Trust, commitment, communication, compatibility: They're thebuilding blocks for any relationship, whether it's a friendship,marriage, or the unique bond between an independent agent or brokerand the insurers they represent.

But as in any relationship, each partner's idea of what'simportant is different and evolves with time. Sure, it's easy foran agent to be seduced by a hot commission level and sexy marketingmaterials. But real relationships survive adversity. How docarriers perform when claims comes through? Are they fickle–do theypull out of markets or regions when things get tough? Do they keepup to date with the latest technology?

Insurers have needs, too. They're looking for someone with driveand goals, and a solid plan to reach them. Money isn't everything.The quality of the business counts, too. And what about the future?Agencies with perpetuation plans are more attractive than agenciesthat just live for today.

AA&B spoke with both sides of the equation todetermine what's important to each and why. The results follow,with additional input on our Web site at agentandbroker.com.

The agencies:

Tom and Bev Goff, principals, Northern Insurance Agency,Fort Wayne, Ind.

Tom and Bev Goff started their business in 2007 as a captiveagency of a large national insurer. Tom, an entrepreneur with anMBA from the Kellogg School of Management, and Bev, with abackground in human resources, decided to sever ties with thecaptive insurer and go independent by shooting for an agencyappointment with Erie Insurance.

“We knew what we were looking for; we want to do a good job forour customers and we're very service oriented,” Tom said. “When wefirst sat down with the district sales manager for Erie, we thoughtit was a perfect match. We started out with the right company andshared values, and the result has been very positive for us.”

They noticed the difference right away. As direct writers, theirclosing rate was 25 percent. After starting with Erie, they were“amazed” when that increased to more than 80 percent. “Winningcreates a winning mentality and creates synergy,” Bev said. “Itcompletely changes the dynamic of the agency.”

The agency's annual premium volume is now about $350,000,primarily personal lines, about 85 percent of which is with Erie.Tom and Bev are supported by a part-time CSR and a summer intern.The agency has 3 other direct appointments and several brokerrelationships for surplus lines and alternative coverages, but Erieis their lead insurer.

Part of the agency's growth strategy is to hire a full-time CSRand increase its commercial lines sales, which in turn will pay theCSR's salary. With his background in the corporate world, Tom isprepared to write bigger commercial customers, and is counting onErie to support him in his goal. “We would like to grow to a $2.5million agency in 5 years. A year from now we'll have moreproducers, and expect within 2 years to open another office in theFort Wayne area,” Tom said. “There's no such thing as standingstill; you're either growing your business or going backwardbecause of competition.”

Erie can help by providing a loan for the Goffs to hireproducers, do promotion and expand sales.

For the Goffs, the best thing about doing business with Erie isthe personal interface they have–with the district sales manager,underwriters, marketing support people, even access to high-levelpeople like the branch manager and regional vice president, Tomsaid. “They treat us like friends and valued partners,” he said. “Ifeel like I'm part of the team and we work together to besuccessful. You can't buy that.”

John McCrudden, vice president, Hardenbergh InsuranceGroup, Voorhees, N.J.

This generalist property-casualty agency has been an appointedagent of Peerless Insurance Co. since 1996 and over the years, hasseen that relationship change for the better, McCrudden said.

Hardenbergh sells all of Peerless's property-casualty products,from small BOP policies to packages, auto, umbrella and workers'compensation, and “they are all successful,” he said. Of theagency's standard property-casualty business, approximately 15percent is with Peerless.

For McCrudden, the best thing about doing business with Peerlessis that they have a “generalist” appetite for business. “They havean attitude of trying to find ways to write business,” he said.“They make an effort to develop strong relationships with theiragents and as a result have a trusting mindset in working onaccounts. And they are just nice people.”

The agency also is happy with its relationship with Peerless'field reps and underwriters, he said. “It has helped that we havehad the same people working with us for many years. It is ourstrongest company relationship. We consider them friends.”

If there is any area of the relationship that needs improvement,it lies in Peerless's BOP policy, which could stand an update inprice and coverage, McCrudden said. He also said that Peerlesscould benefit from co-branding with parent Liberty Mutual.

Marty Beam, CPCU, president, WA Moore & Co.,Kinston, N.C.
With locations inKinston and Greenville, N.C., WA Moore's customers range from anindividual with one auto to large corporations with more than 6,000employees.

