The All Aboard Newsletter

Today we’re going to do a quick recap of our November production, and then shift gears as we talk about the direction of the agency in 2024.

Lets take a ride!

September Results + Breakdown

605 Items Sold

$590,209 of Written Premium

$1,102,653 of Annualized Premium

Well, 605 items wasn’t the result we were hoping for. At this point, as many LSPs as we have, we’re targeting $750,000 of written premium and 750-800 items.

So when we fall about 20% short of that, its extra painful.

To put that shortfall into context, that $160,000 of written premium is worth about $43,200 in revenue for the month of December. And in a year where the agency has been running at break-even (or a loss) each month, that shortfall hurts a lot.

I can’t complain though. We know that we’ve been very fortunate this year. Georgia has been on fire with some of the top producers coming in the country from our state.

The rate increases and RMP changes that we’re dealing with right now are much needed for the long-term outlook in GA. Its just not very fun to deal with them for the 3-6 months.

We do have our challenges inside the agency too though. Quotes have slowed dramatically.

Whether its because we’re down an outbound caller or two from our SDR team, the holidays + time off, or general fatigue from a hard charging (and record setting year) - We know we need to get back on track.

If you want to inspire fear and anxiety in me, its quite easy.

Just show me a downward pointing trend line of our quotes.

Slowing quotes presents a huge problem for us. Here is why: our sales cycle is around 20 days, which means that a slow week or two of quotes in late November, are going to result in a slow middle of December.

Then, we all know what happens late in late December. See how thats a big problem?

Then, to make things even more bleak - Close is still down. We finished November at 15% item close, and we’re currently sitting at 16% one-third of the way through December.

Reminder: Goal = 20%

We’re working hard to find the “soft spots” in the market. But the challenge is that every zip code, attribute, or place we look lacks a meaningful sample size (300+). So, we can make cuts to our marketing in areas that “look” like they’re bad, but we run the risk of cutting out good areas where we are just currently getting unlucky.

Around 35-40% of all HH we’re quoting are ineligible on either Home or Auto lines. And while we could try to write it monoline, the guidelines often call for a required bundle to write each of the auto or the home.

That challenge will impact part of our 2024 strategy, which we’ll get into later.

We know at this point compared to Summer 2023, the target market for Allstate is a lot smaller than it used to be here in GA.

Last year we increased our marketing spend by roughly 40% post rates to keep momentum. This year, we’re not going to do that. We’re not going to brute force our way into writing more. Its just not worth the extra money required to do so.

At some point, its just basic math. The economics of the agency need to work, and as you can see below, CPA is up drastically. Increasing our spend might increase quotes, it certainly won’t increase close.

We’re not going to pour gasoline on the fire until we feel confident we can close the business.

In January, we were still reeling from the 25% average auto rate we took in late September 2022. We spent more on marketing to keep the pace, keep up quotes, and keep numbers high.

Cost per item swelled. You can see again, in August, September, and October our spend once again started pushing towards $50,000 per month. Cost per item increase into the high $70s.

We slowed down in November, and you see a $95 cost per item, which should drop for another week or two, but probably land in the $80 range.

Having a $20 to $25 increase in cost per item across 600 items can reach almost $14k in additional spend to get what we need.

So we aim to answer the question:

“How do we continue growing, but in a more profitable way”

And the way to do that is to:

• Slow Down

• Diversify Revenue Streams

So in closing, with both quotes and close rate down - We need to do some soul searching.

Who are we going to be in the last few weeks of 2023, and who are we going to be in 2024?

How do we work smarter within the current market environment that we have?

How do we think about what other people might be ignoring?

How do we continue to grow our premiums at a similar rate as 2024, but with a bigger % on lines other than home and auto?

We need to get our quotes back on track, fix close, and then we will work to scale gain.

Slower, more profitable growth

Profit is a relatively simple concept to grasp. How much money do you have left over in the business after paying all the expenses. Easy right?

But what’s not so easy? Finding the right balance between focusing on profit, or focusing on growth.

Many people believe that every business should have both when in reality, these two goals are often trade-offs. They’re in direct competition with each other.

