Following more than 35 years as a senior executive with fourdifferent P&C insurance organizations, including serving asCEO, I was offered the rare opportunity to run a midsizeindependent agency in northern Indiana. Although I had reliedheavily on my grasp and knowledge of independent insurance agenciesin building successful insurance companies, I didn't realize howlittle I actually knew about life at the agency level.

After two years in my role as president & CEO of the SilveusInsurance Group's P&C division, I feel as if I have completedan MBA degree in insurance-company operations. While some of myexperiences have been affirmations of approaches I had experimentedwith in my years at carriers, other lessons have shown me that theimportance I once placed on certain agency-company interactions wasfar greater—or smaller—than what is truly required or desired byagency principals and their organizations.

My recent experience has given me a heightenedawareness of what agencies need and expect from their companypartners. I have developed a lengthy list of “dos and don'ts” that,given the opportunity to return to the ranks of insurance-companyexecutives, I would immediately implement—and I firmly believethese changes would fundamentally alter for the better thecompany's strategic relationships with its independent-agencypartners. Oh, to have been given this opportunity much earlier inmy career.

In what follows, I describe 10 key imperatives I believe everyP&C company's senior strategy team should consider adopting oravoiding to one degree or another. They are the result of my havingnow lived the life as their agency customer, infused with myheritage as an insurance-company executive.

Imperative #1: A Coke, Smoke and Joke:Marketing Representatives That Waste Our Time

We average no fewer than 65 visits a year from carrierpersonnel, with each visit generally lasting at least one hour. Iwould venture a guess that 90 percent of those 65 hours would havebeen better spent watching grass grow or paint dry.

In the past two years, not once has a marketing representativebrought a list of submission activity from our agency—and worseyet, not one has been able to discuss the topic once we presentedour submission log to them.

In 100 percent of the cases, they brought with them their mostrecent production report for our agency—which we received in themail or via email several weeks prior.

On precious few occasions have the company representatives beenprepared to advise us of specific classes of business written inthe past 90 days in their respective territory. In nearly allcases, however, we were asked what classes of risks we weresuccessful in writing.

I can count on one hand the number of visits from marketing repsor underwriters who arrived fully prepared to look at our newbusiness prospects and upcoming renewals and engage in underwritingand quoting while in our office—or make a commitment to do so inthe upcoming days and weeks. I could go on with describing theabsolutely meaningless nature of the vast majority of visits fromcompany personnel, but I won't.

Suffice it to say that I have found the agendas of suchvisits—when there is one—to be one-sided monologues of informationwe already have; recitations of the company line and upcoming ratechanges; and expressions of satisfaction or dissatisfaction withour production results. What I have not seen with any meaningfulfrequency is a roll-up-your-sleeves session where the company repis willing and able to get into the weeds and help us writebusiness.

Imperative #2: Say What You Do, Then Do What YouSay

Few companies adhere to this most fundamental need of theagency. Their malfeasance comes in two varieties.

First, they claim to be generalists and willing to entertainrisks across a broad spectrum of classes. However, they fail tosend that message to the front lines where a “hidden” list of dosand don'ts is found tacked on their underwriters' cubiclewalls.

Second, and perhaps more insidiously, companies will providetheir agents a list of classes of business in which they considerthemselves players—and want to encourage the agency to submit risksin those classes. But when the agency does so, it learns that thecarrier really only writes risks meeting other unpublished criteriaor prices these risks so uncompetitively that the business is notmarketable.

So my advice to carriers: Be very clear in defining yourappetite.

One clever method I have seen employed is the use of greenlights (willingly write competitively), yellow lights (write onlythe risks meeting other criteria, or which are best-in-class, or atprices which may not be competitive) or red lights (will not writeunder any circumstance).

And be sure to communicate this appetite broadly andconsistently, both externally and internally—and monitor yourunderwriters' compliance therewith.

While having a broad, competitive appetite will give carriersthe greatest opportunity to grow within their agency partners,having a more selective appetite will still stand them in goodstead, but only if: 1) it is applied consistently; 2) they offercomprehensive and unique coverage enhancements; and 3) theirpricing is competitive.

