How do you go about selling risk management when premium rates are falling and insurers are being ever more generous with their coverage? That was the question we posed to those entering this year's sixth annual National Underwriter “Commercial Insurance Agency Of The Year” award program. Our winners had plenty to say on the subject and other key challenges during NU's lively “State Of The Agent Roundtable” discussion.

All three award-winning programs were profiled in NU's Sept. 24 edition. However, as part of the award program, the three winners–this year's “Champion” and two agencies receiving an “Honorable Mention”–were treated to a weekend in New York City last month. While in town, they joined me and our 2006 Champion for an in-depth discussion of the challenges facing independent agencies.

Highlights of that lively roundtable session follow, including capsule bios to briefly tell you who the winners are and what sets their agencies apart.

You may also hear this year's winners reveal the secrets of their success firsthand by registering–free of charge–for NU's first Virtual Conference on Nov. 15, from 12:30 p.m. to 1:30 p.m. EST. Go to http://events.unisfair.com/rt/nuco~futureofinsurance for details on this and the other six online sessions, which will be archived and available online through Feb. 16, 2008.

For now, read on for tips about prospecting, account retention, recruitment and training from four outstanding agencies that serve as role models for their peers.

Sam Friedman:

Editor, National Underwriter

How do you keep risk management front and center with your clients and prospects with prices falling in so many parts of the country for so many lines of coverage?

David Becker:

Cottingham & Butler,

2007 Champion

First of all, our heritage has been with clients who want to take risk. Something like 75-to-80 percent of our business is with those who are already in the alternative market, and hopefully, over time, we have taught them that preventing and managing claims is the most important long-term way to control their costs. And most of our clients have bought into that.

Another big part of our success is we deliver what we design. We actually have the TPAs, the loss control consulting and our own captive consulting group.

Clients get to know our service people, so even if someone else gets them a cheap number from a different carrier, they hate to give up the service people they've worked with for many years. It creates another hook with the client, and they don't want to give that up for a one-time deal and then not be able to get that attention.

John Turner:

J. Rolfe Davis Insurance,

Honorable Mention

At the end of the day we're going to sell you an insurance policy, but that's not where it starts. Our process is to discover, design, implement and administer. It's a continuous process throughout the year.

We also super-qualify our prospects. So if they don't accept in the beginning what we do and how we do it, we leave, because if they want somebody to create an auction, we are not auctioneers.

Once they become a client, they've already bought into our concepts, so even in a softening market they'll stick with our program. The majority of our customer base is really sold on what we do as a solution provider. So we haven't seen a lot of threats, because clients anchor onto what we provide for them. It's harder to change what you're doing if it's working.

Sam Friedman:

Anderson, if your agency did not have a disaster recovery plan in place, you wouldn't have survived Hurricane Katrina. Your agency is in New Orleans, with offices right across from the Superdome!

W. Anderson Baker III:

Gillis, Ellis & Baker,

Honorable Mention

Indeed! Certainly, we are not enjoying a soft market in New Orleans right now, but that gives us that much more opportunity to talk to a client about what they're getting besides just the insurance. We can tell them that we practice what preach.

We had a growing risk management and loss control department prior to Katrina, and we found that it was such a value that we expanded it after Katrina to accomplish two goals for a client. Certainly, we want to help on the human side–bodily injury issues to employees and protection of their own property–but we also use it to make the client more attractive to underwriters.

There's a very skinny set of underwriters willing to write coverage in New Orleans right now. We make it clear to the client that one of the things we are trying to do is make insurance easier for you to obtain in a very difficult market, and that is frankly how we are able to keep clients active with us.

If we keep telling them over and over again that insurance is simply part of their risk management program, even though it's a necessary part, they've got to make the rest of the house look good so we can buy the insurance for them. Usually this strategy works very well for us.

Sam Friedman:

What if an agent comes to you and says, “About this risk management pitch–what's in it for me? Do I really need to do this? You know, I'm a pretty good salesman. I've got good connections with my underwriters. Risk management sounds like a lot of work. Is it really necessary for agents to get into all this to be successful in the next five, 10, or 15 years?

