistency when people
buy the “right” coverage
in the appropriate amount. Good participation often (although
not always) suggests healthy persistency. One exception is “hard
selling,” which can boost participation while damaging
ultimate persistency.
The “right”
type of coverage refers to both product selection and product
quality. In other words, the best sales process takes the
individual's needs and priorities into account, matching
them with a superior product solution (quality and quantity).
Service Correctly
Finally, both the home office
and field need to provide appropriate service levels, from billing
and claims to problem solving and reenrollment.
Accounts that have
persistency problems have probably failed one or more of these
tests. Stated another way, these four tests provide carriers
with a framework for examining persistency and developing programs
and policies to improve results. The starting point for such
an effort is a complete review of lapse experience as well
as customer-contact policies and procedures. The experience
helps point to “soft” or malfunctioning areas among
the tests, while the procedural review identifies areas for
improvement.
A thorough persistency
procedural review answers the question, “Is there any
way we can practically exercise more control over the results
of each of these tests?” The selection and servicing
tests are obvious focal points, and carriers need to be confident
of their procedures in these areas. But there is a growing
belief that the enrollment and sales tests may hold the keys
to ultimate profitability. So how can carriers control the
enrollment and sales process so as to steer cases towards better
persistency? What are the practices that support improving
results and, conversely, which practices flash a danger sign?
And ultimately, how do we structure our program to encourage
the former and discourage the latter? These issues will be
examined in the next issue of Outside Input.
For more information
about Eastbridge’s persistency audit, contact us at
(860) 676-9633. |