Companies that are growing and scaling quickly often lose a ton of money, burning cash at an insane rate. They’re able to do this because they secure funding, usually through private equity or venture capitalist investors.

Then, after they grow and grow and grow, they start to “mature.” They slow growth, and get profitable. Companies do this because they need to, not because they want to. The reason - They’re out of cash OR their investors (a.k.a you) want a return.

Growth is expensive. Most people lose money every time they make a sale. Then, over time, through our residual incomes, we eventually go “profitable” on that household.

P.S: I’ve worked with a lot of agents who think they’re profitable on each sale, only to find out they weren’t accountable for ALL the costs. Make sure you account for everything!

So, to make it simple, think about it like this:

• NB often drives “growth.”

• Retention drives “profit.”

But, the funny thing is that retention also helps drive growth. The less people leave, the more each new policy helps you grow.

So if retention helps both growth and profit, why do we ignore it so much?

I think there are a few reasons such as:

• The companies we represent talk “growth, growth, growth”

• There are a lot of commonly held beliefs about retention that are wrong

• We don’t want to deal with it

We’re told a lot of things.

We are told we CAN impact retention a ton if we do reviews with clients, sell them life insurance, and do all number of things. We’re also told that we CAN’T impact retention at all because retention is always dependent on rate environment.

The truth likely lies somewhere in the middle. I believe we CAN impact retention slightly with our behaviors in the agency, but its more about not messing it up, than trying to get people excited about their policy.

Who knows, maybe I’m wrong. Maybe we can crush retention by getting people excited. - If you think I am in fact wrong, please email me and lets talk strategy!

Retention is going to be a huge area of focus for us in 2024. Not because we have a goal tied to a specific retention number itself, but rather because it factors into Customer Lifetime Value (LTV).

The higher your retention, the longer your customers stay with you aka the longer their “lifetime.”

By changing our view to Customer Lifetime Value (LTV), we can zoom out and see the entire picture of how we increase profitability.

Increasing LTV per household AND increasing the frequency in which you write high LTV customers is the winning strategy.

Get someone to stay longer? Great, the LTV on that HH just went up!

Got an upsell on coverage or bundled an additional line? Boom, LTV goes up!

Think of each customer you bring into the agency like the seed of a tree. The longer they stay, the taller the tree gets. The higher the HH spend with additional services, products, and coverages, the wider that tree gets.

Your goal is to have a forest of trees, where those trees are both wide AND tall.

Not every customer is created equal. Who would you rather have?

• 1 car + Renters

• 4 Car + Homeowners + PUP

The first option is a short, skinny tree. The second option is a wide, tall tree.

Get the latter, do it at scale, and great things are going to happen.

So to make it simple: To raise LTV, get them to stay longer, pay more, or both.

To find the most strategically advantageous areas to focus on for NB, we decided to run some LTV analysis on all the major products we can offer. To do so, we took our average premium, the retention rate, and measured them all against each other.

The results were pretty surprising. You can see them below:

The breakdown above shows LTV per policy type. For auto policies, we used an assumption of 2.18 items per policy.

Much to my surprise, the top three most valuable items by LTV are three lines that we’ve largely been ignoring.

We’ve dabbled a bit in commercial this year, but after seeing that it has the highest LTV of almost everything else, we’re investing in marketing for commercial auto so we have leads coming in January.

North Light and National General were also two lines that we ignored. Given that they were part of our expanded markets (and we get paid slowly) plus the perception they were a pain to write, we basically said “lets not waste our time.”

And while that is OK when times and rates are good, when 35-40% of the HH you quote have an ineligible line, all of a sudden those companies start to look pretty attractive. We don’t need to market for them, we have the opportunities right there already. We just need to give those prospects the option.

The surprises didn’t stop though. As I was going through the numbers, I decided to ask two questions:

• What type of increase do we need in retention to get 1 additional renewal on Home and Auto?

• What is that worth in real dollars to us in the short-run (next 12 months) and the long-run (customer lifetime).

The answer to the first question was:

• 1.4% Retention lift in auto from 82.39% = 1 Additional Renewal

• 0.8% Retention lift in home from 90.70 = 1 Additional Renewal

So if your retention has dropped this year, you’ve probably felt quite the squeeze on renewals, even with the NB variable compensation on the first auto renewal.

