Filed Under:Risk Management, Captives

Bucking The Trend, Top Agencies Thrive

Times are tough, insurance is competitive, and the independent agency business isn't what it used to be. No matter--agency owners who are creative, determined and look toward the future are not only surviving hard times, they're thriving.

The five winning agencies in the ninth annual National Underwriter/American Agent & Broker Commercial Agency Awards for Excellence program personify that business model. They may not be setting profit records, (although some have posted respectable revenue increases over 2008), but they're doing just fine--even in regions of the country that have had more than their share of misery.

The winners and finalists were profiled in the Oct. 4 edition of NU and the November issue of AA&B. We spoke with executives from the five winning agencies about their formulas for success and where they see trends heading in the future. Their insights are provided below.

National Underwriter

Not only is this a soft insurance market for most areas of the country, but the recession has caused a lot of shrinkage in insurable exposures as a result of layoffs, bankruptcies, fewer startups, etc. How is your agency adapting to maintain your top and bottom lines?

Robert L. Cohen

IMA Financial Group

2010 Champion

2010 Winner: Sales & Marketing

2010 Winner: Customer Service

IMA's strong financial position allows us to reinvest in the company and in new products and services for clients. Clients seek brokers that deliver the best quality. Clients are looking to stretch their dollars right now, and IMA is able to provide more in-house, value-added services.

IMA is well equipped to manage through a recession because we specialize in multiple industry segments. Even though the construction practice is down due to the economy, the energy and technology practices are performing at high levels.

We have purposely avoided concentration risk in our business model, so we're diversified enough to maintain strong performance across a variety of industry practice areas.

Marc F. Eagan

Eagan Insurance Agency

2010 Winner: Technology and Operations

2010 Winner: Recruitment and Training

The soft market that has affected the majority of the country has touched us very little in south Louisiana. Rates, particularly for property insurance, held firm with little or no give for the past five years. This is mainly due to the fact that our area has been hit by a major storm.

Even casualty lines have held, although we have seen much more competitive pressures in these lines. These have driven rates lower, but still not as low as we hear from most other states.

The recession, on the other hand, has somewhat affected the exposure bases of our clients. We take a progressive approach to returning premiums on audit and reducing renewal premiums due to a decrease in exposure.

Clients will remember us for helping them manage their premiums through difficult times. As the economy swings back, they will be more understanding when premiums increase. We as agents can't have it all one way.

Tom Cotton

Hugh Cotton Insurance

2010 Finalist

We are very careful to avoid nonessential expenses.

We are getting closer to our clients to assist them in cost cutting where we can and we are motivating our producers to prospect for new clients. We prefer to sell our way through the downturn.

Terry Scali

Lapre Scali & Co.

2010 Finalist

We have a few national programs that are growing and not subject to our local economy, and we acquire roll-in books of business and agencies which are accretive to our business.

David Schaefer

AH&T Insurance

2010 Finalist

As both the economy and property and casualty pricing have been setbacks to growth and profitability, we have judiciously focused on increased expense controls while emphasizing the need to successfully identify new business opportunities that are larger and in economic segments less impacted by the economy.

National Underwriter

How do you avoid becoming a mere price-shopper in this soft, competitive market? How do you maintain your value-added service offerings in such a difficult economy?

Robert Cohen, IMA Financial Group

IMA is a strategic business advisor to our clients. By working with our clients on reducing their total cost of risk, we minimize the impact of market-cycle pricing.

Value-added services are not optional for us. Providing them is a pillar of our business model, and it's the only way to achieve a true reduction in cost of risk for our clients.

Marc Eagan, Eagan Insurance Agency

In the past, producers analyzed various renewal quotes and presented the insured with what they determined to be the most advantageous. Now our marketing department offers several renewal quotations, which are frequently passed along to the client.

We present options in our written proposals that clearly outline the differences and allow the customer to decide whether to take added coverages at a higher premium or to select a quote primarily on pricing.

We round out accounts to take advantage of package discounts and make a strong effort to have all policies expire on a common date, also allowing better pricing without sacrificing coverages.