Jack Galloway:

Barney & Barney

2006 Champion

Today, agents must add value to the insurance transaction. Otherwise we will be replaced by a competitor offering the cheap quote of the day.

For clients, it's not just about their current premium but their cost of risk. How do you and your clients lower their cost of risk? You do it with loss prevention, safety training and good claims management.

This whole combination of risk management activities that agents instill in the client makes us valuable to them and keeps their costs down.

Sam Friedman:

How do you go about distinguishing yourselves–not just with a risk management philosophy but also on delivery of such loss control services?

David Becker:

One of our first commitments is that we'll actually build the capabilities in-house to deliver what we said we were going to design, so when we say “you should do X,” we actually know how to do it.

Second, we offer written service timelines. We give every one of our clients, every year, a 12-month schedule of what we're going to do for them, and then we track and monitor everyone's responsibility to deliver that for the client.

We tie our compensation bonus structure for our service people to retention–but if they don't hit the written service timelines, they don't get the bonuses. So we are reinforcing to all of our employees the need that when we make a promise to a client, we deliver–and against a time frame they can count on.

That has really helped us elevate the game and the commitment of our internal folks. Plus our client now says, “These guys have said they're going to do something, they write down what they're going to do, and then they do it.”

And then we review it every year going into the renewal, and make the game plan about where they feel they have their biggest issues and how we should align our resources to help them deal with it.

Sam Friedman:

As more and more agents begin to adopt a risk management approach–or at least claim to have done so–how do you set your agency apart?

John Turner:

We're professional service providers, and what's critical is between the ears in my mind–the intellectual capital and experience on your team that allows you to identify the needs and craft the appropriate solution.

So it starts there, but it's also what you deliver. We roll out service-level agreements similar to a timeline. But it's not a cookie-cutter approach. We have standardized systems that have enough flexibility to customize based on client need and segmentation.

I'm a huge believer in segmentation because everybody wants to talk about risk management and all these value-added services, but you have to determine what is really meaningful to each customer–who has a role in developing and executing your service agreement. They become a stakeholder in the process all year.

You have to deliver what you promise, but so does the client. You need to stay on top of them so they hold up their end, because a lot of what we do pertains to what the customer provides us throughout the year. They're holding us accountable, but we also hold clients accountable to themselves.

We do quarterly stewardship reports, and we compare our progress to the milestones and checkpoints we've set up throughout the year, so they financially understand how their program is running, and from a service perspective, they understand the challenges and what service is being delivered.

Sam Friedman:

How do agents go about keeping risk management in the game plan when competitors show up promising deep premium cuts on insurance?

W. Anderson Baker III:

The client has had such price pressures imposed on them the last two years, now that we're seeing a little bit of softening, the clients who are paying two-, three- and four-times what they paid two years ago for property insurance will now grab any lifeline they can.

While we're not as formal with things like service-level agreements, we do want to make sure the client knows what we've established for them–that we're actually hitting the benchmarks we've agreed to.

Then we make sure they are forewarned about this coming softening of the market, and remind them we got them through this tough market for the last two years, that we've kept our risk management program in place, and that if we're doing it right, we'll be able to go to the market, hopefully stay with the same underwriters and bring their price down.

If not, we'll shop it for them but try to give them a reason not to set up an auction. That's a losing proposition for us, and we frankly don't want to get into that kind of a shopping game.

Sam Friedman:

Being a risk manager requires a different set of skills than just shopping for insurance. Once an agency makes a commitment to put risk management first, how do you go about preparing your sales staff to pitch that and your service staff to deliver? How do walk the walk, rather than just talk the talk?

Jack Galloway:

It doesn't happen overnight. To be successful selling risk management services as a broker, you must have that risk management talent on staff, and your sales people have to understand it is a true differentiator.

The salesperson is the one who coordinates that risk management team on behalf of the client, so there must be a lot of training. Sales people need to understand and communicate how effective claims management and loss prevention can be to help the client.

