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Firing Customers…Dump Letters

This is a question received by one of our state associations:

"What are your thoughts on 'dump' letters? We have lots of very small single commercial lines accounts that cost us more than we recover in commission income. The agency has sent dump letters in the past, advising customers that we cannot maintain what we believe is an adequate level of service with the commissions we get from their accounts. What do you think about this practice?"

This isn't the first time we've been asked about this and, needless to say, HOW you go about dissolving your relationship with a customer is critical. Here are a couple of questions we ran in a recent VUpoint newsletter under the "From the Editor" column:

"I was wondering if you could point me in the right direction. I have a situation whereby I need to fire a client. Do you know of any literature that would help me? Basically, I want to find out the rights of the agent and the rights of the insured."

"We recently acquired another agency. Unfortunately it came with a ton of small commercial accounts that we really don't want. What are our options for getting rid of these accounts legally? So far we've thought of adding service fees, having carriers increase renewal premiums or selling off the book. Let me know if there are any other options. It's costing us more than double what we earn to service these little guys."

Increasingly, agents are discovering that they have customers that they no longer want for one or more of many reasons. Maybe it's a contractor that generates so much certificate of insurance activity that commissions can't offset the cost to service the account. Other customers may have "personality" problems or present what agency management perceives as a morale hazard. In any case, here are five VU articles that you might find helpful:

Last Updated: December 3, 2015