Agency/Broker Profiling


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The agency profile tells the agency's story and presents the agency's expertise to prospects, clients, and companies.

It's like a resume. If you're looking for employment, you would prepare a resume that highlights your work experience, education, and other activities in a way that makes you look good to the prospective employer.

Likewise, the profile should impress the prospect with your competence- your ability to anticipate and solve their insurance problems. It's no different from the testimonials an agent might show a prospect when trying to land an account.

Insurance companies want to know that you are in absolute control of your business and that your staff is competent to handle whatever comes along. They want to know that your agency uses good risk-management techniques to prevent errors and omissions exposures and that you know how to maintain growth of profitable books of well-controlled business.

An agency profile may be used for a multitude of reasons, such as attracting carriers and markets, building specialty programs, and so on. It is also invaluable when applying for a loan from a banker or lending institution or considering a merger or acquisition.

The first step in the agency-planning process is the profile: If you know where you are, you can see where you want to go-and neither is possible when you don't know where you've been. A profile makes introspective forecasting (production and financials) a routine process and greatly simplifies business goal setting. It identifies problems so you can solve them.

Completing an effective profile should put you in a position to deal with problem opportunities in an expeditious manner; once dealt with, they should not come back as major problems again. You should be able to stop feeling as if you spend most of your time 'putting out fires,' moving books of business to restrictive markets, etc. You might even be able to start enjoying the insurance business again!

With that in mind, here are a few important general sections that should be included in a profile:

1. Physical agency information, such as name, addresses (mail and location), telephone and fax numbers, and names and specific information about principals.

2. Agency-staffing information, describing the positions, duties, and experience of each staff member.

3. Production information, outlining the mix of business, written premium, commission income, number and size of accounts, and number of policies.

4. Carrier information: written premium, loss information, lines of business, and carrier positions held. (It is important for your carriers to feel that you understand their situations.)

5. Automation capability.

6. Perpetuation arrangements. Carriers want to know that the potential for a long-term arrangement is possible-that, if something should happen to you, the relationship would continue in a smooth, businesslike manner.

7. Other ownership interests and relationships.

8. Account development and maturity of your book of business.

9. The marketing program for generating new and additional business.

10. Whether you have a business plan. While you may not want to give your carrier a copy, you should have a simplified version available for discussion. The profile is a giant step in preparing a formal, written business plan. No agency is too small to have one!

Because everyone likes to associate with a winner, we all should be able to demonstrate on paper that we fit that description.

A sample profile is included. You may wish to print a hard copy so you can refer to it as you follow this narrative.

The first section in our profile provides/asks for basic information about the agency, which does not need any special research to complete. Obvious items to include are the agency's name, mailing address, location address, telephone number, and fax number. An agency with more than one office or an associate office would want to explain any unusual relationships or situations that might raise a question.

Describe the type of entity (corporation, partnership, proprietorship, etc.), listing the names and titles of the officers and owners and the ownership percentages. A statement about their respective activities in the agency is also important.

If any items need additional explanation, it would be prudent to include an additional narrative page with the profile.

The general information section is followed by a series of specific items, as follows:

Item No. 1

The first item should uncover the agency's total written premium for the most recently completed year and the previous year, and the amount forecast for the current year. Gross commission income should also be provided in the same section. If your goal is to try to attract companies and formulate a contract with them, they will want to know that your agency the size they want and is in a growth mode.

If you do not meet their size requirement (cannot commit to a volume sufficient for them), you may still be able to interest them with a very specific marketing plan that shows measurable success.

Later, when you get into carrier volume, business breakdown, and loss ratios, you can be more specific.

Item No. 2:

The next item question deals with the agency's mix of business by line of insurance, and is expressed as a percentage of the total written premium. This is significant because the mix tells a lot about the agency and the type of business you write.

For example, Personal Auto insurance constituted about 38.0% of the total premium written in the United States in 1992, and for at least the 12 previous years, it produced no underwriting profit. The underwriting loss from Personal Auto over the last 12 years was in excess of $52 billion. (Underwriting loss in 1992 alone exceeded $2.6 billion.)

Obviously, if you have a Personal Auto mix of business higher than about 38% of the total written, be prepared to explain in detail and demonstrate the profitability of this book. Even that may not be enough, since many carriers have dramatically reduced their Personal Lines writings or gotten out of them entirely.

Even Homeowners, which represents about 9% of total written premium in the United States, had only one underwriting profit year in the past 12 years, producing a 12-year total underwriting loss of more than $26 billion. Major catastrophes, such as Hurricanes Andrew, Iniki, and Hugo, have had a dramatic effect on this line of business.