Generally, we will bring risk management staff with sales people out on the calls, or we will bring the sales manager who helps in the early stages of a salesperson's career to communicate the risk management services we offer.

Sam Friedman:

What role does risk management play in landing new prospects?

David Becker:

When we're working with any prospect of significant size, we send along on our nickel a loss control person to do an assessment before we bring up insurance, because we think it's very hard to market the account to a carrier if we don't understand the exposure, and especially if the client doesn't understand the risks.

We like industries that have tough coverage problems, because of our ability to get the underwriters to understand what the issues are, and then what we're going to do about them. So we start with a risk management assessment right off the bat.

Second, when we have a new account to pitch, our sales managers typically ask, what are the three nonprice reasons that this prospect should buy from us? What are we going to do for them that would make us earn the business?

Sam Friedman:

Is that approach ever a hard sell internally? Do your own people ever revert to the price-shopper mentality?

David Becker:

We try in our sales meetings to instill some discipline in our sales process, and we bring the whole team–our marketing staff and some of our loss control people–into the weekly meeting. We examine each account and talk about what we can do for them given what the safety folks saw, what the producer saw, what the client's needs are.

That leads us to develop a proposal outlining what we're going to do. And the proposal isn't just, here's the price of the insurance, but here's the service and here's the process of the loss control strategy that we have in mind for you.

Once we win an account, we always tell our sales executives that they are the captain of the team. It doesn't mean that they play every play or every position, but they have to orchestrate the other members of the team–our service staff, our safety staff, our claims staff–to make sure they are delivering what we promised, based on our written service timeline, which is like our playbook.

We're just instituting a new system now that if anyone misses a timeline, electronically and automatically the sales executive gets an e-mail the minute anything is missed. We want to reinforce the notion there's no reason you can't be accountable. We're going to give you systems and processes to make you accountable.

Again, it's a team concept. We don't expect the producer to be the expert on loss control or claims, but there's no excuse for them not getting the right people in the room, or getting them out to the client to serve them.

John Turner:

Risk management is a resource game. You can't just change your business overnight and think you're going to be a risk manager. Culturally, you have to evolve your business over time, which takes the right people, the right resources and the right tools.

We use a multidisciplinary team. We start in the discovery phase, where we're learning a lot about the prospect, and they're learning about us in the process. We have to earn the right to meet with them. You have to know something about your prospect before you ever walk in the door.

We don't just look at their commercial insurance. We look at their entire operation. When you think about a middle-market business, they're dealing with a multitude of professional services. They have a legal team, a CPA firm they use as their auditor, a banker and an insurance person.

If I'm their attorney, I know their contracts–that's about it. If I'm their CPA, then I'm auditing their financials. But if you think about what we do, to properly insure that risk we need to have an understanding of the entire company–from the financials, operations, human resources, the contracts they have in place.

That means we need to craft a total solution. To do that, we have to be a strategic partner with our customers. So, we like to hire folks that either have an MBA, or they are MBA-caliber and we'll help them get the degree. We want more of a business consulting approach where we can pluck resources internally.

Rather than just selling them insurance, if your approach is to craft the solution, and have the resources available to deliver it, and you hold the producer accountable that's leading the team as quarterback, you are going to have that account back at renewal because there are resources and support staff attached to that account the client doesn't want to lose.

W. Anderson Baker:

Some of the larger national brokers tend to have a “finder, minder, grinder” mentality. We don't have that.

When someone hires me as their insurance agent, they get me for good. I am with that account forever. I've got clients I've written for 20 years, and while, yes, some of the work is passed down to support staff, generally, an account that is of any size deals with me and only me on just about everything except for certificates of insurance and auto ID cards.

But if they've got strategic issues, if they are having claims problems, they are going to come to me, and I will sit down with our risk management people and figure out how we craft a solution.

I want to know that they've got a problem. I want to know what's going on, so they don't get lost in our shuffle. It's not as though I come into a renewal meeting only.

Large brokers fly in from out of town, and we compete with that every day. But when you have to fly in that expertise, it loses something as the months go by, and you have 11 months of having never seen the person and then have a steak dinner with them once a year. The client is really not getting much of a bargain out of that.

