The following article was derived from a presentation given at the ASCnet TENcon meeting, which was held last October in Orlando, Fla.)

Several years ago, we worked in an insurance agency whose owner began every staff meeting by asking, “What kind of organization are we?” We all learned quickly that it was a sales organization. Think that's a given? Not necessarily so.

Although sales are an agency's lifeblood, not every agency is a total sales operation. Our company is a boutique consulting, valuation and investment banking firm specializing in the insurance brokerage industry. We provide sales management training, operational and financial consulting, business planning, perpetuation planning and various other services for our clients. We studied agencies and met with our own sales-management team to identify the common traits of high-growth sales agencies and learn what really drives their new-business sales. We're going to share with you what we learned and encourage you to adopt some new practices to make your agency a total sales operation.

We found that high-quality, high-growth organizations share the following four traits:

1) The prevailing culture or mindset is, “We are a sales organization, and we want to build a culture that supports sales. We will remove all obstacles that impede new sales.”

2) Each person in the agency has a clearly defined role. Everyone knows what part he or she plays in growing the business.

3) The agency provides a foundation for true teamwork. Its principals understand that it takes the entire team to generate new business and provide outstanding service to clients.

4) The agency establishes teamwork and growth goals, and tracks and rewards achievements in those areas.

A new attitude

Your agency might need to adopt a new mindset. As we mentioned earlier, an agency is like a human body, and new sales are the blood that nourishes it. Service and support are the skin that keeps everything intact. To remain healthy, you need to work as a team instead of pulling against one another. Every position is important, and every team member must play his or her position well for the team to win. Producers must produce new business, service people must provide outstanding customer service and the support staff must do their part to facilitate the process.

The top sales organizations define such roles as producer, CSR and support person, and establish minimum performance standards for each one. When all understand what is expected of them, they work together to drive new and organic growth.

Producers

Producers' primary function is to generate new business. They also must pre-qualify leads and determine if prospects are willing to switch to a new agent who offers greater value-added service, or if they are simply shopping for a better price. Part of this process is identifying prospects' pain and providing a solution for it.

A producer is responsible for understanding the agency's capabilities, resources and limits, and for targeting only quality accounts that meet the agency's standards. For instance, suppose a producer announced during a sales management meeting, “My wife knows the controller at Disney, and she thinks we can get that account because they're not having success with their current agent.” The Walt Disney Co. is a huge corporation, with 10 theme parks on three continents and thousands of employees. If the agency in question is small and has only a few markets whose capacity clearly is not sufficient for such a risk, then pursuing such an account as Disney would waste both the agency's time and the prospect's because the agency doesn't have the resources to follow through.

A producer also must ensure that he or she has adequate time to obtain expiration dates, establish timelines for the completion of tasks and otherwise develop each submission. Collecting loss runs and all other information needed to complete applications prevents the process from bogging down when the producer hands off the account to the service team. Obviously, producers also are responsible for building relationships, closing deals, cross-selling and account rounding.

One way to define a “producer” is to establish a minimum level of new-business production and a minimum average account size. Regardless of the agency's size, a sales agent should produce at least $50,000 in annual revenue (new growth); anyone who produces less should be reclassified. A producer should focus on and service the top 20% of his or her accounts. Take the revenue generated by that top 20%, divide it by the producer's total number of customers, and the result is the minimum account size on which the producer should work. Anything smaller should be passed off to an account executive or service team.

By shedding smaller accounts, producers ultimately grow their books of business. We found that 60% of producers' time is spent on accounts that generate only 5% of their revenue. You might say, “Those accounts got us started; they built our book!” We understand, but you also must generate new growth. To do so, you need to focus on the accounts that pay the most–the top 10% to 20%–and let someone else service the rest.

A person's pay should reflect his or her role. The person mentioned above received a 35% commission on renewal business, and his book was $350,000, so he was paid $122,500 per year. He had a CSR helping him, so that person's salary added to the cost of maintaining his accounts. If a producer performs more like an account executive, then he or she should be paid accordingly. The producer in our example should have earned $50,000 to $60,000–roughly half of his actual compensation.

Producers also should be responsible for obtaining referrals, which is one reason they should work on the top 20%, a realm certain to be ripe with referrals. For instance, the president of a manufacturing firm undoubtedly knows the executives of other firms in the same industry or related ones. A producer who writes that firm and develops a relationship with its president can ask him or her for referrals to those prospects.

Finally, producers are responsible for creating service timelines for their clients. A producer can't offer the same services to every client, and not all clients want the same type or level of service anyway. The top-tier clients should receive certain proactive services, while the middle and lower tiers should receive more reactive services, or perhaps a combination of the two. (Proactive services are those that producers offer, such as quarterly loss analyses or risk-management counseling. A reactive service is one that a producer provides at a client's requests, such as certificate issuance.) Also, some clients want to see their agent only once each year, while others expect a monthly visit or telephone call. The producer should decide which services to offer each client and when they should be rendered. The CSR is then responsible for making or arranging the client contact and following up with the producer. For example, the CSR might send the producer a note that says, “Call this client; it's time for your quarterly meeting.” The producer and CSR should meet regularly (at least quarterly) to discuss the timeline and adjust it as needed.

