Quick Car Insurance

It sounds like a book for losers! Interestingly it was going to be published under the title until the author and publisher decided to rename it “The I got dumped handbook” It was a best seller. Would it have sold so well under the first name?

Headlines or labels are critical to get clients to buy. This is more important than ever with so much competition for the same consumer dollar and the increasing attitude of live for today and not to worry about tomorrow. So in an effort to ram this message home, here is proof from the publishing industry.

Which of these books would you be inclined to consider buying based on the title?

1) At This Point In Time
2) They Don’t Build Statues To Businessmen
3) Before The Anger. These were the work-in-progress titles of actual books.

However when they made the bookshelves the titles had been changed to:

1) All The Presidents Men
2) Valley Of The Dolls
3) Roots.

These sound much more appealing. And to prove it, some books have been published under two or more names. Here is an example. When ‘The Art of Courtship’ was re-titled ‘The Art of Kissing’, sales went up four fold!

So, what about financial services? How does carefully selecting book titles apply to selling insurance products and investments? First, it applies to branding. What does your name conjure up? Is there another one that could capture your client’s imagination more? Second, what about your slogan if you have one?

Which of these two lead letter headlines worked best? The one that opened with ‘An invitation to an investment seminar’ or the one that opened with ‘Managing your own investments, a 3 part course’. The second outperformed the first by three to one.

The subject of property insurance and claims adjusting often leads to lead to blood pressure rising when speaking with home owners and Condominium Association Board Members. I have heard the nightmare stories. If you dig to find the source of the problem, it is a series of misinformation and errors that lead to costly errors and issues during the claims process.

These usually include:

• Paying too much
• Gaps in coverage leading to forced-placement by banks
• Errors and Omissions that impede the claims process.

Many times Boards are paying more than they should on their insurance premiums due to unnecessary coverage, mistakes on the appraisal and/or errors in the application by the insurance agent or the Board member.

Gaps In Coverage. Often when a Board unknowingly does not get enough Flood Insurance, the banks take notice and automatically force place their premium priced insurance on the personal home owner. This is an unnecessary expense and burden on the homeowner.

Errors & Omissions: The Board needs to understand exactly what is covered. Conflicts during the claims process can stem from the community thinking something was covered that was not, an error within the policy or false information in the policy. The Board usually does not learn about the mistake until a claim is rejected.

Here are some proactive ways that will make the process of bidding and the possible claims process later easier and less expensive for the Association. Knowledge is power!

Steps towards having the Right Coverage at the Lowest Premium:

My firm works regularly with agency owners in the planning and execution of the sale of their business. Some key questions have been raised more frequently with the pending tax increases set for 2013, so I thought it would be helpful to address these to a broader audience in the dialogue that follows. The level of detail is significant but the intent is to provide a more complete discussion of such important questions. I hope you find this information useful in your business planning.

1) What are agencies currently selling for as a multiple of revenue?

While simplistic in nature, setting a value based on revenue is not realistic. The insurance distribution system contains a wide array of agencies and brokerages serving different market regions and segments. We have seen agencies sell for anywhere from 1.0 to 2.7 times annual commissions with an average guaranteed price range of 1.4 to 1.8. In our experience though, the value to a buyer is generally driven by pro forma earnings, risk and transaction terms, and all three are equally important. Multiples of revenue are generally the product of the expected price, and not the determining factor.

The pro forma earnings provide a buyer with a return on their investment and cash flow to cover any debt service. The risk assessment is a subjective measure of how well the buyer believes the investment will yield their desired return. And finally, the terms relate to how well the buyer can leverage their capital, such as when there is significant seller and/or third party financing, and also hedge any significant risks, such as with a portion of the purchase being paid on an earn-out contingent on maintaining revenue, earnings, accounts, etc.

I was at a BBQ and over a drink got into a conversation with two people about insurance and investment. The conversation raised the issue of where you go for financial advice, which developed into a rather interesting discussion. I encouraged the debate and treated it as a research opportunity.

Of note was learning about the importance of key words in motivating consumer behaviour – which I will explain. By way of background, the two I talked to have the profile of almost perfect clients. They both enjoy well-above average incomes and high levels of net personal wealth. They were aged 54 and 49 (I asked). The older one is a successful accountant while the other owns his own business and also sits on public and private boards.

Sorry to say, but both had somewhat cynical views about advisors in general, recounting stories of ‘idiots’ they had met. These were some of their comments. “I don’t trust how they make their money. I have heard that they can make 150% on the premiums of some insurance products.” “I hate the way they have to sell you something to make money. That must influence their advice.” “I’ve got four life policies. Two of them are more than 25 years old. I should cash them in.”

Clearly they were somewhat ignorant as to the way advisors work. Which means that neither of them have proper financial advisors in their lives. The real value from the conversation however was their reaction to some specific words. When I talked about how many advisers work, it was key words that made the biggest impact. Notable among these were:

“Audit.” I suggested that a good adviser would be able to undertake an ‘audit’ of their financial lives, including their investment and insurance portfolios. This instantly got their attention. The word ‘audit’ has a powerful meaning to business people.

Here are two businesses whose lessons apply very well to financial services. These are from real businesses here in New Zealand that happened in the past twelve months.

A builder: This business had been static for some time, his advertising efforts being in all the normal media such as radio, press and directories. Wanting to grow the business, the builder analyzed the last 20 jobs and was stunned to find that ALL were from referrals! Until he had looked closely at them he just assumed that the advertising must have been generating the work.

So, he made up a list of potential and existing Centres of Influence, being architects, structural engineers, developers, the local authority staff, real estate agents and previous clients. He then arranged breakfast meetings with them in small groups. He called them (surprise, surprise) “Friday Breakfasts,” so EVERY WEEK he invites two or three of them to meet informally with him and his staff over croissants and coffee.

Business has gone up 100% in just twelve months. His profit has risen as not only is he saving on advertising but he does not have to compete with as many when tendering. The staff love them as well and as an unexpected bonus, motivation and productivity have increased.

The lesson: What are the real drivers of your business – referrals, advertising, sponsorship or something else? If it’s referrals, do you have a proactive plan for cultivating more of these? The builder in this case study has obviously found a low-cost and apparently very effective plan.

A consulting engineer: This engineer’s clients are local government and large developers. Advertising to date was primarily in relevant industry journals. He undertook a small amount of informal research, which revealed that his clients did not know the range of services he offered. So, he created a simple monthly newsletter that went to his clients explaining the full range of services.