How You Can Spend More To Acquire Insurance Clients | Insurance Agency Playbook

In today's riveting episode of The Insurance Dudes, Craig Pretzinger and Jason Feltman dive deep into the often overlooked but crucial aspect of retention in the insurance business. Join us as Craig reminisces about his almost-cancelled 2019 Christmas trip to Kauai and how a key realization about lifetime value (LTV) of clients changed everything. Together, they break down how understanding and leveraging retention can significantly boost your profitability, revealing the profound impact of LTV on growth strategies. Whether you're a seasoned agent or just starting out, this episode is packed with insights to help you make smarter, data-driven decisions. Plus, don't miss out on the exclusive worksheet designed to guide you step-by-step in calculating your own LTV. Tune in and discover why retention truly is the gift that keeps on giving.

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Transcript

Speaker 1: 0:00

Hey, Mr Jason, do you remember when I almost canceled my Christmas Kauai trip back in 2019?

Speaker 2: 0:06

Uh, yeah, I remember that you were pretty stressed out about something, what was going on?

Speaker 1: 0:11

Well, before we tell them what happened, let's look at the reason I was actually able to get on that plane, even though I was freaking out, All right. So today, Jason, we're going to talk about retention. Ooh retention.

Speaker 2: 0:35

What did you say, Mr Craig? I thought we were talking about sales.

Speaker 1: 0:44

Nope, I tricked you. First we need to know some things about retention, because without retention we can't really know much math wise, right?

Speaker 2: 0:48

I remember when I used to think that retention was something that like who cares right, it's all about sales and it was just to make a bonus. It's simple numbers. If I have 4 million in premium and my retention is 80%, then I need $800,000 in new business to end the year at 4 million. Isn't that all you need to know, mr Craig?

Speaker 1: 1:14

Kind of sort of no, no, no, not that's good. It's good, but you need what you need to do next Once you know your breakeven point. Do you know what that?

Speaker 2: 1:24

is Well, you find out how much growth you need to max out that bonus and multiply it by the beginning of the year premium. So if I need like 10% growth, then I need another 400,000 on top of that, on top of the 800,000, which comes to 1.2 million or 100 K a month. Is that right, Mr Craig?

Speaker 1: 1:45

Man, you are like a brain man with those numbers just spouting out of you.

Speaker 2: 1:49

like that You're not the first person to tell me I'm like brain man, your wife. Yeah, it was a different reference, though.

Speaker 1: 1:56

Yeah, Well, anyway, you're close, so we can use retention to figure out our lifetime value.

Speaker 2: 2:05

LTV.

Speaker 1: 2:05

Mr Craig, what the holy pig is that Lifetime value is the prediction of net profit that you're going to get over the relationship of having this client right. So you're making a decision on how much that client is going to bring in for the over the course of them being with you, and we can figure that out.

Speaker 2: 2:24

Yep, that one is a big one, man. When I first figured that out, that was a. That was like a light bulb that went off. Okay. So this all makes sense, but how does this all fit in with with retention?

Speaker 1: 2:37

Well, think about it the longer a client stays with us, the more premium they're going to pay over time, right, and the higher our retention rate, the more clients we keep for longer periods. So retention directly impacts our lifetime value, I see.

Speaker 2: 2:55

So if we have higher retention rate, our LTV goes up and then we don't have to work as hard to replace lost clients with new sales. Do you like to work harder or less hard, Mr Craig?

Speaker 1: 3:06

I don't think you can say that on the air, but I am going to agree with you and say it gets really interesting here because once you know and without it getting hard, so once you know your LTV you can make much smarter not hard decisions about how much you're going to invest to get that new client what you said, mr Craig. Decisions about how much you're going to invest to get that new client what you said, mr Craig. So let's say your average client pays 1500 bucks of premium a year.

Speaker 2: 3:33

Does that make sense. Yeah, okay.

Speaker 1: 3:34

And your average retention is 80%. Okay, right, so if an average. So that means, if they're at 80%, we can figure out right from that. There's just a quick conversion. You can even ask chat GBT if you want, but you can figure out exactly how many years it is. So with the 80% you're looking at five years of renewal, or five renewals, right, five times. So if we're getting 1,500 each time, that's five times 1,500.

Speaker 2: 4:04

That's right, I need a third hand. You can also ask Jeeves, right.

Speaker 1: 4:10

Yes, yeah, I believe that you have to say operator. Get me Javes.

Speaker 2: 4:15

So so you're saying the lifetime value of that client is $7,500. That's a lot more than that first month premium, Right?

Speaker 1: 4:23

Exactly. So, yeah, now you're profitable, right? And it's not just some kind of magic thing saying, oh, I guess I make more. It's actually knowing what you're going to make. And now you can make real business decisions. Because in the old days what would happen is I'd say, oh, we got $1,500 in premium from this, so we made $300. Can't do it, right, like it doesn't make any sense.