Tom Cotton, Hugh Cotton Insurance

The agents who say they never compete on price are the ones with the most competitive markets. We're all price-shoppers. Value-added services do not matter if the client can't afford the premium.

Terry Scali, Lapre Scali & Co.

We train our agents to sell off X-date (expiring date) and to focus on risk management and enterprise risk management issues and analysis.

David Schaefer, AH&T Insurance

The soft market has provided the opportunity to greatly improve coverage for our clients. We are building out insurance programs to enhance coverage they already buy, as well as consulting with them to build partnerships so they are not simply buying insurance.

We also customize our value-added service offerings so a client or prospect can decide if the need for that offering is worth any additional cost. By providing this customization, the clients truly can choose what value adds are important to their programs.

National Underwriter

Do you incorporate risk management into your standard game plan with clients? If so, how do you keep loss control efforts front and center in a soft market, and at a time when many clients are looking to cut operating costs?

Robert Cohen, IMA Financial Group

Risk management is at the core of IMA's approach to protecting our clients' assets. We customize risk control efforts to address the issues that trigger losses.

IMA performs loss analyses and monitors loss ratios throughout the policy period to educate clients on trends and to focus their attention on areas that need loss control and loss prevention efforts. Our clients, in concert with IMA, can easily and cost-effectively implement loss prevention best practices.

The client's cost is minimal after IMA allocates many hours of loss prevention services and secures a commitment of time and resources from our insurance carrier partners and their loss prevention personnel.

Marc Eagan, Eagan Insurance Agency

Producers are required to meet face-to-face with clients at least once a year to view operations and observe changes in the risk.

Because most standard insurance carriers provide risk management free of charge, we use these specialists to analyze midsize to larger accounts, especially those with safety exposures, and offer suggestions for improvement.

We emphasize to the client that premiums are generally reduced over time by following the recommendations of a loss control professional, which ultimately becomes evident.

Tom Cotton, Hugh Cotton Insurance

If the client didn't want to have claims when times were good, they certainly can't afford to have claims in the slow economy.

Terry Scali, Lapre Scali & Co.

We provide trained producers for this purpose. They are supported internally by expertise and externally by subcontracted specialists.

David Schaefer, AH&T Insurance

Risk management for our clients is SOP (standard operating procedure) for our company.

Savings due to effective loss control efforts highlight the bottom-line benefits of a strong risk management program.

Safety is not optional, and we continue to remind our clients and prospects of its importance.

National Underwriter

What are some of the major technology challenges your agency has faced, and what have you done to overcome them over the past couple of years?

Robert Cohen, IMA Financial Group

The insurance industry is highly regulated and continues to see more changes in this area. Poorly managed corporate risks are getting publicity, not to mention costly legal judgments, which underscoresthe importance of regulatory compliance and transparency.

Related to these issues, from a technology perspective, the past couple of years have been challenging as we focus on document management, records retention, e-mail encryption, data loss prevention and e-discovery, to name a few.

These are enormous, time-consuming tasks that require effort from nearly all areas of the organization.

Cooperation among diverse departments has made successful outcomes possible.

Marc Eagan, Eagan Insurance Agency

To wisely use rapidly changing technology, we upgraded all servers, replaced our existing hardware by adding dual monitors, scanners, new computers, desktop faxing and additional color printers.

To position ourselves for future growth, we migrated our software from Vertafore's AFW to AMS 360, with several months' advance preparation culminating in two weeks of intense, hands-on training and a follow-up visit from the trainer to answer more complex questions.

The need for seamless customer service during a catastrophe made us aware that our agency's building and property may be incapacitated and employees strewn all across the country. Even so, clients need immediate response to claims issues and reassurance from their agent that their claims will be handled in a timely manner.

To accomplish this, we established an emergency management committee which meets several times a year, especially before the start of hurricane season. Each member has specific written duties spelled out in a handbook of instructions.

We also furnished key personnel with laptops capable of running our business applications; arranged for our entire network to be backed up in several offsite cities; turned our website into a communications hub where employees and clients can access up-to-the-minute information on direct claims reporting, the agency's physical status and return-to-work requirements; and had emergency re-entry passes in hand prior to evacuation orders and issued them to our own first responders.