And a caveat is in order: If a carrier has mastered the“selective appetite”—but is forever adding and deleting classes andunderwriting criteria to and from it—they will have gained nothing.Agency personnel will remain confused and uncertain about what theflavor of the month is.

Imperative #3: Just Because You Want anOrganization with 'Silos,' Don't Expect Your Agencies to Buy theFarm

We have a contractual relationship with a very large Fortune 100insurer that shall remain nameless. Actually, let me correctmyself: We have five contractual relationships with that insurer.At this carrier, we have five marketing reps and five underwriters:one each for personal lines, small commercial accounts, midsizecommercial accounts, large and specialty commercial accounts, andAgribusiness accounts.

We have five profit-sharing agreements, none of whichacknowledges the presence of our total relationship.

Although we write in excess of $1 million in premiums with thiscarrier, we were recently notified that one of the five contractswas going to be cancelled due to lack of satisfactoryproduction.

It has become more common for carriers to silo personal andcommercial lines internally, and I understand the need to doso.

However, I do not see the need to have two marketing repscalling on the agency. Nor is it acceptable to separatepersonal-lines from commercial-lines production for the sake ofprofit-sharing eligibility. I cannot stress this point enough.

For example, we represent another quality carrier that hasestablished a $500,000 premium threshold for personal-lineseligibility and a $500,000 premium threshold for commercial-lineseligibility.

In total, we write $1.2 million in profitable business with thiscarrier. Unfortunately, $900,000 of our volume is commercial linesand only $300,000 is personal lines. Despite the fact that we havedelivered $1.2 million in very profitable business to this carrier,we receive profit sharing only on $900,000.

Fortunately, carriers parsing business in this manner forprofit-sharing purposes are an exception and not the rule.

I understand that there are generally good reasons for designinga carrier's organization around macro-business segments, processingdemands and strengths of personnel. But it is critical thatcarriers present to their agency partners a single face (andprofit-sharing agreement)—both literally and figuratively.

In our agency, there is a direct correlation between thecarriers with which we have superb relationships and theirunderstanding of this critical element in carrier-agency interface.And superb relationships will always yield greater results for allconcerned.

Imperative #4: Speaking of Profit-SharingAgreements, Did You Hear About the One Designed by an Actuary andWritten by an Attorney?

Carriers should ask themselves: “Why do we offer profit-sharingagreements to our agencies?” The answer is self-evident, or so itwould seem.

Insurance companies desire profitable growth from, and ameaningful share of the business produced by, their agencies.Therefore, they offer agencies an incentive to do just that.

From the agencies' perspective, those agreements represent amajor opportunity to generate significant revenue with noassociated marginal expenses.

In our agency, we attempt to calculate potential profit-sharingcommissions each month on a trailing 12-month basis. We certainlydo not want to approach the fourth quarter without an awareness ofour position with each of our carriers. To the extent that we candirect business without sacrificing our clients' best interests, wedo so.

It is necessary for us to perform these calculations becausenone—I repeat, none—of our carriers provide interim profit-sharingprojections throughout the year.

So lesson No. 1 to carriers: If you want your agencies toproduce the kind of results you are incentivizing with yourprofit-sharing agreement, shouldn't you provide them with regularupdates throughout the year?

That disappointing oversight notwithstanding, lesson No. 2 iseven more significant than the first lesson.

Our agency has 19 profit-sharing agreements offered by 14contracted carriers. They range from one page to 13 pages inlength. While the length of the agreement may be an indication ofits complexity, that isn't always the case.

If agencies are unable to project profit-sharing results frommonthly production and experience reports provided by theircarriers in a relatively straightforward Excel spreadsheet, then(coupled with the fact that carriers are not providing interimprojections) these incentives are powerless to cause desiredbehaviors. They simply become “cross-your-fingers” lotterypayouts.

Carriers should test their profit-sharing agreements forsimplicity by asking one of their staff members—a staff member with1) no more than a basic understanding of Excel; 2) a copy of thecarrier's monthly production and experience reports; and 3) noadvance knowledge of the agreement—to calculate an agency'sprojected profit-sharing results on a trailing 12-month basis. Ifhe or she is unable to do so, determine why that is the case andthen simplify your agreement so that he or she is able to doso.

