A big-time writer of small-business insurance

Writing small business might not be feasible for us, let alone profitable, without so many referrals. The annual premiums and commissions for these accounts are lower than for others, and we couldn't afford to write the business if we had to spend much time on marketing or visit clients before writing their coverage. I do a lot of telemarketing for larger accounts, but because of the high number of referrals we get, I don't have to do any cold-calling or direct-mail campaigns for small businesses.

The key to profitability is to keep small-business accounts for the long term. Because larger accounts have to pay significantly higher premiums, clients frequently ask their agent or broker to shop the account around at renewal time. Even if your large clients don't request quotes at renewal, the sizable commissions they pay means you must constantly be aware of competition for these accounts and be on the lookout for lower premiums to keep the clients happy. With premiums already fairly low, small-business clients are less likely to ask you to shop around, and the low commissions mean competitors will be less interested in working to get your clients' business.

Who you callin' small?

We don't have an elaborate system for classifying accounts as small business. For the most part, our small-business clients are those whose accounts can be quickly quoted and bound using a business owners policy, through the Web sites of the carriers we work with. BOP eligibility is restricted by the type of business, annual sales and square footage of an insured's premises. These criteria can vary from one carrier to the next. In general, a business must have no more than 25,000 square feet and $5 million or less in annual sales.

We have a large number of accounts that fall within these guidelines, and we use BOPs to insure about 85% of our small-business clients. Most of our small-business clients are offices and small manufacturing operations. We also insure some small entertainment production companies, a few retail businesses and a few service operations. Other risks eligible for the BOP are some contractors, convenience stores with gas stations, laundries and dry cleaners and smaller restaurants. Particular limits (e.g., no more than $1 million in annual sales and a seating capacity of 150 or less) apply to restaurants.

A call from a small

Because we're a small agency, the other producer and I pretty much "do it all" when we get a call from a small-business prospect. When I take a call, I fill out the applicant information part of an ACORD form while I'm talking to the prospect. I discuss how much property, liability, auto and workers comp coverage the prospect wants, and complete those sections, too. After I talk to the prospect, I run a credit or insurance score on the prospect.

The carriers we work with the most all provide excellent coverage for a variety of risks. Because I work with so many small-business accounts, I've become knowledgeable about our carriers' small-business programs. This helps me decide more quickly which of the carriers is most likely to have the best combination of coverage and price for a particular client.

All of our carriers make submitting information and getting a proposal quick and easy. I submit information online at a carrier's Web site and also can view a proposal there. I can even e-mail that proposal to a client or prospect. With some prospects contacting us through our agency Web site, it's possible to go from first contact through binding coverage without even picking up the phone. This speed and efficiency is another reason for the profitability of our small-business insurance.

BOP-ping along

Insuring small businesses with a BOP does not just save time and money for our agency. The policy also offers an efficient and affordable way for small businesses to get basically the same protection that larger businesses get from commercial package policies. Businesses save time with the BOP because it puts all the basic coverages they need in the same form. The policy is also flexible enough to add endorsements to meet the special needs of particular types of businesses.

A typical account might be a large manufacturer's representative. The BOP provides building and contents coverage with a replacement-cost option. The client might choose $4 million in liability coverage with a $2 million limit per occurrence, and a $4 million products-completed operations limit. The annual premium for this policy would be $4,657. The commission on a new BOP is usually around 15%.

Piling on

Insuring the basic needs of a small business presents an excellent opportunity to write other lines of coverage. This is an important part of making these accounts even more profitable. I begin when I'm on the phone with a prospect for the first time. In addition to the BOP's basic coverage, I'll ask about commercial auto if the prospect uses vehicles in its operations. In our market area in California, workers comp insurance has really become a problem, so I'll ask if the business is happy with their workers comp situation. Depending on the type of business, an insured might benefit from EPLI coverage or additional crime coverages. I'll also suggest an umbrella policy.

I don't stop with ensuring that a prospect's business is protected. I also ask about health coverage for employees. If the prospect is interested, I'll refer him or her to another producer who specializes in group health. This strengthens our bond with a client by helping with all his insurance needs. Since we also have access to national carriers for personal-lines insurance, I'll try to refer a small-business client to our own personal-lines department.

When we write a BOP for a client, his other policies may not be up for renewal at that moment. In that case, I just ask for the renewal dates and make a note of them in our office. Every month, a CSR and I go over accounts that have lines of coverage we don't write coming up for renewal. We often split these accounts up, and the CSRs work with us to contact these clients to see how happy they are with their current coverage. This frequently pays off in new business for the agency.

Easy to serve

Small-business accounts are usually as easy to service as they are to sell. Every carrier we work with has its program set up as direct-bill, so we're really finished with the account once we write the policy. Our CSRs will handle any changes in the policy down the road. Sometimes I'll take the initial call from a client who views me as the "point man" for his account, and I'll just pass the change along to the CSR. A few of the carriers we work with have customer service centers that allow clients to call the carrier directly for changes. However, unless a carrier has a reason for wanting a particular client to use this option, we don't enroll many of our clients.

Little big man

I treat my small-business clients the same way I treat my larger accounts. Despite the smaller commission per insured, the ease of writing and keeping accounts and the potential to add coverage make these accounts worth our time. If you take advantage of the BOP programs offered by most carriers and make rounding the accounts part of your procedures, you'll find that "small-business" doesn't have to mean "small" business.

Joe Gieson is a principal with United Agencies Inc. He currently serves on the board of directors of the Independent Agents and Brokers of Burbank, Glendale and Pasadena. Mr. Gieson previously worked as a commercial-lines marketing executive with CGU Insurance and as a large commercial account and program business underwriter with Hanover Insurance and Ohio Casualty Group. Readers can contact him at jgieson@unitedagencies.com.