Tom Cotton, Hugh Cotton Insurance

Our major challenge was older staff that was reluctant to adapt to change. We now have a younger staff.

Terry Scali, Lapre Scali & Co.

We discovered that online server technology was much more expensive for us as we have grown, so we have made the move toward repositioning to our own servers.

David Schaefer, AH&T Insurance

AH&T has made great strides in the last five years to remain a leader by leveraging innovative technology solutions in ways to improve productivity and customer service while developing and offering our clients value-added tools.

Our research, installation and implementation of the technology in place today began with an examination of areas within our agency infrastructure where poor performance impacted productivity. These weak areas included building power, network infrastructure, dependable access to external agency resources via the Internet, e-mail performance, and communication between our Leesburg, Va., and Seattle offices.

Once AH&T's infrastructure and systems were brought up to speed and operational, we began developing and implementing several initiatives to provide value-added services to our clients and carriers.

We've leveraged technology to provide clients with easy access to their account information, forms and other pertinent information 24/7.

AH&T has also developed a web-based service to assist clients with certificate management and utilized technology to transact business with carriers.

National Underwriter

How is your agency responding to the rise in online marketing and social media, such as Facebook, Twitter, etc.?

Robert Cohen, IMA Financial Group

Recognizing the rising trend in B2B (business-to-business) service research being done online, IMA is actively updating our website to enhance functionality and provide an interactive experience for the visitor. Our producers rely on having a site that provides valuable content, showcasing IMA as a thought leader in our industry, to help their clients and prospects learn more about our company.

We've also embraced blogging internally to help our leadership communicate with associates about key initiatives.

Marc Eagan, Eagan Insurance Agency

We recognize the need for social marketing and are in the process of establishing Facebook and Twitter accounts. Although many businesses are participating in this type of marketing, we realize that the majority of people using these media do so primarily for social reasons.

As a business, we are carefully planning the course of action to implement these valuable tools. Once in place, we will continually monitor these accounts, post information, answer questions and be sure all information contained on these pages is positive, current and fresh.

We have also determined it is in the best interest of the agency not to allow all employees access to these accounts, but rather give only one or two staff members the ability to post news.

Our Facebook and Twitter pages will be available within a year.

Tom Cotton, Hugh Cotton Insurance

We are taking advantage of all of them. We're learning as we go, but we are trying to take advantage of the new media.

Terry Scali, Lapre Scali & Co.

Our agents feel comfortable with various forms of online marketing, so they choose those forms with which they are comfortable and they utilize them.

David Schaefer, AH&T Insurance

AH&T is working to optimize our use of online marketing and social media to reach our clients, prospects, and current and potential employees.

We have tested the waters by starting a Facebook group, LinkedIn group and Twitter page.

We hope to develop a strategy to more effectively use these outlets in the next six months.

National Underwriter

Getting new blood into this industry has always been a challenge. How is your agency recruiting and training the next generation of insurance agents and CSRs? Has the high unemployment rate brought different types of candidates to the insurance agency business?

Robert Cohen, IMA Financial Group

Whether we're in a hard or soft market, IMA is always on the lookout for talent, and we use every means at our disposal to identify and attract potential stars because we recognize that our success depends on our people.

It helps that IMA has long been an employer of choice, having been named a Best Places to Work finalist by the business journals in all of our geographic markets and winning Best Places to Work top honors in both Denver and Wichita.

In addition, the fact that we're employee-owned also helps us attract and retain top personnel.

Once on board, we help new entrants develop into seasoned insurance advisors through an emphasis on career path and our in-house training program.

With our specialized practice areas, we provide employees with the opportunity to specialize in industry segments, allowing insurance generalists to quickly develop niche expertise. Cultivating specialized expertise allows IMA to effectively address the most complex risk management challenges.

We're optimistic about the future of insurance as a career, and we're excited about the bench strength IMA has in place for the future.

We have seen an uptick--however, it's not been a deluge--in unsolicited resum?s from nontraditional candidates who don't have insurance backgrounds.