On a related note, we recommend preparing a “report card” to give to clients when renewing their policies. A report card not only solicits feedback from clients; it also reminds them how much you do for them and that you're looking out for their best interests. For example, “We promised we would give you a quarterly claims analysis, and we did so on this date.” List all of the other services you provided throughout the year. Give clients a chance to offer their comments; be sure to read them all and follow up on them. Obviously, you should address any subjects for which you do not receive passing grades.

CSRs

Just as a producer is most effective when producing, a service person helps an agency most when providing service to clients, thereby freeing producers to generate new business. We define a customer service person as someone who manages relationships with clients on a day-to-day basis. Key duties include fielding client calls, handling change requests and claims, checking policies for accuracy, solving administrative problems, assisting in the marketing process and keeping producers up-to-date on significant developments related to their accounts. A CSR or account manager also is responsible for making sure the agency fulfills its service commitments to clients. The CSR doesn't necessarily have to deliver every service personally but should monitor the account to see that things get done and deadlines are met.

CSRs consistently should follow established workflows and procedures to maximize operational efficiency and reduce E&O exposures, sometimes enlisting the help of support staff. When dealing with clients, they must follow the agency's written minimum standards, which are different from workflows and procedures. A standard is an expectation that an agency's staff must meet. For instance, Walt Disney World employees (who are called “cast members”) can never tell a guest “no.” If a guest requests something, the staff must find a way to comply–that's Disney World's standard. Your agency's standards might include returning all telephone calls within 24 hours.

Support staff

Your agency may hire support staff to assist your service personnel. Support people perform such simple, run-of-the-mill tasks as processing auto ID cards, checking basic endorsements, helping CSRs maintain client files and issuing certificates of insurance. If anything exceeds the support person's level of training and expertise, someone with greater knowledge must approve it. For example, some agencies consider certificates of insurance a huge E&O exposure and don't allow support staff to issue them. However, if an agency creates a template file for certificates, a support person should be able to safely issue basic ones. If special wording is requested or used, then an account manager or producer should approve the language, document doing so and obtain approval from a company underwriter before the support person finishes the job. If CSRs check endorse- ments returned by companies, they're not using their time effectively. Duties such as these can–and should–be transferred to a support person.

Do sweat the small stuff

If your agency has a small-business unit, make sure it truly is a profit center. We recommend that all agencies determine the minimum revenue needed to break even on an account. Factor in the salaries of the service people and support staff; the cost of utilities, computer equipment and office supplies; and all other expenses associated with maintaining that account. When agencies perform this exercise, they often find they're losing a lot of money on some of their accounts. One agency we dealt with recently determined that it needed to earn $600 in commission on an account just to break even–and many of its accounts paid only $100 or $200. That revelation was a real eye-opener.

We also suggest that agencies not pay producers for small business. We know many people object to this idea, but it makes sense to reward only the behavior that you want to see repeated. We're not saying small accounts are unimportant, but if you want your high-level producers to bring in mid-size and large accounts–the most profitable ones–then pay them commission only on that business. Let people at a lower pay level take care of smaller accounts.

Another way to increase efficiency when placing smaller accounts is to use just a few standard markets. Many agencies make the mistake of shopping their small-business accounts as much as they do larger ones. But if someone on your staff goes to 10 or 15 markets for an account that yields only a few hundred dollars in revenue, you lose money just by writing that account and will have to maintain it for about five years just to break even. Also, avoid placing smaller accounts with excess and surplus-lines carriers, because it takes longer for CSRs to process renewals with them and such markets present more risk than the accounts are worth. Instead, choose only three or four admitted companies adept at handling small accounts and use them as your go-to markets for such business.

Establish efficient workflows and procedures, then monitor them to ensure that everyone adheres to them. If you still have paper files, switch to e-filing or T-filing. If your personnel are keying in data at a carrier's Web site and then entering it again elsewhere to issue new policies or process endorsements, we suggest that you discontinue the duplicate data entry. If necessary, take a strong stand with your carriers. Tell them you're happy to do business with them, but you need to be able to work through a facility like the IVANS Transformation Station or at least get downloads from them.

Carrier service centers work well for some agencies but not so well for others. Use one (or more) only if your agency truly benefits from doing so. Before you place an account with a carrier service center, make sure that all the client's lines are with the same carrier. For example, a client whose businessowners policy is with one company and whose workers comp policy is with another could find it frustrating and inefficient to contact two different service centers–and prefer instead to just call your agency whenever they have a question or problem. In that case, you are sharing some of your commission with the service centers, yet you're still servicing the account.

Monitoring procedures will reveal whether you're getting your money's worth from a service center and also uncover any related technical or training issues you might need to address. If using a service center saves you time and you're pleased with the results, that's great. But if you encounter problems, or find that you're still taking many client calls or see your retention begin to decline, don't hesitate to pull the plug.

