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Review and Outlook 2009-2010: Independent agents and brokers

What are 1 or 2 initiatives that your firm must execute in 2010 to reach your growth goals?
Robert C. Smith: We are working with each producer to develop solutions that address specific issues clients are facing in this difficult economy. On the P-C side of our business, these solutions include reducing the total cost of risk through insurance program design, safety programs and loss control or claims analysis. On the employee benefits side of our business, the solutions address access to wellness programs, health savings accounts and plan design options that help defer some of the increases employers are facing with rising healthcare insurance costs.
Karen K. Farris: Our firm has a 10 -year strategic plan that includes specific growth objectives. There are two initiatives within that plan that are critical to us achieving our goals. Three years ago we embarked on a mission to reposition ourselves as a stronger sales organization. This involved an overhaul of our sales process as well as a shift in culture. We work with an outside accountability partner to keep us on track. It has paid off and we are successfully executing a growth plan in a down economy. The second initiative involves a change in the way we bring in young producers; relying more on sales profiling and the establishment of a learning path to make them validate in a shorter period of time. Discipline around these two initiatives will be critical to achieving our growth objectives.
Allen Fee: We are just starting our planning process and have identified several key action items that we must accomplish to attain the type of organic growth we are hoping for:

o Improved internal marketing

o Improved producer performance

o Better prospect call performance and preparation

o An improved and streamlined sales process

o Identification and recruitment of new producers.

How does your firm consistently inspire, motivate and connect your people toward your stated growth goals?
Farris: Our strategic plan is a working document, not a once-a-year exercise that gets put aside once it is completed. Teams consisting of owners, managers and account service personnel have been assigned to the 6 strategic initiatives that support our plan. Once a month, we hold an accountability call and report on our progress and identify any issues that need to be addressed in order to move forward. We have a financial model that outlines the benchmarks we must achieve and everyone is aware of the role they play in this process.
Fee: We try to motivate and inspire by our own actions. The owners are the top producers, and are driven by growing our books of business. We have tried trips and competitions, but at the end of the day a good producer is going to be motivated by the thrill of success and increased financial gain–and that is an internal motivation.
Smith: We have a group of highly motivated individuals who operate effectively in a team environment. The goals and expectations at Ascension are high, and our compensation plan rewards achievement. We provide excellent account management support to allow the producer to be focused on solution-based selling, and give the account management team the tools and resources they need to be successful.
In addition, we ensure that each person knows what the corporate goals and objectives are and the importance of their performance. Each person in our firm should feel invested in hitting his or her goals, so in turn, the organization can hit its goals.

What do you think are the current and future trends in the industry that will require you to have new skills?
Fee: The Internet, Facebook and social networking are going to be increased competition and opportunity, therefore figuring out how to use technology as an enabler is a huge trend we are going to have to deal with on an ongoing basis. I think the insurance buyer is going to be different as well; hopefully there will always be a value on relationships and attentive service, but I believe the buyer 5 to10 years from now is not going to be the same as it was 5 to10 years ago.

Smith: We are in the middle of a transitional period where the agent or broker will be increasingly compensated based upon the advice, counsel, and the proprietary products and services that he or she brings to the client. Producers must increasingly become students of the insurance business and of their clients' businesses while staying current on new products, services and solutions.
Farris: Trends that I see in the industry involve more specialization, more globalization and the need to maximize the use of technology to drive efficiency and expand our capabilities. As a result, we will need employees who can bring more to the table than general insurance knowledge, who have the ability to design a seamless program that complies with all local statutory requirements for a client with international exposures, and be able to deliver products and services using the latest technology on a 24/7 basis.

What have you done to control costs/expenses in this soft market?
Farris: We have always been conservative in our financial management; we have a strong balance sheet and feel that this is a time of opportunity for our firm. We have budget metrics that govern our overall operation and we benchmark against our peers to keep on track. Like many others, we have started outsourcing some of the more routine backroom functions in an effort to have our staff concentrate on their core competencies. We are keeping a closer eye on the profitability of each of our divisions and taking the necessary steps to make adjustments if needed.
Fee: We have always run a conservative agency, from an expense standpoint. This year we became debt free. Debt is a growth engine, but it also can take you down. We felt at this time in this economy and in this market, being debt free was a primary factor to future success. We manage financially on our core business, never using investment income or contingency income to run the agency on a day-to-day basis. We have taken a close look at all of our expenditures, and cut out unnecessary things. At the same time, there is opportunity now for good people, so we are not letting the market get in the way of future growth by overlooking good opportunities. We have not frozen raises, salaries or 401(k) contributions. We are going to grind through it and take care of our people; at the same time, if there are underperforming people, now is the time that you have to make some hard decisions as well.
Smith: Each employee feels a heightened sense of urgency in their personal effectiveness in serving the clients. The performance expectations that the clients and insurance companies have placed on the agents and brokers has been raised. It is essential that we equip our employees with the tools and skills they need in order to be successful.

This is not the time to “cut expenses.” Now is the time to improve our effectiveness for our client. When do think we'll see a firming in the market?
Fee: I thought it was going to harden in the first part of 2010, but it's not. I think 2010 is going to bring a good deal of underwriting hardening. I think accounts that have had loss problems are going to be a placement problem, but I do not see any pricing hardening on good accounts in the near future.
Smith: We do not anticipate any meaningful pricing increases in 2010. We are building our budget with an expectation that 2010 will be similar to 2009.
Farris: I think that the market has firmed, but you don't see the result because the exposure base is down. Projected revenues and payrolls are still down or flat but the premiums are not decreasing proportionately. Additionally, carriers continue to price new business more aggressively than renewals. I don't see any change in the market until the middle of 2010.

What exciting reasons would you give new talent to think about becoming an agent or broker?
Smith: There is a bright future for dedicated people who are willing to work hard and advocate for their clients. But the business is not for the faint of heart. It requires dedication and passion for which the person will be richly rewarded.
Farris: What I think is exciting about the brokerage side of the insurance industry is the opportunity to partner with our clients and function as an extension of their staff. We are involved at a strategic level and have an amazing window into their business. I don't define what we do as simply providing insurance, I see it as helping them identify, mitigate and address risk. Everything our clients do has an element of risk and it is our job to help them balance the risk with opportunity.
Fee: I believe there will always be a demand in our industry for motivated, competitive people who are driven financially and driven to assist people in important decisions to their business or personal lives. Protecting your assets is an important business, and one we have always treated as a profession. If you care about what you are doing and who you are serving and want to be a financial success, this is a good business to be in, but it won't be easy. You have to differentiate yourself more than ever, and you have to go at it each and every day. I think you must be goal driven, and willing to do the things necessary to reach your goals.

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