Sam Friedman:

Risk management talent and expertise doesn't come cheap. How do you get compensated for all this value-added service?

Jack Galloway:

Most of the services we are providing are not on a fee-for-service basis. We offer value-added services for choosing Barney and Barney. With our agency, you won't just get insurance–you'll get some loss prevention and some claims management.

We take a client segmentation approach, where we look at the size of the account in terms of revenue and exposure. How many claims are they having? How many locations do they have? What is it that the client feels they need from us so that we can work together to design a good plan?

As long as the risk management plan is reasonable and appropriate for the size of the account, then we go ahead and execute that plan without any additional fees beyond our commission. But there are services we can break out for an additional fee–if somebody wants a detailed business continuity plan, for example.

David Becker:

For those who say risk management services are expensive to deliver, I'd challenge them to take a look at what five points of retention does–it's absolutely astounding in terms of how much you save by keeping accounts with good service. When you run that number, you realize it isn't that expensive to do really good risk management because the benefits are enormous in reducing client turnover.

We have to get compensated for what we do. If there are some people that need more loss control services, we charge a higher fee. We do some claims work fee-for-service.

The way we approach clients is very similar to the way we approached them when I was in the consulting business–which is, do you want your partner to be financially successful? Do you want your partner to be able to invest in the right tools? If so, we are going to charge an adequate amount of money to compensate us, so that we can reinvest in the tools and our people.

If you've got a relationship with your client where both of you are aligned, and you're trying to work on their issues, they understand that. They aren't trying to nickel-and-dime you. They want you to be successful and bring the best people and the newest ideas. So, it's really been about having a professional, grown-up conversation about it.

W. Anderson Baker:

We are almost exclusively a commission-driven agency, so we take what we can get from the companies. Contingencies have not been a big factor for us in the last couple of years for all of the obvious reasons.

It is expensive to deliver these services, and we don't charge much for them–unless a client needs something absolutely specific, tailor-made. But my colleagues are right in terms of retention–the service is worth it to keep my clients in my book.

A key is not to deal with somebody if risk management is not what they're all about. If they are just a price-shopper, we'll drink coffee and that's about it. We just don't have enough time. I've done enough practice quotes in my career. I don't need to do any more. If they don't want to buy into a risk management philosophy, we can move on to someone else who does.

Likewise, my underwriters have done a lot of practice quotes as well. We don't want to waste their time working on a submission where we are one of three brokers going to 12 insurance companies. Underwriters are extremely busy. They look for a quality account that they have a chance of writing. So, the expense issue is not all that much, because we know what we are going to get out of it.

Sam Friedman:

With the increasing number of agencies pitching themselves as risk managers, have clients gotten the message? Or do you still find yourselves called upon to just get them a price quote because they always put their insurance agency contract out to bid every few years to keep everyone honest?

David Becker:

We try not to pursue relationships that are based purely on providing a quote. We aggressively qualify accounts, and if we are one of many brokers, we don't work the account. If they've been with a local broker for 15 years, we usually don't bother because there's a relationship there.

Lately, however, I've challenged our people to ask a secondary question if the prospect says they have a longtime relationship and are happy with their local broker. Does that prospect really know what they're missing? And, if they're not sure, what can we do to give them a taste of what we can do? I tell our folks, those should be the easiest pickings out there.

But if we can't find a way to demonstrate our value through references, I'll go further and say, “Let's put some money at stake. Let's go do a couple of services for free for you. We'll have our safety people come out and spend a week with you.” My sense is, once they get a taste of what we do, it will change their minds.

Sam Friedman:

Is buyer attitude ever a problem in pitching a prospect? Most people don't seem to relish dealing with insurance issues.

David Becker:

There is a great deal of negativity about insurance. Most people don't like insurance-buying, or at least don't look forward to it. But if they haven't experienced it in a different way, you can't necessarily flip your nose at them and say, “Hey, they are just stupid buyers.”

Maybe they just don't know what they need, or how risk management can work for them, so our job is to get them a new experience in a quick and unique way and open their eyes. If we feel like we can do that, we will invest in that.