Marc Eagan, Eagan Insurance Agency

We strive to develop young, talented producers by assuring new producers an excellent chance to make it in the business. We attempt to bring a new producer on board every 18 months, the approximate timeframe it takes one producer to validate or come off scholarship.

We continue to use our internship program as a courtship arrangement to see if it can work both ways--if the producer candidates fit well with our agency, and if we fit well with them.

We pay a referral fee to employees who recommend a successful candidate for hire. We seldom use head hunters.

Human resources and department managers screen applicants prior to the initial interview and administer Caliper (personality assessment) tests to viable candidates for employment.

We insist on in-depth training and cross training, offer an automated system of insurance license renewals, and pay for continuing education classes.

Our in-house education director schedules consultants and guest speakers to offer seminars to employees on premises.

Most importantly, our excellent reputation draws people to us. Young and established agents are frequently in contact with us, asking about the possibility of joining our agency.

Tom Cotton, Hugh Cotton Insurance

We recruit out of the local InVEST programs. As our older staff retired, we have picked up good folks laid off by large brokers.

Terry Scali, Lapre Scali & Co.

We recruit college graduates and we have a pre-graduate intern training process. We also utilize our staff as our front line for recruiting experienced industry employees.

David Schaefer, AH&T Insurance

The importance of recruiting and training the next generation of producers and CSRs is critical for agencies that want to survive and remain independent.

We are focused on accomplishing this and are hiring and mentoring talented young sales and service individuals.

We seek young professional applicants that have been employed in another industry with some degree of verifiable success in their job, either in sales or service.

After hiring, we develop and mentor these young professionals to accelerate their knowledge and job capability.

National Underwriter

Do group benefit sales play a major part in your business? If so, how do you go about cross-selling such non-p&c products? How might the new health care reform law impact this business for your agency?

Robert Cohen, IMA Financial Group

IMA's business model is focused on selling both sides of our business through an overarching discussion of managing risk. Our strategy for managing health risk in an employee population mirrors our approach to managing the risk in the p&c arena.

It helps that our producers are not cornered into selling only p&c or benefits. They are responsible for interacting with key decision-makers from an organization to understand their needs and goals. Then IMA discusses how we would address all of their company's risks.

IMA is a consultant to our clients and not a transactional broker, so we view health care reform as an opportunity that plays to our strengths. We have begun developing strategies to enhance how we work with our customers as they navigate reforms. It is an exciting opportunity for us to do the things we do best, which are advising our clients and innovating.

Marc Eagan, Eagan Insurance Agency

Our benefits department recently hosted a complimentary breakfast seminar for approximately 100 of our commercial lines clients featuring a senior health care analyst from Blue Cross/Blue Shield and an independent CPA (certified public accountant) to explain the challenges and requirements that small and large businesses face due to the health care reform law. This seminar was extremely well received and appreciated by our clients and resulted in quite a few new business leads.

Our benefits department relies on the p&c producers to bring in viable new business after assessing the needs of their customers.

Tom Cotton, Hugh Cotton Insurance

We ask every client if we can provide a one-stop service for p&c and benefits.

Terry Scali, Lapre Scali & Co.

Group benefits play a meaningful role in our business. We believe 50-life groups and smaller are susceptible to loss to government- run exchanges or co-ops.

David Schaefer, AH&T Insurance

Yes, today 30 percent of our agency revenue is in group benefits.

Cross-selling benefits and p&c is our largest source of new business to most of our producers.

At this point, we are still waiting to see how health care reform will impact our benefits business. It is hard to envision how our role will disappear; however, we expect that the revenue from group benefits business will change.

National Underwriter

What might carriers in general do to improve their partnerships with their agents? What can agents do on their end?

Robert Cohen, IMA Financial Group

Building relationships between agents and carriers is not difficult. Start by consistently delivering the basics of mutual understanding and common business courtesy.

You might say it boils down to blocking and tackling.

A respectful relationship is a two-way street. Agents need underwriters to provide products with pricing, terms and conditions that they can sell, and underwriters need agents to sell their products to buyers.

