As a broker, you know what return on investment (ROI) means to your business. When you invest in a tool or a resource, your expectation is that it will create a positive payoff for you. Your clients aren’t any different. They want to see outcomes that benefit their business. And your agency is one of the ways they experience ROI. But when you’re working closely together, your client may not see the real value that you bring to the table. You have to help them take a step back and examine what you’ve done for their company.
Showing value isn’t as easy as presenting a few cost-saving metrics. Showing value requires you to have a full understanding of your client’s business, their goals, and their insurance plan. Being able to effectively illustrate how you are helping to make your client more profitable will result in higher customer satisfaction and retention.
Measuring ROI for a Client
A basic ROI measurement is calculated by taking the amount of money you helped a client save, divide by the initial value of your clients’ investment into your services and their premium. Multiply that number by 100 to arrive at a percentage.
However, value looks different for each client and this simple calculation will oftentimes shortchange your agency. To calculate true ROI, you must factor in past, present and future goals and achievements.
Past: From the very beginning, you need to know your client’s desires, including but not limited to:
- What they hope to get out of partnering with your agency
- What they want from their broker
- Their 1-year, 5-year, and 10-year business goals
- The specific loss issues they need to address
You should also record your clients’ pain points, such as:
- Number and severity of losses over the past four years
- Past poor claims management experience
- Past employee fraud incidences
- Past number of incidents and injuries
- Business cash flow and financial needs
During the broker onboarding process, it’s the agency’s responsibility to highlight the importance of understanding a client’s big picture goals and put a measurable goal or action alongside it.
- A construction contractor wants to lower their worker’s compensation premium; broker sets an incident rate reduction goal like -0.25% LTIR.
- A manufacturing client wants to open a new plant; broker sets a date and time to meet with the client to go over anticipated payroll, class codes, risks and liabilities.
Present: Your client has targets for the end of this year. It’s important that brokers have the ability to illustrate that the client is on track to meet — or exceed — those targets. For example, if your client set a current year goal to reduce workers comp claims and you’ve realized they will pay $325,000 in workers comp premiums this year, compared to $400,000 last year, that’s a 18.75% ROI, or $75,000 in savings. Showing your client both numbers illustrates how their investment in you is paying off.
Future: To show how you will help your client achieve future goals, show how the systems you have in place are paying off. For example, in order to expand into a new market, your client needs to add three new sprinter vans to reach prospective customers. At an average cost of $35,000, that’s $105,000 in cash they need to make the purchase. They have a high deductible plan and paid out $80,000 last year on workers compensation insurance claims. But now your agency is involved, and you’ve eliminated three-quarters of these out-of-pocket expenses.
By improving their safety management and reducing the number of preventable incidents, you’ve saved them more than 75% of the cash they need to purchase the vans. Your efforts have created tremendous ROI because not only are they saving money, but they can also expand and grow revenue.
How to Illustrate the Role of Safety Metrics in ROI
Your client’s past safety record is an indicator of how you can position your value. What were their problems before they hired you? Maybe they struggled with a high number of preventable incidents that resulted in an abundance of lost productivity.
Examine loss reports: Analyze your client’s loss reports for the previous five years. Identify the patterns and trends that were costing them time, money, and productivity. For example, say a client of yours was dealing with a high number of employee back injuries, which is a very common preventable injury. Through your guidance, they’ve invested in several pallet jacks to help take mitigate these injuries. Over the past two years, the number of back-related incidents — and the costs associated with them — has been reduced. This gives a visual picture of the ROI your expertise has created.
Analyze the safety management process: Your client’s past safety record is an indicator of how you can position your value. What were their problems before they hired you? Maybe they struggled with a high number of preventable incidents that resulted in weeks of lost time.
There is a current philosophy in safety management called New View, or Safety II, that minimizes human behavior and maximizes systems that effectively reduce or eliminate risk through engineering controls, like safer equipment or IoT technology.
As an agency, you can adopt a similar line of thinking when it comes to getting results for your clients. How can you set up a system that drives results with less dependence on the client? One option is to implement a loss prevention system, such as a safety management technology solution.
Examine safety incentive programs: OSHA describes incentive programs as important tools to promote workplace safety and health. In its 2018 Workplace Safety Index, Liberty Mutual estimated that employers paid more than $1 billion per week for direct workers comp costs for disabling, non-fatal workplace injuries occurring in 2015.
Ensure your client has safety incentive programs in place. Once in place, keep track of the number of injuries or incidents that are reported. Employers often find that changes made to improve workplace safety and health also result in significant improvements to their organization’s productivity and profitability.
Report the numbers: When you create a savings opportunity, keep track of it. Expound that number over several years so your client sees the long-term affect.
Monitor the costs of safety purchases. When you recommend investment in personal protective equipment (PPE) or some other systems that will improve safety, log the expense. As the equipment begins saving money for clients, show them their return on investment.
Over time, workers comp premiums will decrease as well. It’s imperative to show a client’s savings on insurance costs due to safety or incentive programs instituted on your recommendation.
Your Value to the Client’s Business
When you and your agency partner with a client, you’re bringing numerous benefits to their business, some of which they may not realize, like time. While your main mission is to lower workplace incidents and save your client money, your actions also result in the all-important time savings.
Lowered workplace incidents: With safety management processes and incentive programs in place, your client can clearly see their number of injuries and incidents decrease. And when safety is improved, client’s witness the trickle-down effect.
Cost savings: With fewer injuries and incidents, clients realize a tremendous cost savings in the form of lowered workers comp claims and thus, decreased workers comp premiums.
Time savings: Possibly one of the best metrics for ROI is time. Because of reduced incidents and improved safety culture, clients and their employees no longer spend as much time on safety training or processing claims paperwork. Now, they can focus on other, revenue generating projects.
How Safety Management Technology Comes into Play
Your clients typically want to do better, especially when it comes to safety. But sometimes we all need a little assistance. This is where a safety management technology solution comes in.
By using a platform that allows employees to report observations and log incidents, you and your client can see what parts of the business need improvement. They can begin to make the changes that you recommend because the results have been clearly illustrated to them. Foresight is a safety technology solution that allows your client to lower their premiums for being safer.
You need the right set of tools to show value. Foresight is live proof of your strategies in action. It tracks every single activity, effectively showing a client that what you’re doing is working.
Utilizing a spreadsheet, you can pull together the investment your client has made into safety. Add their major safety costs drivers, such as workers compensation premium, out of pocket expenses, and lost time. Include in the expenses of improving safety. This may be new equipment purchased, training costs, and time. These are the metrics you use to show the returns and how that will impact your client’s business.
A value adding agency knows it’s worth. It’s up to your firm to make a conscious effort to continually show your client the value of your services. This is a key component to a long-term relationship and will lead to high-quality business through referrals.
Insurance is driven by who you know and what you can offer. There are thousands of agencies in the market with access to the same carriers and many of the same tools. The attributes that separate you from all the others is what you do for your clients that makes their business better than it was before they worked with you. It’s not only about providing a solution to one part of their company, but also being a dedicated partner who is driving change that will impact their entire operation. Foresight helps value-adding agencies become proactive risk managers.