The agency was appointed as a Montgomery Insurance agent 5 yearsago. Since then, WA Moore's relationship with Montgomery haschanged dramatically due to the insurer's alliance with LibertyMutual. “They are now a critical partner rather than just anothermarket dealing with our agency,” Beam said. “The acquisition ofOhio Casualty added substantial volume to a book we were buildingfrom scratch. With the Safeco acquisition and Liberty's decision touse that carrier as the personal lines platform, we now representMontgomery for commercial lines only.”

Roughly 20 percent of Moore's commercial standard book is withMontgomery, and 50 percent of its personal lines book is withMontgomery (now Safeco).

Moore has had success selling Montgomery's school and countryclub programs and its golf course product, as well as somelower-hazard
construction accounts, distribution, and retailers, wholesalers andrestaurants.

“The strength of the Liberty organization means this company ismore likely to survive than some of their other regional and superregional competitors,” Beam said. “The local decision makingcapability and the quality of the leadership team, combined withstability of underwriting experience, mean for us that Montgomeryis viewed as a long-term partner.”

Beam sees a possible challenge due to Liberty digesting itsrecent acquisitions, although “in our view they are doing anexcellent job with this.

“This carrier's underwriters, field reps, service and staffpeople are excellent,” Beam said. “The president and the regionalVPs are exceptional and in my estimation could successfully manageany commercial enterprise. They are as good as I have seen in the33 years I have been in this industry.”

Terry Kelso, president, Kelso Consulting, Columbus,Ohio

As the former president of the PIA of Ohio and a formerindependent agent, Kelso has a unique perspective on the subject ofagency/carrier relationships. He even started a agency/carrierrelationships committee for PIA of Ohio, which visits companies todiscuss the top issues on members' minds.

Top issues include aligning the wants and needs of carriers withthose of agents. One top priority is for companies to improve easeof doing business, a subject Kelso knows from first-handexperience.

When it comes to differentiating factors, ease of doing businessis most important, followed by compensation, which is typicallybetween 15 and 20 percent of sales for most top carriers, Kelsosaid. Finally, there's the philosophy of doing business that mustmatch between agent and insurer.

His former business, Associated Insurance Agencies, ran intotrouble when its national companies decided to non-renew somecustomers because the carriers didn't want any contractors orchurches professional liability insurance business. “Companies thatdo that make me nervous,” Kelso said. “Their response to a problemis to just withdrawal from a line.”

The agency had an especially good relationship with one bignational insurer that made policy rating and issuing seamless andpaid a 20 percent commission. “It was great, but then it shut downits local office, fired the regional VP, and let go of most of itsfield reps,” Kelso said. “And no one called to let us know aboutthe changes.”

Kelso finds that regional insurers are more understanding andresponsive and more in tune with the marketplace in general.“Nationals think they must burn their ways into a market throughlow price or lack of underwriting discipline, but then theirreactions are '180' when something happens,” he said.

Automation is an important element in the “ease of doingbusiness” category, and some insurers understand it better thanothers. Companies like Cincinnati traditionally were lax in thearea, but are increasingly upgrading their efficiencies, Kelsosaid, while Grange Mutual and Westfield in Ohio are noted for agood grasp of technology.

Insurer field reps are the face of the company to agents, so agood relationship there is frequently a key to success, Kelso said.Relationships with underwriters, once a key driver in anagency/company relationship, have unfortunately been minimized inrecent years due to more automation of the underwriting process onthe company end.

In the final analysis, communication is essential to the healthof the relationship. “The more you can communicate with yourcompanies, the better off we all are; don't let something fester,”he said.

The insurers:

Erie Insurance

“This is a relationship business; we need to do all we can tostrengthen and maintain the relationship we have with our agentsand put Erie first in their minds. We realize it's incumbent on usto help them succeed,” said George Lucore, executive vice presidentof field operations, Erie Insurance Group. “When our agentssucceed, Erie succeeds.”

Since the company's inception in 1925, Erie has marketed itsproducts exclusively through independent agencies, which now numbersome 2,000 agencies in 11 states and Washington, D.C. Recognizingthat each state and agency are unique for markets and agencysaturation, Erie looks to grow market share in all jurisdictions,while concentrating on newer states such as Tennessee, Illinois andWisconsin.

Erie's basic distribution strategy remains unchanged in spite ofthe economy, although the insurer recognizes that marketingassistance to agents is especially important in a down economy orsoft market. In response, Erie has introduced additional marketingtools and programs to help agents sell and retain customers,including enhanced co-op advertising and customer contactprograms.