Achieving success requires that agents and carriers are consistent and honest with one another. Agents should be able to rely on carriers to tell them early in the game when they "can't play" rather than later in the process.

Common business courtesy includes being respectful of timeframes, returning phone calls and e-mails, preparing for meetings and calls, and being on time.

Marc Eagan, Eagan Insurance Agency

Partnership is very important today, particularly in an area that carriers offer capacity on a restricted or limited basis.

The saying of "doing more with less" is more important today than ever before.

Those few agents that have earned this right to become partners with a particular carrier should be given the tools to make the relationship a financial success. Working closely with top management allows the agents to open a dialogue for strengthening the partnership. This will lead to a long and prosperous relationship.

Tom Cotton, Hugh Cotton Insurance

They can eliminate the redundancy in our workload and provide more accurate and complete information.

Terry Scali, Lapre Scali & Co.

Books of business are intangible assets and thus difficult to borrow against. Carriers understand these assets and have cash that they could loan to the well-managed agencies, which in turn can provide greater amounts of business to such carrier partners.

David Schaefer, AH&T Insurance

Carriers can improve partnerships with agents by providing more resources for automation. Together we'd like to find ways to eliminate key strokes on both ends.

National Underwriter

How do you see the independent agency system evolving over the next several years? What will be your biggest opportunities and the biggest challenges?

Robert Cohen, IMA Financial Group

IMA is bullish on the future for independent agents.

The independent agent can be nimble and responsive to market forces and make decisions "in the trenches" without encountering hierarchical or bureaucratic challenges.

The employee benefits arena and health care reform are tremendous opportunities for independent agencies to excel.

The biggest challenge for independent agents and the entire insurance industry remains the protracted soft insurance market.

Marc Eagan, Eagan Insurance Agency

We envision the independent agency system to continue to be the premier sales and marketing force throughout the country for those carriers utilizing independent agents. It is the knowledge and relationship that the independent agent has with his clients that continues to generate profitable business for the companies.

We must continue to adapt to the changes that are thrown at us. As we become more automated, we strive to continue our trusted advisor mentality and not to lose personal contact or become a "quote shop."

Standing still may mean going backward today. We cannot let the environment around us get too far out in front of us.

Tom Cotton, Hugh Cotton Insurance

Buyers are moving to an electronic transaction rather than face to face. Independent agencies are developing an online sales process that is buyer friendly and marketing the new transaction against the direct writers.

Terry Scali, Lapre Scali & Co.

There will be more consolidation of established agencies and more clusters for start-up agencies and, overall, an aging and shrinking industry workforce.

David Schaefer, AH&T Insurance

Over the next several years, we see increased consolidation of both large and smaller "mature" agencies. Mature in this case is the largest shareholders are planning retirement and there are insufficient qualified internal buyers.

We also see independent agencies growing faster, with more innovation than larger agencies.

The independent agencies will be more innovative, agile and responsive.

National Underwriter

What kind of market do you expect in 2011? Will renewals still be soft for Jan. 1?

Robert Cohen, IMA Financial Group

While we don't have a crystal ball to predict the outcome of Jan. 1 renewals, we can say that the economy continues to be a challenge, and we don't see the market hardening in the near term.

As we navigate the 2011 insurance market, we're confident that IMA will continue to attract new business as clients seek value-added services and creative solutions.

We also anticipate organic growth as our clients become even more appreciative of IMA's quality and unique offerings.

Marc Eagan, Eagan Insurance Agency

In our area, we foresee a soft casualty market, not as dramatic as in the past, and a hard and fluid property market.

As long as our area can remain free of major storm damage, we believe the availability of property markets will continue to grow and more competitive pricing will be the norm.

Tom Cotton, Hugh Cotton Insurance

Continued slow economy and soft renewals.

Terry Scali, Lapre Scali & Co.

More of the same, with very little change on the rate side.

We're hoping for growth of insurable exposures and a more supportive political environment after the November elections.

David Scahefer

We expect renewals will be soft for January 1 with no increases.

Laura Mazzuca Toops is editor of American Agent & Broker magazine, part of Summit Business Media's Property & Casualty Media Group, which includes National Underwriter.

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