Speaker 2: 4:50

You are blowing my mind, Mr Craig. I never thought of it that way before.

Speaker 1: 4:55

It's really a game changer, isn't it? I love it. It goes even further. When you understand LTV, you can make better decisions about your client service, your attention programs and even which types of clients to target. How so, Mr Craig? Well, if you know that a particular type of client has a higher LTV, maybe because they tend to stay longer or they buy more policies, or you can afford to invest more in acquiring, you can afford to spend more in acquiring them. You see? Yeah, so on the flip side, if a client has a lower LTV, I cut you off. I'm sorry, but I'm so excited about this.

Speaker 2: 5:36

Yeah, I was just going to say this makes so much sense. It does. Yeah, you're so calm. I can see how this could just have a huge impact on our growth strategy.

Speaker 1: 5:47

Absolutely. And the best part, even small improvements in retention can have a massive impact on the LTV and your profitability over time. It's the gift that keeps on giving.

Speaker 2: 5:59

I love those kinds of gifts, like on Christmas vacation. Was that the cheese of the month club? Oh?

Speaker 1: 6:10

right, clark, you look like you could use a cool one.

Speaker 2: 6:14

Okay. So how do we actually calculate this LTV? Is there a formula, Mr Craig?

Speaker 1: 6:22

Well, as a matter of fact, there is, and it's pretty simple, right? It's just the average premium per client times the average retention rate divided by the one, minus the average retention rate.

Speaker 2: 6:34

Ooh, can you break that down for me, because I got to know this?

Speaker 1: 6:39

I bet you do Sure thing. So let's go back to the example. If your average premium per client is $1,500, your average retention rate is $80, then your lifetime value of that premium is $6,000.

Speaker 2: 6:52

Boom.

Speaker 1: 6:53

Okay, I think I got it Okay, and then we can compare that LTV to our acquisition costs to see if we're profitable, right, and we were going to always want to put that that premium converted into what your comp is Right, but you've got it, though, and it's just an average, so some clients are going to have a higher LTV, some are going to be lower, but understanding that average is really powerful to work from.

Speaker 2: 7:17

Yeah, this is absolutely incredible. I feel like I've been leaving so much money on the table by not understanding this.

Speaker 1: 7:26

Oh, mr Jason, don't beat yourself up. Most agents don't fully leverage retention and LTV in their growth strategies. I mean, I didn't? You actually showed me a lot of these things too, right? Yeah, yeah, that's the irony of this episode. But now that you know, you can start making smarter data-driven decisions. Do you like making data-driven decisions?

Speaker 2: 7:49

Mr Jason, I do, and I do so much that I am ready to dive in. But wait, you never told me what happened with your Kauai trip.

Speaker 1: 7:59

Oh, right, I thought you would have remembered, but that's all right. So let's just say I had a last minute realization about the LTV of some key clients and it totally changed my perspective on that decision. I knew that there was some big money coming in because of the future revenues, so I wasn't as freaked out man.

Speaker 2: 8:18

I absolutely love it. Retention and LTV for the win. Yep.

Speaker 1: 8:24

So, folks, if you could take one thing away from this episode, let it be this Retention is not just a feel-good metric, it's a key driver for your long-term profitability. So start tracking it, start improving it and start reaping them rewards Got to reap them.

Speaker 2: 8:40

Got to reap them. And if you want to dive deeper into calculating your own LTV and using it to make better business decisions, be sure to download the worksheet that we put together. Another worksheet, why not? It'll walk you through the process step by step. Dude, if you collect all these worksheets and you got all of them, you are probably cranking, and if so, you have to email us and let us know.

Speaker 1: 9:06

Yep, because if you don't email us and let us know, mr Jason is not going to let me make any more Right.

Speaker 2: 9:12

So you can email Fred at the iDudescom, that's F-R-E-D, at T-H-E-I-D-U-D-E-Scom.

Speaker 1: 9:26

No joke. Yeah, fred's going to check it out and Fred is going to be super pumped that you sent a message. So, basically, if you send the message in, you're voting for me, and if you don't, you're voting for Jason. I think I'm going to get a lot of votes. Yeah, and you know what else? So you can download the thing in the notes or you can head over to the web page which you gave part of as part of that email address. Okay, did you realize that the webpage and the email address are almost the same? It just has a somebody's name with an ad in front of it and then no www. You're blowing my mind today. I know it's just it's a highly techie day. So, uh, yeah, is that it for today?

Speaker 2: 10:02

That's it, folks. So yeah, is that it for today? That's it, folks. Remember. Retention is the gift that keeps on giving, just like good old Mr what was his name? Uncle Eddie said right, nurture those client relationships and watch your profits soar. This is Craig and Jason signing off. Signing off.