Companies Cagey About How They Pick Their Agents

For independent agents looking to understand what insurance companies expect from them, the best advice might be to read your contract carefully, don't miss any target figures on volume and profitability, and be prepared for some hard-nosed negotiations in this hardening market.

There is no insurance industry benchmark when it comes to company appointments, explained Doug Terrill, executive director at Marsh Berry and Company, an insurance consulting firm in Concord, Ohio. “Carriers decide what is important to them; nothing is carte blanch,” Mr. Terrill said. “Nothing is standard.”

In making their choices, companies look at an agencys premium volume, growth, business objectives and loss ratio, Mr. Terrill explained, but defining a benchmark is not easy.

One company, Amerisure, a regional insurer headquartered in Farmington Hills, Mich., does list qualifications for appointments on its Web site (www.amerisure.com). Among the requirements for a company appointment, Amerisure must be among the top five carriers of business in the agency, and the agency must attain an average earned premium of $1.5 million for each of the last three consecutive years with an average return of 10 percent during that period, or $1 million in earned premium with a 15 percent average return during the same period.

However, most companies play it very close to the vest as to how they choose and compensate their producers. A visit to other company sites does not reveal such details, and the few companies willing to discuss the issue would not get into exact figures. Other companies contacted by the National Underwriter would not discuss the matter at all.

Possibly the events of Sept. 11, prompting the acceleration of the hardening market, are playing a role in the reluctance of carriers to discuss their relationship with agents, suggested one knowledgeable source who asked to remain anonymous.

Representatives from Warren, N.J.-based Chubb and The Hartford were willing to discuss their relationships with agents and the companys expectations in general terms.

“We are fairly selective with our choice of agents and brokers,” noted Robert Hamburger, vice president in charge of management of agency services for Chubb.

Chubb has more than 5,000 agencies representing a product that is geared to the “high-end” personal lines customer, explained Mr. Hamburger. An agency could find a mix of commercial and specialty commercial, but the focus would be on the high-end personal lines side.

To get that appointment, the agency would have to show a profitable book of business measured by their loss ratio, and demonstrate growth over a period of time, Mr. Hamburger said. The producer must offer a good customer base and an excellent reputation for professionalism in both business and community dealings, he went on to say.

“The producer must show a high level of understanding of the insurance transaction and must represent our product to the customer,” Mr. Hamburger continued. “We are also looking for a producer with a good capital base and track record in the line they are going to represent.”

Chubb also looks for an agency that represents a wide range of other carriers covering a broad spectrum of markets, according to Mr. Hamburger, who noted that a newly-appointed agency cannot expect to do a broad line of Chubb products right off the bat, but should expect to “start small and grow large.”

Because regional considerations can impact a book of business, Mr. Hamburger would not get into specific numbers in the company's expectation of performance, except to say that Chubb looks for agencies with “a fairly established book of business.”

“We need commitment from the agency,” emphasized Mr. Hamburger. “We do not take all comers. There is a certain cost to doing business and it is not worth training the producers if they are not going to reach that level; and it is not a small level.”

Chubb is committed to the independent agency system, Mr. Hamburger went on to say. That commitment means working with agencies to make sure they continue to be successful. Among the things the company does to help agencies reach Chubb's goals is to make sure there is plenty of information on the business. Training courses and seminars are sponsored by the company and can also be applied for continuing education credit.

“The smarter our producers can become on a line and forms, the better off we all will be,” remarked Mr. Hamburger.

Exhibiting a high degree of professionalism and good business planning are a few of the attributes the Hartford looks for in its appointments, said Sue Honeyman, a company representative.

The Hartford looks for three specific things in an agency, she noted: the agencys perpetuation plan, an active sales plan, and a desire for long-term growth.

Explaining that the company does not want to overlap its representation, Ms. Honeyman said Hartford makes an analysis of the lines the agency is interested in to determine if that business plan fits in with the current territory.

After an interview, if the regional representative feels the agency would be a good match for the Hartford, then they go ahead with the appointment. The agency and regional executives meet periodically to review and update the sales plan for growth and profitability to make sure that fit sticks.

“We set the goals together so it is clear to each side what is expected from the other; that way we avoid misunderstandings,” Ms. Honeyman said.

The primary emphasis, Ms. Honeyman said, is to look for an agency that has a long-term interest in working with the Hartford to “grow together.”

To help in that growth there is the Hartford School of Insurance and other training programs for producers and customer service representatives. The company also produces sales materials to help agents become more profitable and efficient, Ms. Honeyman pointed out.

Agents can also take advantage of the companys Electronic Business Center, where sales material, electronic quoting and other business functions can be done online instead of over the phone or by fax. Hartford also has a business management consulting firm to help agencies adjust their business plans, design perpetuation plans, enhance profits or assist with technological development.

“The Hartford has been selling through independent agents since 1810,” Ms. Honeyman observed. “Thats a lot of years of experience with agencies and a lot of years to perfect these things. We expect a lot of our agents, but we do not want them to be uncomfortable with our expectations. We look for a good relationship with everybody.”

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, December 10, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

Contact Webmaster

Special Reports /

Companies Cagey About How They Pick Their Agents

Related Stories

Recommended For You