Agents Locked In Game Of Survivor

By Edward Curry

Can agents and companies work smarter together? The track recordof agency partnerships has been poor in both hard and softmarkets.

Today, the independent agency system remains under extremepressure from all sides. Insurers are pushing more and more of thepaperwork that was once their responsibility down to the agencylevel, without any thought of compensating the agency for theirexpense.

During the hard market, some companies imposed new businesslimitations on agencies, while asking them to re-underwrite theirrenewal books–a not-so-subtle way of limiting their exposures.Agent commission reductions are also in vogue.

Whenever or wherever there is a question of profit or rateinadequacy in a given area or state, carriers resort to one ofthree choices: either temporarily cease writing in that particulararea, restrict the writing of new business, or close those marketsin question entirely.

When agents can, they roll the business to another company. Thisis a questionable, time-honored tradition that is not in any waycost-effective. It is debilitating to the agency and not always thebest choice for the customers.

Of course, customers have no say in the process at this point,but somewhere down the line, buyers will react, and when they dorespond, it may be with choices that carriers have a hard timeaccepting or living with.

Agency-company relationships fare no better in soft markets.Many insurers openly seek alternative distribution methods to growin the absence of rate hikes. As insurers latch onto these newdistribution partners, agents will find their most formidablecompetition might come from those same carrier partners they haverepresented for years.

The driving forces for many stock insurers during soft marketsare their stock values. How they are viewed by the investmentcommunity and shareholders is the overriding concern to those inthe executive-making loop. Their focus on favorable financialreturns allows agency-company partnerships to take a back seat toprofit goals as they seek out low-cost alternatives fordistribution to produce target returns.

These tactics play havoc with agents who have staff in place andare out there trying to grow in a soft market with increasingagency costs. Many agents begin to resist growing and just plan tohunker down as well as screw down costs, grow as best they can, andoperate with the limited personnel they have on hand.

Agencies cannot grow in spite of the insurers they represent. Ifthey find that both are going in different directions, they mustfigure out a way to work together.

Those agents who wish to survive and grow in such environmentsmust come to grips with the fact that they must align withpartner-carriers that are willing to work with them and not abandonthem for other sources of revenue.

Despite all the upheaval and uncertainty, there is without adoubt opportunity for agents who can operate in any marketenvironment. There are many entrepreneurial agencies out theregeared to excel in this market, and they will continue to flourish.I have found these agencies make up approximately 15 percent of thetotal agency mix.

Of the remaining 85 percent of agencies, about 25 percent are inthe caretaker or no-growth mode due to age, proximity toretirement, lack of desire or the ability to keep up with thechanging environment, or they have been making enough money longenough to satisfy most of their creature comforts and needs.

Agencies in this grouping will have a hard time making it intactpast the next 10 or so years. Increasing costs, growing complexity,company pressures, changing customer buying preferences andchanging market forces will see to that.

For the remaining 60 percent of the agencies, this is a time ofgreat opportunity–providing those agency owners are willing to payattention to eight simple rules outlined in the accompanyingarticle.

The insurance industry that emerges five years from now willbear little or no resemblance to the market and conditions thatexist today. Times of turbulence and uncertainty can often bringexceptional opportunities to those who have the ability, thefinancial stamina and the willpower to persevere.

Edward D. Curry is president and founder of TargetMarketing-Management Consulting in Virginia Beach, Va. His latestbook is “Insurance Agency Consulting: The Straight Skinny & TheHow Tos.”

Eight Tips For Growth In Any Market

By Edward Curry

These following eight concepts need careful consideration,thought and a great deal of brainstorming on the part of agencyowners who plan to grow their agencies and to prosper.

Rule #1: Make your agencies available when customerswant to buy.

Recognize the changing market and be on the lookout for newopportunities. You would be positively amazed at how many agenciesroutinely close their doors and phones for the all-important lunchhour. This is not sterling customer service.

Rule #2: Be aware of the changing regulatory environmentthat allows new sellers into the market.

Banks and financial institutions selling insurance will have tobe recognized and dealt with. The products you've had exclusiverights to sell in the past will now be sold by others as well.However, there is an opportunity here that agents can and should bepursuing.

Rule #3: Provide professional, knowledgeable staff toyour customers.

Your staff must provide perceived value to buyers. In addition,agency owners must learn to be both manager and market strategist.It is imperative that you develop your talent in these areas.

Rule #4: Be willing to shell out dollars to pay fortraining, helping to improve the working environment.

Make your agency a profitable, exciting place for you and yourassociates. This will do wonders for your turnover and your outlookon life.

Rule #5: Educate yourself, attend seminars, read andnetwork with other very successful agents.

Don't wait for help from carriers, as it may be a long time incoming. This is your agency. You are the owner and this is yourresponsibility.

Rule #6: Instill the philosophy that each client must betreated as a total financial entity.

You must know or learn about your clients' specific needs, wantsand desires, and you had better be in a position to meet them. Inshort, every agent and agency owner must recognize their book ofbusiness as a customer database and work it accordingly.

Rule #7: Learn to understand and sell your clients thefinancial instruments they need as today's hedge or gateway totheir futures.

This is a must. This breeds customer satisfaction along withhigher renewal ratios and more bucks for you and your associates.Also, it makes it much more difficult for your competitors to gettheir phones in your customers' ears.

Rule #8: Objectively determine how you measure up to thenew emerging distribution systems, such as banks.

Can you compete, or should you consider joining forces and helpthem work their customer lists?

Reproduced from National Underwriter Property &Casualty/Risk & Benefits Management Edition, March 5, 2004.Copyright 2004 by The National Underwriter Company in the serialpublication. All rights reserved. Copyright in this article as anindependent work may be held by the author.