Independent Agencies Can Boost Value By Winning The War For Talent

Recognizing this fact, the future of the agency/brokerage business belongs to those who are capable of attracting and retaining the most qualified and capable producers.

That being the case, we can predict where future success will be achieved by following the flow of talent and identifying the organizations that are capable of creating and providing an environment where the best and the brightest producers want to be.

If you track the flow of talented producers over the last five to 10 years, it has been heavy and largely in one direction. Several of the national insurance brokers have lost a lot of talent in their production ranks and have seen it flow directly to a fairly limited number of independent regional and semi-national brokerage firms.

There are a number of reasons that this has taken place and probably will continue to take place for many years to come. Many of the producers who have made moves would suggest that, for the entrepreneurial producer capable of generating business, the quality of life at several of the national brokerage houses has deteriorated.

In an effort to improve profitability and better control business, attempts have been made to institutionalize books of business, producers have been disassociated from their renewal books, and the placement of business has been centralized.

In addition, the consolidation that has taken place at the top has cut the size of producers prospect list. All of this is creating a less appealing environment for producers and has negatively impacted their earnings potential.

At the same time, risk managers and insurance decision-makers at larger accounts have become aware of the capabilities of some of the larger independent regionals and are now considering them as not only viable but attractive options to the national brokers.

Corporate insurance buyers have seen the flow of talent to the regional brokers. They have also found that the regional brokers have capabilities and service offerings that not only rival those of the national brokers but in some instances can provide these services more efficiently, effectively and less expensively.

On top of all of this, producers have made the change due to the fact that they can produce more business, make more money, and generally get some kind of signing bonus or equity kicker to offset the expense of making a move and in recognition of the value of what they are bringing–or are capable of bringing.

The producers who are considering changes today also have the benefit of witnessing the success that has been achieved by many of the folks who made a change in years past.

Those who have been most successful at recruiting producers:

Recognize the value of producers.

Understand and can communicate how they can improve the quality of life for producers.

Are willing to make the effort to actively recruit them.

Are willing to spend the money to attract producers and help offset the cost required to make the change.

Have been willing and able to create a culture and an environment in which top producers can prosper.

Some have questioned whether this trend will continue–whether weve evolved into a "free agent" market where the top producer will continue to move around, or whether we may actually see these same people move back in the direction of the national brokers.

In my opinion, I would not anticipate that there will ever be an active flow of producers from the regionals to the national brokersunless producers cant sell and they need the institutional muscle and name to support their sales efforts.

Lateral moves among the regional brokers are a possibility, but would be unlikely due to the significant disruption and cost of making a move that provides limited additional benefit.

Based on what we see, all the factors are in place to suggest that the flow of talent will continue. There is some suggestion that it will slow down due to the fact that the talent pool has been drained, but these are big organizations–and to their credit, they have demonstrated their ability to hire and develop talent and will continue to do so.

With that, there will probably continue to be a flow of producer talent. If you want to know where the future of the industry is headed, take a look at where that talent is landing.

Bobby Reagan is the president and CEO of Reagan Consulting, an Atlanta-based financial and management consulting firm working with insurance agents, brokers and financial institutions that developed and produces the "Independent Insurance Agents and Brokers of America Best Practices Study." He can be reached at bobby@reaganconsulting.com.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, July 28, 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.