The relationship between insurance companies and their producers is often characterized by a functional disconnect. The source of the problem is a basic misalignment of goals between agencies seeking growth and companies pushing for increased profits.

But these goals do not need to be in conflict with one another. In fact, insurance companies and producers are missing a tremendous opportunity when they allow this perceived conflict to come between them.

The “perceived conflict” is a key concept in this case. The root cause of the problem is how companies and agencies view each other. There is nothing wrong, nor intrinsically incompatible, about their goals. They simply need to be realigned, and that requires a change in mindset.

To all outward appearances, most carrier-agent relationships look good. Business isn't bad, at least according to the numbers. But upon closer examination of a troubled agent-carrier relationship, the company and its producer seem more like adversaries than colleagues with a common purpose.

Mistrust is in the air. Communication is predominantly one way and at arm's length. It's mostly happy talk and a listing of new products, along with the minimum premium commitments the company expects.

As for a real discussion, an airing of concerns, issues or problems–sorry, but those items aren't on the agenda.

The true costs of a troubled relationship are seldom recognized, calculated or understood. But make no mistake, those costs are real and profound. If left to fester and worsen, they can spell the difference between success and failure.

For change to occur, there must be an acknowledgment that a problem exists, followed by a commitment to take action.

Troubles arise when a carrier views its producers as anything but partners. The relationship is transactional, taking the form of one-way directives that are almost paternalistic in tone.

Since the earliest days of the insurance industry, carriers and agencies have squabbled over coverage, pricing and commission issues. When companies and agencies bang heads on those matters, it becomes a waste of time and valuable resources, and ignores deeper, more significant concerns.

Coverage, pricing and commission are the initial “antes” required to get in the game. They should be negotiated, not endlessly nit-picked.

Carriers need to provide adequate coverage at reasonable prices and pay market rates for commissions. Yes, those issues are important, but they should not bog down or set the tone for the relationship.

For the relationship to work, carriers must recognize what keeps the agency principals up at night. That's what real partners do for each other.

Ideally, there should be a plan for the joint development of a customer-retention strategy. It can begin with something as simple as the company working a bit further ahead and getting quotes to agents earlier to allow the producer to lock up a renewal before the competition gets in the door.

But at some point, both parties must review their total relationship when working on customer stewardship.

Both need to understand the value of their relationship so that it can be effectively articulated to the customer. This involves more than talking about price. Value is created in the buyer's mind when he or she is made aware of the many benefits accrued over the past year by being with a specific agency and carrier.

An excellent way to do this, even for a small-commercial account, is by documenting at renewal time that the promises made to the customer were kept.

Additionally, the pain and true costs associated with switching to a new agent and carrier can be outlined to the customer in a similar way.

The most effective way to deal with problems is before they occur. Carriers and agents can do this is by involving one another in their respective strategy sessions.

This must be an ongoing and substantive process. Carriers can present preliminary product and marketing ideas and request input from their agents based on their front-line experience with customers and competitors.

This process requires:

o Careful listening

o Asking what the agency needs to grow

o Refusal to accept superficial answers

When on the company's turf, an agent may tend to be noncommittal at first, opting instead for the path of least resistance. This will change when the agent realizes the carrier sincerely wants their involvement on a deep level. But here again, actions will speak louder than corporate window-dressing.

Nobody likes pain, but to improve performance, the peak performers in every profession agree on the importance of regularly getting out of one's comfort zone despite the associated pain. Still, most people (including insurance professionals) tend to avoid pain at all costs.

Carriers and their producers love to talk about their successes, but sensitive issues are all too often swept under the rug. That must change.

Companies and agents need to actively discuss difficulties in their relationship and find ways to fix them. It will involve some discomfort. They may find it is the small, unaddressed problems–such as personality conflicts or unnecessary demands for information–that are often the chief offenders.

A chief complaint is waiting until the last minute to tell agents bad news. Producers don't like to be surprised with price increases, coverage reductions or similar changes without adequate preparation time. It can have a devastating impact.

Such problems tend to fester, spawn additional difficulties and can result in agents gravitating to other sources. When problems reach this level, drastic, costly measures are usually required to fix them.

The saddest part is that these issues are easy to avoid with good communication. When agencies and carriers are involved in each other's strategic planning, they'll know what's on the horizon. In fact, both will have been involved in designing and planning it.

The payoff for a partnership mindset, simply put, allows carriers and producers access to resources unavailable in the traditional rocky relationship.

Product development, for example, becomes more customer focused when distributors (who are closest to the end-users) are involved in the process. When carriers work actively with agents to define and enhance the products and services offered, it creates a unique franchise value for them, especially when carriers limit their number of distribution partners.

The most important point, however, is when companies put the needs of their agents ahead of their concern about products, it sends a powerful message. It assures the agent that the carrier is committed to their mutual best interests, on a long-term basis.

The results are higher profit margins for insurers, increased growth in agency business, and better products and value for clients. And isn't that what it's all about?

Special Reports /

Dysfunctional Agent-Carrier Relationship Can Be Saved

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