P&C Insurance Agents Working To Get Their Financial Houses In Order In 2011

Three major themes of the challenges facing property and casualty insurance agents in 2011 come under the headings of managing finances, technology and political mandates.

Farmington, Conn.-based InsurBanc's Bob Pettinicchi, the bank's executive vice president and chief lending officer, said that when it comes to finances, there are several challenges agents will face concerning revenues, business management and credit.

He said one major mistake agents make is not diversifying their revenue streams. One way to accomplish that goal is through developing specializations within the firm, he said.

Agents should also be seeking to expand the sizes and scopes of their businesses by hiring more producers, he added. In this down economy, there are able people looking for work, and training can be very cost effective with the educational opportunities offered through carriers and associations. A new person can help to expand the size and scope of an agency.

“If you're not thinking about that, then you're missing an opportunity,” he said.

Working within the limits of an agency's revenue stream is important, however, and he emphasized that a well-run agency does not make its contingent commissions part of that revenue stream. If they get contingents, it should be treated as a windfall that could be used as a donation to charity or reinvested in the business.

Mr. Pettinicchi suggested that agencies can become more efficient by adopting and utilizing technology.

More than half of all agencies do not have a presence on the Web, he said, noting that they could be using online initiatives to save time and money. For example, an agency that makes virtual deposits–scanning checks and depositing them electronically–saves a half-day or more in an employee's time by avoiding having to run to the bank and make deposits.

The story that banks are not lending is simply not true, Mr. Pettinicchi added. They are not lending to people with questionable credit. This is especially true of any business owner who may have good credit with the business, but has allowed his or her personal credit to lapse.

“It is an integrity issue,” he said. “That tells me I don't want to lend money to you.”

He said agents who find themselves in this predicament need a plan, which is to pay down debt and produce good financial statements.

“Try to control your destiny more,” he advised. “Make your path and have your plan.”

Jill Bookman, president of American Collectors Insurance Inc., in Cherry Hill, N.J., an insurance agency specializing in collectable automobiles, noted that online competition for insurance business is becoming more intense. To combat the commoditization of the insurance transaction, agents need to demonstrate to clients the value they bring to the transaction.

“The agent can interact with the client and provide value to the process,” said Ms. Bookman. “Agents need to interact with their client and provide so much more,” beyond buying a policy.

She said the online transaction is driven by price. The challenge for agents is to step in and explain to the client that they need to consider more than that. That means communicating with the client and going beyond e-mail messages.

Agents have to utilize a combination of old and new technology involving mailings, phone calls and social media.

“Let them [customers] know in a meaningful way that you are interested in them and willing to partner with them to purchase insurance and help evaluate their decision,” she said.

Interest in the client must extend beyond the agent-client relationship to the staff as well, she added. That means not placing limits on the amount of time a service representative spends with the client. Instead, CSRs should listen and learn about the client and aim to deepen the client's investment in the insurance decision with the agency, she said.

Fred Thomas, president of the National Association of Professional Insurance Agents, and branch manager of the Bitterroot branches of Missoula, Mont.-based Western States Insurance, agency said the number one challenge agents face is the soft market. There is no end in sight to the soft market, and agents will have to continue to battle for market share and revenues.

For many, meeting that challenge has meant getting their expenses under control. Any agency that has not done that “needs to get its house in order and get it right,” Mr. Thomas noted.

He said that the future of federal legislation related to implementation of health care reform and some tax issues will be important areas for agents to pay attention to.

Health care reform implementation could remain in flux as provisions are fought out in the courts and the future remains uncertain. The former Montana State Senator said there could also be a move within Congress to starve part of the legislation by not funding the bill.

“If down the road health care is taken over by the government, where does it end?” he asked. “That is a big challenge.”

Another point of legislative combat is the reporting requirements under the health care bill for purchases from vendors of $600 or more. The requirement to issue 1099 forms to the IRS for such transactions “is a major impediment” that needs to be kept on the front burner.

Mr. Thomas said he hopes to see repeal of the reporting requirement within the next 60 days.

Other items agents need to keep an eye on include the Optional Federal Charter, which he believes will not come to pass in this Congress, and updates to the National Flood Insurance Program.

He said agents need to take their message of concern to congressional representatives That message, he explained, should be less government, less regulation and rejection of one-size-fits-all-government in America.

“Let them listen to real people who work on Main Street, and pay attention to that message,” he said.