Marketing panel

Every agency should have a marketing panel that qualifies prospects and reviews all submissions presented to the agency. No matter what your agency's size, and even if you don't have a marketing department, you can increase your hit ratio by creating and using such a panel. We've seen eager new producers start working on accounts for which their respective agencies have no markets. If an agent lands one of these accounts, a CSR likely will spend many hours trying to find a market for a piece of business that the agency doesn't normally write and for which it has no carrier relationship. A marketing panel, on the other hand, can help ensure that new business matches up with your carriers' appetites.

Your marketing panel should consist of the sales manager, the service manager, an account executive, the head CSR and a producer. The panel's main duty is to meet periodically–once a week or so–to look at every submission and determine whether it meets the agency's criteria and should continue to be processed. Panelists should consider whether the insured has an unmet need for which the agent has offered a solution and ascertain if the prospect is likely to fire his or her current agent. This measure will help producers avoid “practice quoting,” wasting your staff's time and decreasing your efficiency and your profit margin.

The panel also should determine whether the producer has allowed adequate lead time and has gathered complete and accurate data. Producers sometimes fail to understand CSRs' time requirements. I've seen an agent hand a CSR a few bits of information and ask for a quote on an account that's up for renewal in a few days, with no regard for whatever else the CSR might be working on that now must move to a back burner. Such last-minute tactics not only annoy and inconvenience CSRs but also can harm company relationships. Likewise, providing complete and accurate data might sound like a no-brainer, but apparently it isn't. Earlier this year, we visited an agency and found a lot of friction between its producers and service staff. We learned that several of the agency's producers routinely put information on applications that they knew was false to ensure that underwriters would accept the apps and offer favorable quotes. For example, they might say that a building had a sprinkler system when, in fact, it did not. Then an underwriter would quote the risk as though it had a system, an inspection would indicate otherwise, the rate would change or the application would be denied, and the CSRs would have to explain the reason to the client and deal with the fallout. Much time-consuming drama and ill will could have been eliminated if a marketing panel had acted as a gatekeeper for the agency and had the authority to veto a submission or suggest that a producer build a carrier relationship or otherwise continuing to work on an account and present it again later.

Rewards

For motivating sales staff to perform well, we prefer the carrot to the stick. Most of us work better when we know what is expected of us, respond better to positive feedback than to negative and tend to repeat behavior for which we have been shown appreciation. Still, many agencies do not have any type of bonus pool for their service staff. If they do, disbursement typically is arbitrary–”Everybody gets $1,000 this quarter”–rather than tied to measurable goals. If you want your producers to bring in large accounts, pay them for doing so (and stop paying them for small, unprofitable business). Likewise, if you want to see account retention increase, reward your staff for retention. We suggest creating a bonus pool from which you can pay predetermined bonuses to CSRs and support people who reach specific goals for things under their control.

Our sales management team recommends posting producer performance goals and results where everyone in the office can see them. At one agency we visited, a huge banner near the copy machine displayed all agents' sales goals, quarterly totals and year-to-date standings. The banner was updated daily, and it prompted everyone in the agency to think about sales every time they passed it. Don't think you can accomplish the same results by handing each producer a printed spreadsheet with his or her goals and progress–it won't work as well. A producer who is having a good run will look at the sheet, congratulate himself for hitting his goals and put it in his desk drawer. Those who are not doing so well might feel a bit embarrassed at first, but then will realize that few people know they're falling behind. Instead, create a large display and post it prominently so it can serve as a daily reminder for everyone to work on sales. Another benefit to this tactic is that CSRs can see how their producers are doing and prod them along, since their compensation is tied to the amount of new business their producers bring in.

Require producers to at least hit 95% of their goals for their CSRs (and other members of their support team) to receive bonuses, which can be a percentage of their base salary for the past quarter. For instance, a service person supporting Bob, who peaked at 115% of his goal, would be paid an additional 10% of last quarter's pay. Thus, a CSR who earns $40,000 annually can qualify for a $1,000 bonus every quarter that his or her producer hits the goal.

Once you've established and posted goals, created the bonus pool and announced how you're going to use it, be sure to use a reliable tracking mechanism to eliminate guesswork and pinpoint breakdowns in the system. If producers' goals are published, and some people fail to reach them, then you have some objective basis for holding those people accountable.

We've outlined what might be called “The Four Habits of Highly Successful Sales Agencies”: 1) create a sales organization culture, 2) clearly define the role of each individual within that culture, 3) promote teamwork among all team members, and 4) establish and monitor guidelines, and track and reward sales success. If you adopt these habits within your agency, you will be on your way to becoming a total sales operation and will enjoy an increase in new-business growth.

Rob Hamilton is a consultant at Marsh, Berry & Co. His consulting activities include valuation of insurance agencies and brokers, financial and operational management, business perpetuation and compensation. He can be reached at Rob@MarshBerry.com.

Special Reports /

Taking your agency to the next level with the total sales concept

Related Stories

Recommended For You