Filed Under:Agent Broker, Agency Management

The Four Cs: The Model Agent/Company Partnership

Most know that Florida’s homeowners’ insurance market is poles apart from other lines and other states. For agents, one of the more challenging differences with a landscape dominated by domestic carriers and managing general agents (MGAs) is the appointment decision-making process. Specifically, what type of appointment should be made? Limited or regular, Citizens Property Insurance Corp. takeouts only or new business,  other options? Then there is the critical question of whether the partnership will produce a result satisfactory to the carrier, the agency, and ultimately the agency’s customers.

Some may recall a time when agency appointment decisions were based on the three Cs: competitiveness, contract, and commissions: Is the product competitive from both a price and coverage standpoint? Is the company’s contract acceptable? Are the commissions adequate to provide a reasonable return on servicing the business?

Before Florida’s residential property market relied almost exclusively on mono-line domestics, there was also a fourth C: compatibility. From the standpoint of automation and workflow, was the company a good fit?

For independent agents, such compatibility issues were dissected and improved through national projects such as the Agency Company Organization for Research and Development (ACORD), the Insurance Institute for Research (IIR), and the quest for Single Entry Multi-company Interface (SEMCI), and were jointly pursued by agent members of the Florida Association of Insurance Agents (FAIA), Independent Insurance Agents & Brokers of America, and national and super-regional carriers. In the 1970s and 1980s, FAIA lead the way with its Manifesto projects and functional cost studies, all designed to help lower costs for both partners and improve independent agent competitiveness with direct writers. 

But what about Florida today? How does an agent know to accept or reject an appointment offer (or to seek one) based on three or four Cs if the true costs of the relationship are unknown? What good, for example, is a fair contract and a higher commission percentage if processing costs and workflow requirements are incompatible and so costly there is no profit left over? Since consistency often drives profitability over the long-term, is it not also important to know the degree to which company processing issues may assist or impede attainment of the agency’s strategic goals?

The Model Partnership Panel
Last year, FAIA’s board commissioned a study to assist agents seeking or accepting offers of appointment with Florida’s new breed of domestic carrier. A Model Partnership Panel of involved and technically savvy agents was formed to address the issues. Ably assisted by independent consultant Al Diamond, owner of the Agency Consultant Group, and FAIA staffers past and present, the panel designed and distributed a survey on existing workflow issues and requirements of Florida’s top domestic writers.

The Web-based survey was sent to those agency domestic carriers writing over 90 percent of Florida’s homeowners’ policies. Accuracy is paramount, so after agent panelists assembled the original draft, it was screened and revised by half a dozen carriers for both accuracy and relevancy. An advanced hard copy was then forwarded so companies could better prepare to give accurate and complete answers on the final electronic version.

Once completed, the answers were returned to each carrier for another review, final revision, and the opportunity to write in qualifying comments. The final data set was then reviewed by agents of each company and, to the extent possible, inconsistencies were resolved, results corrected, and totals again recalibrated. The survey questions and the final report, due out shortly, will be available on FAIA’s website for agency members only and will be the most comprehensive survey of its type ever conducted in Florida.

Measuring Compatibility
So, what will agents (and companies) learn from the results? The study deals with carrier requirements and capabilities in the areas of technology, degrees of outsourcing, compensation, and financial workflow requirements. In addition to the original three Cs, agents need to know whether policies can be rated online, whether the carrier participates in agency downloads for direct bill business, and how it handles direct deposit of commissions and ACH transactions. Does the carrier have a consumer portal; a “find an agent” section on its website? Can the agent process endorsements on the company website, and if so, which endorsements?

FAIA’s Model Partnership Survey will reveal the carrier procedures for claims handling as well. For example, wouldn’t it be good if an agent knew before accepting an appointment whether a claim can be filed by email, phone, or fax by the agent or consumer? Does the company participate in claims download or does it use an MGA for claims handling?

Speaking of the MGA—which is the entity the agent most often deals with—what is the company’s MGA? Is it wholly owned and does it use outsourced services, and if so, to what extent? 

An agency may know it will receive a 10 percent commission on new business, but are commissions paid on the gross premium? Do commissions differ by peril, territory, risk, size of agency or other factors?  Are commissions paid on an annualized basis or as earned? These issues matter, and can cost the agency many dollars by each year’s end, and certainly over the long haul.

Speaking of costs, what about inspections? How are they handled? Are 4-point photos, sinkhole inspections, and mitigation re-inspections required? If so, under what circumstances and by whom?

Also, can agents print a new declaration page or access payment history online in real time? Are applications uploaded to the company website? Does the agency receive confirmation of endorsements? Does the company require the agent to maintain client records? If so, what is the term of retention, and does the company permit the agent to maintain paperless records? 

When answers to these and dozens more questions are shared with the agent prior to signing the company’s dotted line, the partnership is built around realistic expectations, not surprise and recrimination. If all four Cs are satisfactory instead of just the usual three, a more enduring and mutually profitable relationship is created for both partners, ultimately serving Florida consumers with a more cost-effective distribution channel. 

Still Time to Participate
Carriers that may have some reluctance to share such detailed information or have it published should know that FAIA is not making judgments or deciding which carrier is right or wrong, better or worse. Nor are we attempting to rank carriers or to measure how well they perform certain functions. That is for agents to decide individually once they have the information to do so. Our task is merely to provide the decision-making information agents need and companies should want them to have. 

Carriers that were not asked to participate but that would like to have their answers included can contact Dave Newell at FAIA. The results will be improved and refined over time and will reflect the changing nature of the agent/company partnership—a partnership we hope will improve, in part, because such a survey was conducted in the first place. 

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