John Turner:

I think the lack of compensation transparency in our business sometimes devalues what we do. A smart client wants to see their business partner succeed and make money. So, we have that kind of mentality. We are not going to devalue ourselves. We want to make an honest living. We are a privately held business that needs to make an operating profit so we can employ our staff and do right by our clients.

We've developed a document, like the benefits summary you would get from your employer in the HR world, that shows clients all the wonderful stuff we do for them every year, and this is how much it costs. We do that also because you'll always get the competing broker that will come in and say, “I can do all that stuff and I can do it cheaper. I'll do it for 5 percent.”

Well, how are you going to do that? Show me how. How does that work? So, at the end of the year we'll give clients their benefits statement laying out all we provide–tools, resources, everything. Here's how much it costs. Here is the investment that we're putting back into your business.

We're being transparent in what we're providing, and it's reinforcing what we do for clients. They value this service from us, and here is what it costs.

Sam Friedman:

Are you concerned that after investing a lot of risk management resources into a particular account, another price-shopping broker might jeopardize the renewal by promising a cheaper insurance premium?

John Turner:

We've been in meetings where it became a competitive situation. We sat down with our benefits statement and said, “Okay, what service don't you want? We can make the price anything you want. You don't want this? That's okay. We'll take that cost out.”

It's like buying a car. You want the Mercedes, right? Everybody wants to buy a Mercedes, but they don't want to pay for the Mercedes. So, there are trade-offs.

Sam Friedman:

Even though our award program focuses on commercial insurance, what place does employee benefits have in your operations?

W. Anderson Baker:

It is certainly a revenue center for us, but it is more an extra link that accomplishes what all gurus would tell you–the more clients buy from you, the less likely they are to leave. Benefits does give us that much more opportunity to touch the client and maintain contact with them.

We find that our retention where we're writing both the property-casualty and the benefits is much higher than when we're writing just one.

Typically, the introduction comes from the p-c producer, and then we have people who will come in and take care of the benefits side. We tried working with an outside benefits agency before and found it to be a very awkward relationship, so it's all in-house now.

Jack Galloway:

Barney & Barney also has a significant benefits operation. It's probably pushing 45 percent of our revenue, and it's clearly more profitable than my commercial division right now.

In California, all aspects of the commercial market are soft–workers' comp is down 65 percent from the 2003 highs. So the cost of benefits is where clients are focused– it's the pain point.

Benefits also fit in well with our overall value proposition. We have worked hard over the years to provide our clients with innovative products and strategies to help mitigate the escalating health care cost we are all faced with.

Through plan design, alternative funding, wellness programs, employee education and many other areas, we try and help clients develop long-term approaches to rising costs and help them protect their most valued asset–their employees.

David Becker:

Benefits are about 30-to-35 percent of what we do. We run benefits through separate producers. The consulting business has gone through a similar transformation, where knowing something matters, and just being a great salesperson doesn't work.

You actually have to have people who are experts in what they're doing, and benefits have become extremely complicated and expensive, involving an enormous amount of federal compliance issues. So we keep that in a separate unit.

We created our own biometric health risk assessment capability nationwide, where we can arrange to have all of your employees' blood work screened. We bought a predictive modeling software system that we run that through, as well as the claims to identify the next set of people who are likely to be big claimants.

Then we bring nurses and coaches to bear on that, and try to do some early intervention–just as we would on a risk management site before claims happen.

We've got 25 nurses and five doctors on staff. We can help people get to the right places. We care. We can help clients resolve claims issues. I think our clients are becoming more and more appreciative of this as benefits costs continue to skyrocket and the pain of the p-c side has become less burdensome now.

John Turner:

Benefits play a very big part for us–it's a little bit over 40 percent of our total revenues, and it continues to be one of our core growth drivers.

Again, we have benefits producers as part of our team on the account. When we see a prospect, it's a JRD prospect–it's not just a commercial lines prospect. We pitch the account with a total-solution approach.

