Two Frameworks For Running A Profitable Insurance Agency

In 2010, while working as a consultant, I decided to pursue my MBA because I wanted to become an entrepreneur. Little did I know that I would venture into insurance, let alone income insurance—or disability insurance, as it is widely known.카지노사이트

Even with billions of dollars poured into the industry, very few insurtech startups manage to become profitable. However, it took my company less than three years to break even, and today I want to share with you two frameworks from my playbook that I think you can emulate to run a profitable agency (or any business). These two frameworks are second-order thinking and ARP (acquire, retain and prune).

What Is Second-Order Thinking?
Second-order thinking is more complex and uncertain. So, people tend to think more in first-order thinking. Let me give an example of the two:

First-level thinking is: “Our competitors are selling this product. Let’s do the same.”

Second-level thinking is, “Our competitors are selling this product, so if we do the same, it is true that we might get more market share. However, our products are of lower quality and price. Our competitors sell to premium customers who are not price-sensitive, which means we might invest our resources and deploy the wrong strategy. Let’s look for another way in.”

You should look to build products that solve a problem for a large market and use second-order thinking as a proxy to create great products. As a result, you will learn to ask questions that help you avoid unintentional and unforeseen outcomes. Here are a few questions you can ask yourself to help guide you through the process.

• If we build this product, what is the range of possible future outcomes on our finances, culture, customers and market?

• Which outcomes will have the highest probability of occurring?

What do most stakeholders who are impacted by the decision think?

• How do our expectations differ from most stakeholders?

• Will we follow through if our decision is successful?

• What is the likely reaction of our competition?

Failing to consider second-order consequences can lead to painfully bad decisions that merely confirm your own biases. Therefore, always ask questions before deciding and try to go one or two levels further when analyzing potential outcomes.

In general, first-order thinking has short-term benefits but long-term negative impacts, as opposed to second-order thinking, which has short-term pain but long-term benefits.

The Acquire, Retain, Prune Framework
Your goal as a company operator is to drive revenue that leads to ROI-positive profits. The ARP framework allows you to build a business that can create a revenue engine with the core purpose of boosting repeatable and scalable business by maximizing your customer lifetime value (LTV) and minimizing customer acquisition cost (CAC). Your ultimate goal is to ensure every customer generates more revenue than it costs to service and acquire them over their lifetime with your company. To do so, you can rely on the following three branches of the ARP tree.

  1. Acquire

There are two major ways to acquire customers: organically and inorganically. Our rule of thumb is to acquire customers in a way as to make your LTV/CAC ratio more than four, with CAC payback taking less than 12 months.

The easiest yet most expensive and non-sustainable way is to acquire customers inorganically through acquisitions of similar companies with a customer base, a joint venture with another operator or a partnership with similar or adjacent companies. Acquiring growth that way is fast but costly. In addition, this strategy can be risky unless you are already a well-established business with a lot of cash on hand.

Therefore, organic growth is the ideal way to broaden your product or service offerings. In this way, your business is expanding as a result of its strengths and initiatives.바카라사이트

In order to grow organically, you can start by segmenting your customers into two categories: existing revenue streams or new revenue streams. What does that mean for your insurance agency?

Increase the sales of your current customer base by:

• Selling more insurance products.

• Selling more add-on products.

• Cross-selling more partner-related products.

Increase the sales to new customers by:

• Expanding to new distribution channels and partners.

• Targeting a new segment of customers (further segmented by age, income, geography, etc.).

• Developing your presence in new territories or geographies.

• Changing your product mix by selling higher commissioned insurance products.

• Launching new insurance products and services.

  1. Retain

You are finally done with the hardest part: acquiring your customers. The second stage consists of retaining those customers, and you can do this by offering great customer service and support. According to a survey by Invespro, it can cost five times more to acquire one customer than to retain an existing customer. As a result, U.S. companies lose $136.8 billion annually due to avoidable consumer switching.

How can this loss be avoided? American Express found that, after just one instance of poor customer service, one-third of customers considered switching companies. Therefore, it’s important to prioritize customer retention within your business.

  1. Prune

Pruning encourages your profit tree to grow sustainably and keep your business structure on solid ground. In terms of customers, you will need to assess which current customers are costing your team more service time than necessary and cut ties with them. But, more importantly, if you want to run a profitable insurance agency, you need to get your costs under control.

One of the largest expense categories is salaries. I have noticed across multiple insurtechs the importance these companies place on growth at any cost and on hiring aggressively. Because of this type of thinking, over the past few months, the industry has seen a wave of layoffs across industries.

One way you can replicate my success is to look at your organizational structure. Then, especially if you operate remotely, leverage a global talent pool by hiring talent internationally in countries with a low cost of living index.온라인카지노

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