We know we have. For instance, we’ve increased our new business significantly, but our income has been flat. A lot of that has to do with retention dropping several points at the end of last year due to our 25% average rate that we took in Sep. 2022.

Retention dropped from 86% all the way down to 79%, before starting to climb back up to where we sit at 82.39%. We’ll see if that home and auto retention holds with our most recent rate increases. Fingers crossed.

When we’re able to quantify what 1% of retention is worth to our top-line revenue, it gets a lot easier to determine what types of investments (or not) to make in retention strategies.

So as we think about improving retention, the best thing we can do is look at WHY people are leaving us.

As you can see above, we had 325 items terminate last month. However, we noticed when looking at November (and subsequent months), about 40-43% of our terminated items are from the customers who have been with us from 0-6 months.

Thats staggering.

There is no reason we should be losing 120-140 items that we just put on the books within the first 180 days.

The first thing someone mentioned was that “they probably get a rate increase, and then shop.”

So we decided to take a look at WHEN people were leaving in those first 6 months.

The scatter plot showing how many days our terminations stayed with us is below:

First - Look at that sea of red. The red dots indicate a termination that cancelled before the 180 day mark.

The bottom box shows a distribution of how many terminations we had by # of days the policies were in force.

Look at how many day 0!!

Then to check against the assumption about their first renewal, we can see that a majority of these policies are cancelling before day 100.

We can reasonably assume that the issue is not the renewal price, as we’d expect to see those people leaving post day 135 (renewals issue 45 days out).

So this is indicative to me that we have one of two problems:

• We’re making a ton of mistakes at new business that we’re needing to fix/rewrite or losing the policies for some other mistake we’re making.

• The marketing is driving clients that buy insurance, and then lapse it for one reason or another.

To put this into context, if we cut the 0-6 terminations in half, that would be worth roughly $16,222 in revenue “saved” per month for the first renewal alone.

Here is the math:

• Roughly 135 Item Terminations in the 0-6 Bucket

• Assuming 890 Average Premium, that is $120,150 in written premiums.

• If we can stop half of those defections, we save $60,075 in premium.

• At a 27% commission rate, that = $16,222.

Thats almost $200,000 per year.

So, if you’re looking to increase your profit next year (even if you’re going for massive growth), dig into your terminations.

So, with these numbers in mind, the picture should be pretty clear. We’re focusing on slower, more profitable growth.

We’ll be focusing on adding more emphasis on high ROI marketing tactics such as:

• X-date outreach campaigns.

• Driving customer referrals at a higher rate.

• Gathering Occupation for every HH to ask about commercial opportunities

• Calling/Mailing the monoline book (I can share my mailer)

• Using Social Media to get opportunities for the sales team.

• Continuing to create organic content on our website to drive search traffic for exclusive, organic leads.

These are high ROI activities. The challenge, and thing holding us back has always been that they don’t quite scale. They’re either finite in nature (x-dates and monolines) or take a long time.

And even though social media might take a while to get going, it can be a massive lead source for you and your agency. Just make sure if you want to go this route you don’t use the generic stuff your company provides.

Seriously - I see the same posts by 10+ agents every month for all the major companies. If you want to stand out, either make your own content, or pay someone to do it for you.

With effort and consistency, social will yield massive results. I have a friend who does about 300 items a month, almost 40% of his NB has come from him and his team posting on social media. Thats insane!

As for your website, its the same thing! Success takes time, but what if you could get 1,000 visitors to your website a month? Even if 5% of them ask for a quote, thats 50 people that you’re driving to your sales team.

Your website is the only salesperson you have that never sleeps, takes a day off, and never gets sick. Don’t skimp on it!

Experts can help with SEO (Search engine optimization) if its not something you’re interested in or unsure about doing yourself.

Of all these tactics, focusing on bundling will be the quickest to implement and most profitable of the list. Focus on bundling both at the point of sale and with outreach on the monoline book.

And before you say you can’t move the needle on bundling, NONSENSE!