In addition to an agents advisory council, Erie has formed agenttask forces for personal lines, commercial lines, life andannuities, technology and marketing. “The input we receive from ouragents through their task force representatives allows us to stayin tune with what's important to them, and it helps us focus ourdevelopment efforts in areas that allow for the mutual success ofour agents and Erie,” Lucore said.

For new agency appointments, Erie looks for “productive men andwomen with growing agencies and good loss ratios with existingcarriers; people who are committed to delivering good advisoryservices to their customers and who are professional anddedicated.” There is no bias toward established agencies; more thanhalf of Erie's appointments are start-up operations.

To help these new agencies succeed, Erie accelerates itscommissions with a financing package and one-on-one training withdistrict sales managers. Erie also supports an active insuranceeducation department that delivers programs both in person andonline, a new agents orientation at the home office, and ErieAgents College, a 3-day program where participants can learn aboutErie's major lines of business, marketing and agencymanagement.

Zurich Financial Services

Everybody wants to be No. 1 to their significant others. “Zurichwants to be the market leader with selected broker locations,” saidRobert Rheel, head of distribution and regional management forZurich in North America. “We don't look at minimum volumerequirements; rather, we want to be the market leader with ourbrokers. Because of our size and the number of offerings we have,there are lots of products we can underwrite for them.”

Zurich unveils a new or refreshed product or market segmentevery 4 to 6 weeks. Recently the insurer introduced ZurichIntegrated Products, providing solutions for customers withrevenues of between $5 and $25 million, as well as new D&O andenvironmental forms.

The insurer stresses a business development approach that speaksto understanding each broker's customer set and delivering specificvalue propositions that help both the broker and Zurich grow, hesaid.

The second component to the agent/insurer arrangement is tocreate an effective trading relationship. Zurich uses metrics tomeasure each broker location to determine how well the company isdoing on quote-to-submission or bound-to-quote ratios. If thenumbers are not aligned to benchmarks, they must figure out why.“If a broker is sending us a thousand submissions and we're notwriting anything, it's not efficient for either of us,” Rheelsaid.

Zurich also aims at improving service levels for its agents.“One theme we're hearing is that the error ratio on policy issuefor the industry is very high,” he said. “It takes several roundsbefore we have a policy we feel comfortable delivering to ourcustomers, so we're investing in shooting for an error-free ratioon policy issuance.”

Zurich recognizes that claims handling is an important elementof agent and customer satisfaction. Under its HelpPoint brandstrategy, the insurer routinely calls brokers well ahead ofanticipated catastrophes, asking if they need assistance andletting them know their availability in the area. “We believe wehave the best close ratio for cat claims than anybody else in theindustry, which is great for customers and creates efficiencies forbrokers as well,” Rheel said.

Over the next 18 to 24 months, Zurich plans to scale back thenumber of broker locations. “We're focused on understanding whatlocations and brokers we want to do business with and positionourselves to be a market leader within those areas,” Rheel said.“It's not about the numbers but creating a strong and effectiverelationship,” he said. “Our strategy is not to have an appointmentin every U.S. city, but of being selective in productive brokerrelationships with a mutual understanding in the way deliver to ourcustomers.”

Liberty Mutual

“Agents are struggling with their top lines and revenues fallingoff due to the economy,” said Scott Goodby, executive vicepresident, Liberty Mutual Agency Markets, and president, regionalcompanies group. “We're trying to help them write business byproviding them with operational support, whether it's hiring newproducers, helping them enhance their technology through a loanprogram, or assisting with setting up a Web site. From a soup tonuts standpoint, we support our agents, especially in times likethese.”

With its recent acquisitions of Safeco and Ohio Casualty,Liberty Mutual Agency Markets now has more than 8,000 commerciallines agencies. Its 8 regional companies will likely be moreselective in making new appointments in the future.

“Our distribution strategy is a depth play rather than breadth;when we make appointments, we want to be in the top 3 of theagency's preferred carriers. In turn, we try to offer franchisevalue to the agency, forge deep relationships and differentiateourselves with greater connectivity and local decision making–ourunderwriting and claims processes focus on serving the agent,”Goodby said.

Under its current structure, Liberty owns 8 regional insurersthat write commercial lines and Safeco, which offers personallines. Although there is a shared distribution philosophy, eachcompany is responsible for its own distribution plans, productpricing, commission levels and bonus-sharing agreements. Libertychanged its profit sharing, now based on combined performance thatallows agents to maximize their bonuses by placing profitablebusiness in both commercial and personal lines.

