Agents Locked In Game Of Survivor

By Edward Curry

Can agents and companies work smarter together? The track record of agency partnerships has been poor in both hard and soft markets.

Today, the independent agency system remains under extreme pressure from all sides. Insurers are pushing more and more of the paperwork that was once their responsibility down to the agency level, without any thought of compensating the agency for their expense.

During the hard market, some companies imposed new business limitations on agencies, while asking them to re-underwrite their renewal 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 rate inadequacy in a given area or state, carriers resort to one of three choices: either temporarily cease writing in that particular area, restrict the writing of new business, or close those markets in question entirely.

When agents can, they roll the business to another company. This is a questionable, time-honored tradition that is not in any way cost-effective. It is debilitating to the agency and not always the best 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 do respond, it may be with choices that carriers have a hard time accepting or living with.

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

The driving forces for many stock insurers during soft markets are their stock values. How they are viewed by the investment community and shareholders is the overriding concern to those in the executive-making loop. Their focus on favorable financial returns allows agency-company partnerships to take a back seat to profit goals as they seek out low-cost alternatives for distribution to produce target returns.

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

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

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

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

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

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

For the remaining 60 percent of the agencies, this is a time of great opportunity–providing those agency owners are willing to pay attention to eight simple rules outlined in the accompanying article.

The insurance industry that emerges five years from now will bear little or no resemblance to the market and conditions that exist today. Times of turbulence and uncertainty can often bring exceptional opportunities to those who have the ability, the financial stamina and the willpower to persevere.

Edward D. Curry is president and founder of Target Marketing-Management Consulting in Virginia Beach, Va. His latest book is “Insurance Agency Consulting: The Straight Skinny & The How 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 agency owners who plan to grow their agencies and to prosper.

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

Recognize the changing market and be on the lookout for new opportunities. You would be positively amazed at how many agencies routinely close their doors and phones for the all-important lunch hour. This is not sterling customer service.

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

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

Rule #3: Provide professional, knowledgeable staff to your 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 for training, helping to improve the working environment.

Make your agency a profitable, exciting place for you and your associates. This will do wonders for your turnover and your outlook on life.

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

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

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

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

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

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

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

Can you compete, or should you consider joining forces and help them 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 serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.


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