At Year-End 2022, our bundling rate was 59%. As of November, our book is 73% bundled.

You can do it to, here’s how:

We did this by adopting what we called a “3 Line Mentality.” The goal was to find 3 items per HH every time. Its less about getting a specific third line, and more about building the habit of finding additional lines.

Then we made it stick by focusing on three things: Awareness, Skill, Accountability.

We didn’t assume that people knew about everything we could write, in fact we assumed they didn’t know. Thats the only logical explanation for why we did 60 boat quotes in all of 2022 right? So we made them aware of everything we wanted them to bundle, the Rmps, guidelines, and customer fit.

Then we trained them! We did 1 product per week and would share value props, talk-paths, how to quote and more. Our managers rotated teaching those products and even invited some of the team to lead the trainings themselves.

Then, we capped it off with accountability. We told the team that they had to get permission from their manager to bind a monoline policy. And when they do, the manager has to report that monoline to the group. This gives us a chance to ask the LSP:

• Why didn’t you bundle?

• Did you ask about life insurance, or a referral?

If the answer is no, we get them to call the customer back. It sets the tone that monoline is not what we do.

If we MUST write a monoline, we need to get something else at the same time.

All that being said, I still believe that outbound callers + internet leads is the most efficient and profitable growth strategy in 2024.

But, just in case the new FCC ruling massively messes up the lead industry (which I do NOT think it will), having a website with a lead generation form and steady traffic is a great hedge against the regulatory changes.

And as for the FCC ruling on first-party vs third-party consent, I think it will be really good for the lead gen industry, the consumer, and the agent in the long run.

• Note - This is not legal advice, this is my own personal opinion and speculation based on what I know today.

• Consult a TCPA attorney if you’re wanting legal advice or opinions!

So, the sky is not falling. Are things tough? Yep.

Will they continue to be tough? Probably.

But that doesn’t mean there isn’t a path forward. We just gotta look in places we might not have before.

So as my last newsletter of 2023, I hope that you get some value from explaining our approach and direction for 2024.

On another note:

Did you know I do 1:1 consulting with agents?

If you’re looking for some extra help in 2024 - I have 3 spots open in my monthly consulting program.

I focus on 5 pillars of focus for your agency: Finance, Marketing, People, Processes, and Data.

Lets find out where your agency is today, determine where you want to go, and then build a path to get there.

If you’re interested in learning more, just shoot me a note and we can talk about whether its right for you and your agency. If its not, I promise to be transparent and tell you why!

On my mind this week:

Using December Well

Every year, as we approach year end, I take the same approach.

We plan in November, Prepare in December, and in January, we move like lightning.

And if you’ve not done your 2024 planning yet, this tactic won’t work for you. Well, not exactly. You’ll need to get moving and combine plan and prep in November.

December is also a time for reflection. So many of us, myself included are so focused on “the next mountain.” Its easy to hit a goal, only to set the bigger next goal. And we either hit that new goal and repeat the process, or miss the new goal and feel let down.

But its important to ensure that we take time to pause and reflect, and ultimately celebrate the amazing things we’ve accomplished this year.

I’m confident that everyone has something that they can be proud of.

So make sure you celebrate that before you move forward into 2024. Of course we’ll reflect on what could have gone better, where WE can get better personally, and what we want to achieve. Thats the easy part.

So as you use December to prepare for 2024, use this time to start laying the foundation for the changes.

• Going to focus on a new product line in 2024? Great - Start training now.

• Looking to grow your sales team? Great - Start hiring now.

• Feeling tired and worn out? Great - Use this time to rest.

Most people wait until January to actually get started.

But by the time you get through New Years, you’re not really moving until half-way through the month.

So if its important, don’t wait. Start now.

What can you do today in your agency that will better prepare you to execute on your 2024 strategy?

Most important of all though - Don’t forget to spend time with your family.

Work will still be there when you get back.

I joined Courtney and Michael Weaver from the Insurance Buzz podcast last week where we talked about a number of topics such as: Remote Hiring and Management, Holding good 1:1s, Balancing Growth and profitable, and more!

Apple Podcast → Click Here

Spotify → Click Here

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