Handling Unprofitable Agents A Challenge For Insurers

"It's a challenge for insurers because what all companies say is ?we have so much money, time and effort invested in these agencies and we don't want to just terminate them. We want to find a way to help them,'" said Ms. Hall, who offered her counsel this week at the National Association of Mutual Insurance Companies convention in New Orleans.

Ms. Hall said the first advice she would give other insurers is to examine the makeup of the underperforming agent's book of business and compare it to the state and to other profitable agents that are within that geographic location.

"When you sit down with an agency's profile, which is basically what its book of business looks like, and when you compare that to the state level, the company level and to other profitable agents' level, you can sometimes tell what doesn't fit, and then look at that to see what the loss ratio is," she told NAMIC members.

In some situations, she also noted, agencies have not had the correct pricing mechanism. "So if the pricing hasn't been corrected, hasn't been high enough, and the agent's book looks really good, then that could be the culprit. So you have to identify what's different in that agency versus someone that's profitable," Ms. Hall said.

Among unprofitable agencies, common patterns include incorrect pricing or classifications, she said. "In other words, they didn't classify the business correctly. Sometimes, we see things where the agent hasn't gone out and looked at particular homes to see if there are any exposures we wouldn't want to write," Ms. Hall explained.

"Another thing that's very common is staffing turnover within the agency–they are constantly having to retrain client service representatives, and something can slip through the cracks. We see that happen frequently," she advised.

Ms. Hall said this is an issue that she often deals with at her company. "We look at the worst-10-percent performing agents in our company–it's a constant review process. And that's really important because we invested a lot of time and effort, as have the agencies," she said, adding that sometimes the problem is just the training issue within agents' own office and staff.

Oftentimes, Ms. Hall added, agents don't realize what they are doing wrong, because they have not been thoroughly trained on the company's position on their operations and "they are not going to know that if we don't tell them," she said.