Imperative #5: Trying to Take the Easy Way OutWill Work—If You Don't Get Caught

I'm not going to spend a great deal of ink on this lessonbecause I have not seen widespread deployment of this cowardlypractice.

It is referred to by some carriers as “Share Shifting,” but itgoes by several different monikers. And it is perhaps the mostone-sided strategy yielding one-sided benefits used by severalotherwise successful insurance carriers that I haveencountered.

Simply described, such carriers seek to grow their books withagencies by encouraging agency principals to move existing booksfrom other carriers with accompanying commission-rate enhancements.They have adopted this as their primary marketing strategy and leadevery meaningful dialogue they have with agency managers with thetopic.

I certainly understand the benefits derived by the carrier. Theywill inherit controlled business which is generally more profitablethan business new to the agency. And their growth within the agencywill not be a function of the agency's ability to grow its overallbook of business.

However, they fail to realize or choose to ignore the fact thatthe agency's primary objectives are to grow its book of business byhigh retention rates and a steady stream of new accounts—and tomove existing business from one carrier to another only when it isin the best interest of its client.

Generally, other than a couple of points of additionalcommission, there is no benefit to the agency—and in fact, theprocess generates additional expense in moving the business,thereby offsetting the additional commission revenue received.There is no benefit to the agency's client unless their coverage isenhanced or price is lowered, in which case the movement wouldlikely have occurred without a deliberate share-shift in play.

Imperative #6: Remember, Agency PrincipalsHave a Company to Run—and It's Not Yours

I would be remiss if I didn't express my utter disgust with thenearly universal practice of carriers that annually send theirmarketing representatives in to see agency principals asking for aproduction goal for the upcoming year.

This process originates in the home and branch offices ofcarriers where dictates are issued to marketing personnel to setgoals for each of their agencies for their internal goal-settingexercises.

My primary responsibility to the shareholders of our agency isto profitably grow revenues. To that end, our staff spendsconsiderable time crafting strategies and objectives and projectingestimated outcomes for the agency and each producer for theupcoming year.

We do not—I repeat, do not—attempt to parse those projectionsamong the carriers we represent. Where that growth lands is afunction of carrier appetite, product offerings, pricecompetitiveness, ease of doing business, and the quality of theinterpersonal relationships between carriers and the agency. Andthose criteria change year to year (and often week to week).

Establishing carrier goals for the agency benefits the carrier,not the agency. What benefits the agency are carriers that seek tolearn the agency's overall goals and the strategies underlying theachievement of those goals, and then suggest the ways that they canbe of help in the agency's future success.

Based upon that process, the marketing representative should bein a position to project production from his or her agencies in theupcoming year to report back to their superiors. But don't ask meto do it for you.

Imperative #7: Is Your Agency AppointmentStrategy Well-Defined and Comprehensive, or Does It Lead to ShotgunWeddings?

In the past 24 months, our agency has either pursued or has beenpursued by prospective carriers on 11 occasions. In those instanceswhere we were pursued (six times), the carriers' marketingrepresentatives never satisfactorily explained why entering into acontractual relationship with our agency was a mutually beneficialunion for both parties.

In all 11 instances, only three times did the carriers'representative ask to see our business plan—or attempt to learnwhere their company would fit in our current and futureclass-of-business concentrations.

But what I have found most disturbing is how little in-depthunderwriting of our agency was performed and how seldom marketingrepresentatives were able to differentiate their employer from ourcurrent stable of contracted carriers.

When I have inquired as to the profile of successful agenciescontracted by the prospective carrier (which I routinely do), noneof the marketing representatives have been able to articulate anacceptable response.

Our agency reviews and seeks to improve the quality and breadthof our carrier partners on a quarterly basis. We do so in a formaland deliberative process—and we expect the same from carriers thatcome courting us. We are still waiting for a meaningful courtship,having experienced too many requests for shotgun weddings.

Those carriers that employ a well- defined strategy in buildingtheir distribution network and utilize highly deliberate criteriaand processes in agency selection have my profound respect. Theyoften “pass the test” in other agency-company practices aswell.

