DCC

publications

• October 14, 2009

  How Do You Compare? National Survey Establishes Benchmark for P-C Carriers' Ease of Doing Business

  Ease of Doing Business (EDB) has been a bit like the weather; everybody talks about it, but doing something about it is another matter. While you can't change the weather, you can equip yourself and your organization not only to cope with it, but to thrive within it.

  Now there is a "barometer"—a national benchmark of nearly 20,000 ratings by independent agents of property and casualty carriers' EDB performance—that can help you see whether it's blue skies or foul weather ahead for you.

  Why It Matters: The Logic Behind EDB

  Think about it from an agent's perspective. Like carriers, agents need business results such as profitability, growth, and productivity. One of the most important variables in getting those results is how easy it is to do business with the carriers they represent.

  Agents will go where:

  • Quotes are completed quickly and accurately
  • Duplicate information doesn't have to be entered
  • Claims are handled promptly and fairly
  • Billing is accurate and timely
  • Renewals and policy changes are easily made

  In sum, agents will choose what's best for them. And what's best for them is carriers who support their productivity by being easy to do business with.

  That is not to say that product, price, and commission are not important. Competitive products, prices and commissions are necessary or a carrier wouldn't be worth representing. But they are not sufficient. As agents and carrier executives tell us, increasingly EDB is the most powerful and sustainable way for a carrier to differentiate itself.

  Why It Matters: The Numbers Behind EDB

  So the logic makes sense; it even makes common sense. But what are the data to support that logic? Is EDB considered to be a critical issue when agents choose where to place business?

  In Deep Customer Connections, Inc.'s third annual EDB survey, nearly 5,000 agents provided more than 19,000 ratings of p-c carriers across the country. We asked these agents: Is EDB important in the buying decision?
  Agents responded with a resounding "Yes!" Over 99.5% agreed that "EDB is critical in choosing which carrier gets the business".

  What Factors Are Important in Ease of Doing Business?

  It is clear that EDB is essential to winning business, according to agents. But what factors comprise EDB, and how important is each?

  To find out, we developed and tested the following EDB Factors with agents and carriers, and then asked the agents in our survey to rate the importance of each.

  Ten Ease of Doing Business Factors

  1. Understands and acts on the needs of agency personnel
  2. Is responsive in underwriting
  3. Is flexible in underwriting
  4. Provides accurate, timely policy services
  5. Has effective, user-friendly technology
  6. Handles claims promptly
  7. Handles claims fairly
  8. Provides marketing support
  9. Provides insurance technical support (e.g., specialty coverage expertise, loss control programs, etc.)
  10. Makes it easy for my customers—the insureds—to do business with me

  After rating the importance of a Factor, respondents rated up to five carriers' performance against that factor. We present the data in the chart below (Overall Results 2005). The red line shows the consolidated performance ratings for 140 p-c carriers. The blue line shows the importance rating of each of the ten EDB Factors.

  

  What It All Means: The Performance Gap and EDB-Index

  Based on survey results, you can see a "performance gap"—the difference between importance, a proxy for expectations, and performance ratings. But it is important to note that not all performance gaps are created equal.
  In order to identify opportunities to improve performance more accurately, we developed the Ease of Doing Business Index (EDB-I) which weights the performance gap for each EDB Factor by taking into account the importance of that Factor. A perfect EDB-I of "100" means that performance matches expectations; you could invest more to improve performance in that factor, but it would have low impact because you are already performing to the agents' satisfaction.

  A low EDB-Index comes from a relatively larger performance gap in a relatively more important Factor, thereby showing a Factor of greater opportunity. If you improve performance in a Factor with a low EDB-Index, you are more likely to be perceived by agents as being easier to do business with and, thereby, get more of their business.

  

  Interestingly, the highest EDB-Indices, solid "A" ratings, are in the least important Factors, Provides Marketing Support and Provides Insurance Technical Support. By illustrating areas of highest impact—greatest opportunity—the EDB-I helps in setting organizational priorities and allocating scarce resources.
  So, how do you stack up? Where is your organization compared to these results?

  The chart Overall EDB Ratings shows that on average, carriers rate pretty well on most factors. But those averages—like the poor fellow who on average was quite comfortable while he had one foot in a bucket of ice and the other in boiling water— mask the great diversity of individual carrier performance. Which raises the question

  "How do you stack up?"

  To measure where you might be, a self-assessment—completed from the perspective of the agent—is a useful place to begin. You can turn each of the 10 EDB Factors into two questions. For example:

  • How important is underwriting responsiveness to our agents?
  • How would our agents rate us in terms of underwriting responsiveness?
  • How important is handling claims promptly to our agents?
  • How would our agents rate us in terms of handling claims promptly?
  • Etc.

  You can then take your self-ratings and compare your EDB performance, Factor by Factor, to the national benchmark.

  The decision on which carrier gets a piece of business is largely made in the agency, not by the policyholder. In other words, the competition for a policyholder's business takes place within the agency. That is where winning will happen. It would be useful for you, and for everyone in the organization, to think about what they could do that will cause your agents to turn that piece of business to you rather than to another carrier. That is why satisfying agents' needs for EDB is the new and growing fundamental difference. And that is why having a national EDB benchmark is such a useful tool.

  Use the national EDB benchmark, look at your barometer, and equip your organization for the blue skies ahead.

  Nort Salz and Paul Croke are founding partners of Deep Customer Connections, Inc., a firm dedicated to helping p-c carriers improve their agency relationships and, consequently, their business performance.   Reach them at 978-263-6100.