Agency Markets is transitioning the legacy sales and processingsystems of its companies to a single policy administrativeplatform, targeted for rollout by year-end. The company hopes thisprovides flexibility, workflow, speed to market and adaptability inthe event of future acquisitions.

Observing growth or contraction by geographic region, “ColoradoCasualty is an up-and-coming company…our Arizona, Nevada and NewMexico book of business will grow dramatically in the comingyears,” Goodby said. American First Insurance in Texas is making amarketing push in Arkansas and Missouri, and Indiana Insurance isdoing well in Iowa and the Dakotas. Liberty Agency Underwriters,which provides excess casualty coverage, is expanding distributionto all Liberty agents.

The regional companies maintain local claims operations thatservice area insureds and agents. The companies have rolled outbest practices to all of these claims operations to ensuremeasurable performance levels. They also have expanded theirservice center capabilities, adding a new center in Spokane,Washington to better serve agents and customers in all timezones.

Wants and needs
It's a no-brainer:insurers want market access, and agents want commissions. Toachieve these goals, agents need good products and services to selland decent compensation for doing so. Beyond that, what are thedriving factors for each party?

What insurers want:

o Top ranking. “If we deliver on our promise ofproducts, service, relationship and competitiveness, we expect theright to earn our way to be the first company within the agency,”said George Lucore, executive vice president of fieldoperations,
Erie Insurance.

o Good loss ratios with other carriers. For newagency appointments, Erie looks for “productive men and women withgrowing agencies and good loss ratios with existing carriers,”Lucore said.

o Agency growth and perpetuation plans. “Ourfirst question to prospective agents and brokers is what are yourgrowth plans and how can Zurich help you to achieve them,” saidRobert Rheel, head of distribution and regional management, ZurichFinancial.

o Professionalism. “We look for agents whoshare our fundamental values and conduct their business withintegrity,” said Scott Goodby, executive vice president, LibertyMutual.

What agents want:

o Ease of use. Providing a seamless processfrom quote to policy is the best way for an insurer to get anagency's business. IIABA's most recent agency universe study showsthat across all lines of business, making it easy for CSRs to writebusiness is the most important and improved area in agency-carrierrelationships.

o Marketing support. “Many companies' idea ofmarketing is a nice, slick brochure they put our name on. We'relooking for a lead generation program that allows us to qualifyprospects in advance, but little of this is available,” said TerryKelso, president Kelso Consulting.

o Trust. “Agencies need to rely on carriers tobe honest about the type of business they want and be consistentwith their behavior so the agency can fairly represent theirappetite and capabilities. Agencies must appreciate the servicelevel and commitment of their partner carriers with respect toplacing business and keep their markets limited to those carrierswho demonstrate partnership, not just the best 'deal,'” said MarkRobinson, vice president, UPS Capital, President UPS CapitalInsurance, Cargo, Credit, Insurance, International Trade.

o Stability. “Companies that withdraw fromstates or lines of business take the chicken way out. All statesand coverages are a challenge from time to time. Cutting andrunning creates havoc for agents,” Kelso said.

Tips to a good relationship:

o Communicate. “Great partnerships learn andgrow by collaborating, sharing open and honest dialogue andremaining committed to the essential and foundational aspects ofour industry,” said Jill Lowder, chief operations officer, RJFAgencies Inc.

o Plan ahead. “We gave Erie a 37-page businessplan as part of our appointment process, and we continue to updatethat plan,” said Tom Goff, principal, Northern InsuranceAgency.

o Put the customer first. “The most importantaspect of a successful carrier relationship is trust, which startswhen the insured's risks and tolerance for risk is understood andcorrectly communicated between the agency and the carrier. In astrong relationship, neither the agent nor the carrier will overpromise and under deliver,” said Mark A. Chestnutt, vice president,J. Smith Lanier & Co.

o Develop relationships. “We're working toimprove our visibility because relationships don't happen by e-mailor phone; they happen in person,” Rheel said.

Confessions of a “marriage counselor”

Insurer field reps are key in cultivatingrelationships

If the agency/insurer relationship is like a marriage, then theinsurance company field representative is the marriage counselor.Whether their official title is field rep, territory manager ordistrict sales head, they're in the business of working with bothsides of the equation to optimize the relationship. And althoughtheir pay comes from the insurance company, good field reps knowthe importance of earning the trust of the agencies in thatcompany's distribution force.

Elizabeth Schenk, field representative for Ohio Casualty, hasbeen in the business for 20 years, spending the last 5 with theLiberty companies. Over the years she's learned that her mainpriority is nurturing a good relationship between the insurer andits agents. “Any agency will tell you that the most importantfactors for success– theirs and yours–are relationship and ease ofdoing business,” she said.

