New Years Agency Checkup and Resolutions

Many agencies, especially those with less than $3 million of revenue, do not have the staffing necessary to segregate the duties of those in the financial area. In these situations, the owners must involve themselves in specific steps of the accounting function, including payroll, signing disbursements and reviewing bank statements.

Do you exercise good underwriting habits and expect the same from your employees?

Agency owners and management set the tone for the types of business the agency writes and the integrity they exhibit in the process. Writing quality businesses in an honest manner with your companies will improve the job you do for your clients, your insurance companies, and your profit sharing results.

Do you strive for best of breed when recruiting new employees and retaining existing employees?

Best of breed employees are self-starters that strive to provide quality service to clients and further the goals of the agency.

It is important to set goals for all employees and have a meaningful incentive program for all levels.

Do you have a profitable producer compensation program that rewards producers for writing new business and growing their books?

An incentive compensation program for producers should encourage new business, growth in their book, and improve their average account size, all while being profitable for the agency.

Producer compensation is your single largest expense category. Does it accomplish what it should for your agencys growth?

Are producers accountable to a sales plan?

Sales managers are not necessary in an agency where producers are all self-starters and meet their goals. But do your producers all have goals, and are they working smart?

By monitoring activity and tracking results, an agency owner has the information necessary to encourage book growth.

Are your customer service workflows documented and used consistently throughout your agency?

Agencies of all sizes should document a set of best practice customer service workflows, using automation as efficiently as possible. The use of transactional filing and consistent electronic documentation of customer activity are excellent ways to leverage the efforts of your customer service staff.

Do you have accounts receivable balances over 45 days?

After 45 days, it is likely that you have paid an insurance company on agency-billed premium. Yet many agencies do not worry until account receivable balances are aged over 90 days.

Your credit policy must focus on the 30-to-45 day range, including using 0-15, 15-30, 30-45 and over 45 days as your accounts receivable aging categories. Requesting cancellation should not just be a threat, it should be the teeth in your program for anything over 45 days.

Also, audits should be collected under a tighter procedure than monthly premium.

It is after Dec. 31. Did you retain adequate earnings?

Retained earnings are the cushion that every business needs as it prepares for an unknown future.

Adequate working capital, a pool of capital for future fixed asset additions, and producer investment will prepare the agency for perpetuation or continued economic downturn.

Are you developing the next generation?

Every agency must prepare for the future. Are you bringing in management with new talents, producers that will grow the business, and staff who are eager to make your agency stand out from the competition?

In addition to attracting the right employees, allow them to take risks, help them grow and accept additional responsibility. If you have any hope of the employee group buying you out someday, you must start taking little steps today, well in advance of the leap.

This checklist hits each areas of your agencys operation with crucial ideas for an agencys survival and increase in value.

Honestly challenge yourself to take steps in 2003 toward building more value and giving you a perpetuation choice someday. Your agency will have higher value, whether you sell internally or externally, but your decisions today will give you more options in the future.

Wayne A. Walkotten is a senior vice president for Marsh Berry Inc. Marsh Berry, headquartered in Concord, Ohio, is a national management consulting firm dealing exclusively with insurance agencies and companies and with banks.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, January 13, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.