When we're out there doing risk assessment on the casualty lines, we're also doing that in benefits simultaneously, and we'll present a combined solution. Those accounts are going to become more institutionalized over time, which protects your business long-term.

My background is benefits, so the key of our approach is, take what you've been doing in workers' comp and let me show you how I can help you in the benefits side–or vice versa.

You try to integrate their solutions as much as possible–especially worker's comp and health benefits. If you have issues in your benefits program, it could potentially spike your workers' comp claims.

Sam Friedman:

This is a people business, and you are all knowledge workers, making recruitment critical. To borrow a sports analogy, do you build through the draft, developing raw talent on your own, or do you go after big-name free agents with established books?

W. Anderson Baker:

We're a smaller organization; therefore we don't have internal training programs, and recruiting is extremely difficult in New Orleans right now after Katrina.

We prefer to find young people who are plugged into the community that we can bring up to our way of doing things, rather than hiring someone from another shop, where you have to break bad habits.

We want self-starters. We want somebody who has certainly got a personality, who can talk his way through the sales process and can make acquaintances as he goes along. We do not need more pure service people. It's the revenue-generators that we need to bring in.

John Turner:

We build from the draft, and we're lucky to have the sixth-largest university in the country now–the University of Central Florida, where 80 percent of graduates actually stay in the Central Florida area. And then we have the University of Florida, which is 90 minutes away. So, we have a pretty good collegiate recruiting base we can draw from.

We'd rather hire somebody out of college or graduate school–or even somebody who has been in the business maybe two or three years, or in a similar line of business like commercial banking. That way, we don't have to un-train bad habits.

We look for student athletes for a lot of reasons. We work with the athletic programs in those universities to identify potential candidates that we'll put through a rigorous testing and interview program.

We've had more success with student athletes because they understand the concept of team. They have that self-starting mentality. They're competitive and they know how to pick themselves back up when they lose–and they don't like to lose. That's where we focus most of our energies.

David Becker:

We're still primarily Dubuque-based, and there's not a great deal of natural competitors to recruit from, so we almost have to develop from within.

We used to lament, like everyone in the industry, how hard it is to find and develop good people, but I take a different mentality. I think you just have to work harder at it.

When someone says, “Dubuque” and “insurance,” that isn't exactly sexy, so you have to get out there on campus and put on presentations. I participated in several of them, and we try to send one of our senior executives to every one. We bought pizza before the group meetings. We took individual candidates to dinner.

They met our team so that once we went through the interview; we pre-sold what we were doing. We had a ton of success with that. We made offers to 14 college graduates in June, and all accepted. Only a few had a connection to Dubuque before.

We also look for some experienced recruits. We have a network of headhunters all over the country, and we have made them aware that we want experienced talent and we'll talk to anyone who has a good story. We've landed three really big impact-players in the last 18 months from national brokers through this process.

Recruiting is a lot of work, but it's paid off. It got us in some new niches that we didn't have, and added new capabilities to our agency. The free agents give us something we didn't know how to grow, and we build around them.

Sam Friedman:

Do you do much hands-on training once you have a draft choice or free agent on board?

David Becker:

About 18 months ago, to develop our “capital between the ears,” we created a training program called “The Journey to Greatness” that focuses not only on technical education that we bring in-house but also on sales training.

We also do business skills training–we offer about 20 different programs in-house, whether it's how to use Excel, time management, how to give a presentation, how to write. We're trying to build our people's capabilities so they're more effective.

We also do, for every employee, a teamwork training program twice a year. This year we had consultants come in and work with groups of 20 and identify the biggest issues within departments, and they put action plans together.

Next year, we're going to work on cross-functional issues related to customer service. How do we, across departments, start to work better to solve what our customers are telling us are their biggest issues?

Last but not least, for every manager and supervisor we have a leadership training development program. This year we do a quarterly session. We're trying to figure out how to grow all our young people into insurance professionals. It's a struggle in itself, but I think it's the right program for where we are located.

Bio Boxes, with shots from Roundtable:

Special Reports /

Soft Market Should Not Deter Agents From Keeping Risk Management Focus

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