Those that sign contracts with any Tom, Dick or Harry generallyfail the test of building a long-term and productive agencyrelationship. Company executives who decide to approachdistribution in this way appear to place no real value on theircontract. Why then should I place value on contracts with thesecarriers?

Imperative #8: Ease of Doing Business IsImportant—But Not as Important as You Believe

From time to time, I pass a motel advertising air-conditionedrooms or colored TVs or both. Offering “amenities” that the buyingpublic expects or demands is a poor way to differentiate one'sbusiness.

And so it is with insurance companies that tout the fact thatthey are easy to do business with. With the technology availabletoday, being easy to do business with should be the norm. And thefact is: Most carriers have conquered this business necessity,though with varying degrees of success.

The message here is that “ease of doing business” (EODB) is anecessity, not a luxury. If your company expounds on itsleading-edge EODB as its primary differentiator from itscompetition, you need to go back to the drawing board. If yourcompany's EODB score is low, you will have only one saving grace(see #10).

Imperative #9: Now Turn to Page 57 in Hymnal13

I'll take just a minute to recite something that managers andleaders of organizations in all walks of life learned in Management101: When messages flowing down from the executive suite aremeaningfully different than those wafting up from the grass roots,customers are confused, frustrated and often turn elsewhere to dobusiness.

In my time in the agency ranks, I have experienced too manydisconnected messages from companies. Carrier executives mustcreate internal processes in which managers, marketingrepresentatives, underwriting personnel and their contracted agencypersonnel all sing from the same hymnal. Otherwise, the perceptionwill exist that the company is not well-managed, and itscredibility will suffer within its distribution network. Afractured relationship will not be far behind—and desired resultswill suffer over time.

Imperative #10: Don't Forget to Put anUnderwriting Department in Your Company

Of course, carriers haven't forgotten to include an underwritingdepartment in their company; it just too often appears that way toan independent insurance agency. Why?

Agency principals universally agree on several points. First,they really want to do business with as few carriers as possible.The time and effort (and therefore expense) required to do businesswith multiple insurance companies increases linearly with thenumber represented.

Keeping track of various submission processes, reporting andremittance requirements, quoting systems, and so on requires aninordinate amount of energy. Also driving this desire is the needto maximize profit-sharing opportunities, which is infinitelysimpler and more lucrative when there are fewer mouths to feed.

Secondly, agency principals are compelled to assure to thegreatest extent possible that they have markets that will write theclasses of risks they pursue on a regular basis (withoutcontinually turning to wholesale brokers at a reducedcommission).

The solution to achieving an acceptable balance between thesecompeting needs requires contracting with a relative handful ofcarriers that actually underwrite on an account-by-accountbasis.

Such underwriting places a greater burden on the individualability of the members of a carrier's underwriting staff. As such,it requires more precise selection of underwriters, better trainingregimens and strict auditing of accounts written.

Unwilling to succumb to this burden, the majority of companyexecutives have tied the hands of underwriters. They haveinstitutionalized what can be done, what cannot be done and whatdiscretion, if any, underwriters are permitted to exercise.

What results from the myopia of class underwriting, however, isthat many companies are chasing the same low-hazard, vanillaaccounts as all other such companies, taking those accounts awayfrom their competitors and driving the prices lower and lower.

And the ensuing, unacceptable underwriting results from theirunderpriced, vanilla book of business are exactly what they wereattempting to avoid. True underwriting requires the exercise ofwell-trained judgment—not the ability to read the “Can't-DoBible.”

Finding the best-in-class risk in a difficult class, or risks inunserved and underserved classes, allows a carrier to get a premiumprice and improved retention because there simply is lesscompetition for such risks.

I have discovered that there are carriers with true underwritershandling accounts in certain class niches. In all other classes,they are strictly by the book. As a result, many agencies arecompelled to contract with more carriers than desired in hopes ofcovering as many bases as possible.

This imperative trumps all of the others: Give me a trueunderwriting company with a reasonably broad appetite, and I willtolerate every other shortcoming cited.