Because I lead the annual "Best Practices Study" research effort, people often ask me to describe the best way to set up and operate the typical independent agency. But I have learned that too many variables exist within the agency community--ownership structure, business focus, geographic location, available markets, etc.--for a single operational model to be truly effective.

A "one-size-fits-all model" for insurance agencies won't yield the success that the McDonald's model provides its franchisees.

However, common attributes can be found in the most successful agency models, and these characteristics provide the engine and fuel by which agencies drive optimal growth, productivity and profit margin.

As listed on the accompanying graphic, these attributes include good leadership, quality people, superior carriers, a profitable book of business, a well-defined value proposition, and highly efficient and effective operations.

Must they all be present? And if not, which is most important?

Many would argue that the precursor to any successful business model is good agency leadership that fosters an environment in which any chosen model can be implemented and sustained.

Good leadership will successfully communicate a shared vision, encourage and lead the agency through change, and expect excellence from itself and all those associated with the agency. Without effective leadership, an agency will probably struggle regardless of the operational model.

Undoubtedly, quality people can give an agency a competitive advantage. That is why the better models include performance-based operations, where the agencies are willing to spend significant resources to provide career development opportunities, competitive compensation, flexible work environments and equity opportunities for high performers.

The inability to attract and retain dedicated employees who are knowledgeable and experienced will stress any operation and could be fatal.

Although superior carriers will naturally gravitate to superior agencies, in the most successful operations, the agencies carefully select their company partners based on the agency's business focus and needs, as well as the carrier's reputation for stability and ease of doing business.

The key relationships are monitored through joint planning to assure the agency remains focused, is submitting business that meets the carrier's underwriting appetite, and that commitments are being kept by both parties. Carriers that provide competitive products, pricing and compensation are essential to any model. Without them, an agency can't exist.

It seems reasonable then to conclude that in the long run, growing and maintaining a profitable book of business is the critical component of any model. The book must generate an underwriting profit for the agency/carrier relationships to endure and provide an operating profit for the agency to function. Long term, an agency must achieve both to prosper.

However, in a world where the consumer wants everything better, faster and at an exceptional value for the dollar, achieving a reasonable operating profit--especially in a soft market--is a challenge. The best operations meet the challenge with a clearly defined value proposition rather than the vague proposal of offering better service, products or pricing.

The best agencies understand exactly (and can articulate precisely) their value proposition, be it their professional experience, value-added services, unique and quality products, array of carriers, and/or the ability to deliver the lowest cost to manage the clients' loss exposures.

A standing joke is that the really great producers have an "elevator pitch." They are able to articulate their agency's value proposition to a prospect in the time it takes to go in an elevator from the first floor to the 30th floor of a building.

But all joking aside, an agency that can pinpoint where it can deliver value can more easily identify and focus on the types of accounts to which it brings particular knowledge, expertise, products or services.

It can build on that niche or segment by soliciting new business through referrals, write it more cost effectively, and keep it on the books longer. And it will continuously purge itself of those accounts that are a drain on the agency's profits, as well as proactively adjust its proposition to changes in its marketplace environment.

As you can see, all of these attributes are important and closely intertwined. One cannot succeed isolated from the others.

Nevertheless, from my perspective, highly efficient and effective systems, processes and procedures should be ranked near the top of important attributes. They provide a strong foundation for all of the other aspects of a successful business model to be leveraged to the maximum.

The underpinning for the best operational models is the heavy use of available technology. The agency management system has a robust database with full client and policy detail, accessible locally and remotely. Workstations are equipped with dual monitors and other tools to allow service staff easy access to electronic information, real-time interface, online services and other automated tools that allow the processing of transactions to be as automated as possible so employees have more time to do what they do better, faster and more proactively.

Technologies that help the agency become less paper intensive (such as scanning and document management systems) are especially important, so work can be delegated effectively to the lowest level.

For example, one of the larger Best Practices agencies is able to outsource the task of policy checking to a team in China. Each night the Chinese team logs into the agency system, downloads the policies and checks them against the application, binder, proposal and other documents--which are all maintained electronically.

This overseas "nightshift" has freed up many of the agency's more highly skilled and compensated employees to concentrate on relationship building, to develop and deliver value-added services, and to support new growth initiatives.

Time is now available to proactively offer cost-saving options, claims counseling and disaster planning advice to personal lines clients, as well as to assist commercial lines clients with the audit process, provide human resource counseling and offer informative seminars while actively soliciting referrals and cross-selling existing accounts.

Enhanced agency Web sites also help to create efficiencies and offer additional service choices when the client is provided with the ability to self-serve. As Web-based services become more important to consumers who increasingly demand 24/7 service and Internet access for all their business transactions and communications, agency operations are adapting to meet those needs in a cost-effective manner.

Regardless of the size of the firm or business model employed, the heavy use of technology results in tremendous efficiencies and effective operations that enable the agency to push less value-adding work downward for lower costs while pulling productivity, growth and profitability upward.

And that is the mark of the optimal operational model for any agency.

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