Each of those agency relationships are unique, and the fieldrep's job varies depending on agency need. One agency may need togrow organically by hiring a new producer, so hiring and trainingmay be important to them, while another agency may need to workwith new business incentives. In other cases, the field rep may beasked to put together producer loans where they help the agencyhire and pay for a new producer. And in today's tough economy,there are more cases where vulnerable agencies may need to considermerging, selling or perpetuating. Whatever the need, it's all in aday's work for the field rep.

Schenk works with about 50 Ohio Casualty “master agents” andabout 150 actual office locations, primarily in centralPennsylvania, although her “beat” spans the entire eastern half ofthe state.

Topics of discussion at these regular agency visits vary,depending on both the individual agency's unique needs and who sheis meeting with. “With agency principals, we talk about overalloperations, review results, and look at critical issues such asacquisitions, hiring a producer, the agency's business plan and howthey're working with us,” she said. “If we're meeting with aproducer, we talk about new business flow and relationship theyhave with our underwriters. With CSRs, it's more of a service andrelationship conversation.”

The conversation may vary, depending on whether she is workingwith a seasoned Ohio Casualty agency or a new appointment. “With anew appointment you're dealing with the unknown, includingpolicyholder needs. You also have to build their trust and your owncredibility over years,” Schenk said. “The key thing is themomentum you have with an existing agency. With a new agency, theTM must build excitement and enthusiasm, and this can take monthsor years. It's our job to make sure going in that we analyze theagency and determine whether they'll be the right fit for us.”

Agency meetings can cover different topics and depending onsize, can involve a single meeting or three different meetings, shesaid.

Schenk usually averages about 5 to 10 agency visits a week, ormore or less frequently depending on the agency's needs. OhioCasualty is within the top 3 companies for all its agencies, and“the ultimate goal is for us to be their first choice and lastlook,” she said.

But although priorities may vary, Schenk finds that most agentstoday are concerned with the lack of new business coming in thedoor. “We're not seeing the growth in business because of theeconomy, and many of their customers are shrinking or going out ofbusiness,” she said. “On retentions, there's an incredible amountof competition, so more agencies are focusing on holding ontoexisting accounts rather than going after new business. But so muchof retention really boils down to the relationship an agent haswith its carriers, with an edge for those that are willing to workwith them to retain accounts.”

These relationships don't happen overnight, so much of thesuccess in an agency revolves around the relationship it has withthe carrier's commercial lines underwriters, she said.

As part of the ease of doing business, technology provides bothcarriers and agencies with an edge, and Ohio Casualty is noexception. “We provide Internet access to what we call an agencyportal, where we make anything and everything accessible tothem.”

To improve ease of use, Ohio Casualty also assigns its agents totheir own territory manager, underwriter and agency specialist, whomakes sure the agency has full access to the company's offeringsand training, “so they're comfortable with accessing informationand are familiar with our rating system,” Schenk said. “Quitefrequently, the quality of our technological offeringsdifferentiates us from our competition for our agents.”

For example, if a CSR gets stumped when working on a quote, it'sunlikely they will come back to that carrier, so ongoing trainingis essential to grow relationships, she said.

The agency's relationship with the company's underwriter is alsoimportant. “The TM can drive business into the carrier, but if theunderwriter relationship isn't there, we'll hit a brick wall,” shesaid. “Before I joined Liberty, I was a territorial manager for acompetitor. The attraction was the quality of Liberty underwriters,which is first and foremost in the agency relationship. Agenciesalways spoke favorably of them because they worked so well with theteam, without any internal disconnect. At Ohio Casualty, the TM isin constant communication with the underwriter, and we worktogether with the agency.”

Good underwriters can take direction from the agency principaland can prequalify an account, making turnaround time quicker.“Because the agents know our interests they have the ability toapply credits and if they're uncomfortable with the quote, cansubmit directly to an underwriter for review and feedback,” shesaid. “They can go from submission to issuance on the spot.”

A good TM is much more than simply a liaison between the insurerand the agency. “Territory managers must be effective for theagency to build their trust and credibility, so we're more on aconsultant level,” Schenk said. “We bring the message of thecarrier to the agency, and they rely on us for just abouteverything, whether they're hiring a producer, generating a loan,negotiating a book roll or educating a new hire. We're pretty muchthe conduit to all the other arteries within the company. Oursuccess really falls on the trust and credibility we develop withan agency.”