It’s counter-intuitive. Independent agents are in the business of providing personalized service, often going above and beyond to accommodate the most demanding clients. With the cost of acquiring a new client estimated to be up to nine times more than retaining one, why cut one loose? And if you do decide to end the relationship, how do you go about it in an ethical, professional manner?
The reasons to terminate a client relationship will vary, but they generally fall into one of two categories:
#1 – Return on investment. If it is costing you more to have the client, than not, it comes down to a business decision. Overhead aside, your costs include time spent quoting (and requoting when they decide they are paying too much), time and effort servicing the account, and the opportunity costs of where else you could be spending that time. Additional consideration may be given to claims history, payment history, and non-renewals by insurance companies.
#2 – Your client is a horrible client. This doesn’t mean they are a bit prickly, or you don’t care for their politics. This client is the one who consistently insists on the wrong type or amount of coverage or forgets to mention they have 3 pit-bulls or needs insurance on their new RV at 5 pm on a Friday night so they can go on a road trip. They are the clients who will never be happy with your service.
Do it right. Typically, the best approach is to send a letter well in advance of renewal stating that it is in everyone’s best interest for them to seek an alternative insurance agency. Make them aware they can often continue with the same carrier with a different agent. As the agent, it is your responsibility to conduct the process in a manner that is neither discriminatory or unfair, and does not leave you open to a lawsuit down the road.
- Check with your state’s insurance board to make sure you are complying with all laws and guidelines.
- Start the process early and document everything. Seek legal advice if needed.
- Ask the insurance company writing the policy for guidance.
With luck, and maybe some good pre-screening practices, firing a client should be something you do very infrequently. Above all else, keep emotion out of the equation when assessing if you should – and when you do – ask someone to move on.