If your agency is heavily into Personal Lines, you need to take special pains to explain how you operate and control your book of business. One strategy you might want to consider is to seek an appointment for Commercial Lines only and then develop the relationship with the carrier with the hope of eventually getting a Personal Lines appointment.

Workers Compensation is another line that has produced underwriting loss over the past 14 years-in excess of $45 billion. The combined loss ratio has been running about 118% and is climbing. All 14 years produced an underwriting loss.

Personal Auto, representing 38% of the total market, and Workers Comp, representing about 13%, together constitute 51% of the total. It is no surprise that the mix of business takes on a new dimension.

If your mix has fluctuated greatly during the period displayed, explain why. Fluctuations can work to your advantage or disadvantage. This is definitely an area to focus on in your planning efforts.

If you are automated and receive agency production reports, book of business reports, and so forth from your system, this should be a relatively easy area to control. If you are not automated, you need to look into this critical area and address the need in your planning. It may be crucial to your survival.

Suggested categories should include, but not be limited to, the following:

  • Fire, Allied, and Marine
  • Crime, Fidelity, Surety, and Glass
  • General Liability
  • Commercial Package/Businessowners
  • Commercial Auto
  • Workers Compensation
  • Other Commercial Lines
  • Personal Auto
  • Homeowners
  • Other Personal Lines

Item No. 3:

You need to provide your overall agency loss ratio. A good way of doing this is to break it down between Personal and Commercial lines.

This may be a bit more difficult for some agencies, since most production documents from carriers are not forwarded in a timely manner. Although you may track this information in your own automation system, you will probably rely for the most part on company statistics.

Whatever information you can develop and provide in this area will be helpful and very important. If you are properly automated, you should be able to track claim and loss-history data by carrier, account, and producer. To track this information, give it some planning and follow-up time, because the benefits can be great. Your contingency or profit-sharing, relationships with your carriers-identifying potential reserving problems with carriers, making your carriers' claim processing accountable, identifying problem clients and possible future problems, etc.-can be affected favorably.

Item No. 4:

Know and be able to communicate the total number of accounts/policies in your agency. This information should be broken down by Personal Lines and Commercial Lines.

By knowing both the number of accounts and the number of policies, you should be able to develop a ratio that demonstrates account development and enables you to address the ever-present one-policy account in your planning process.

Identifying the accounts that do not develop a positive cash flow to your agency and that have a negative impact on the agency will be more and more important as you try to compete. On the other side of the coin, identifying the accounts that are important to the agency because of their all-around positive influence is a good step toward ensuring they stay with you.

Item No. 5:

Identify your five largest Commercial accounts with respect to written premium and gross commission. If you are automated, you should be able to get a breakdown by account size in any range. If you cannot do that, it is an important factor to consider during the planning process.

You don't have to give a carrier the name of the account, but knowing the numbers can tell the carrier something about your agency's ability to land and retain larger accounts. There are only so many of them in any marketing area. If they are quality accounts, the carrier may express an interest and be able to do something on them for you.

For the outsider looking in, such as a potential carrier, buyer, or perpetuation candidate, it also indicates account strength and provides the opportunity to compare large accounts to overall volume. The loss of a large account could have a dramatic impact on your results, and is another area that can be addressed in your planning efforts.

Item No. 6:

Provide information on agency staffing-the total number, including principals. Agency staffing is very important and is treated as a separate section in the profile.

One of the major criteria used by a national broker to measure performance is the gross revenue generated per employee. While a revenue-per-employee standard is helpful, it varies dramatically from agency to agency, depending upon the type and makeup of the agency. No standard is really wrong, but knowing yours can establish a starting place for planning. If you know where you are, you can decide where you want to go!

John Jaques, a renowned agency management consultant, has developed a superlative staff productivity-planning system. It is based on commission and revenue on a per-staffperson basis. You will be able to find it using the key word 'planning' in the article 'Seven Management Keys Go Beyond Survival.'

A carrier might make judgments about an agency based on its perception of the agency's staff. A smaller agency has a staff that handles a broad range of activities; a larger agency usually has more specialized positions. Is the staff being used in a cost-effective manner? In a discussion on staffing, how the employees each spend their work hours carrying out duties is more important than how many people are employed. Once you have determined who's doing what, you can consider tasks and time spent on administration, clerical support, and technical activity for your inside staff.

You will need to break down written premium and numbers of accounts handled for each of your customer service representatives. In a small agency where the employee has broad duties, try to allocate time spent on various activities as accurately as you can.

Treat your sales activity as a separate item, breaking it down by type of producer (besides principals) -- that is, commissioned or salaried, and inside or outside. Consider principals separately, because most principals work in both sales and sales administration, and it is important to distinguish between the two.

By all means, break down the number of accounts handled, written premium, and gross commission, by producer and by principal.

To answer the questions on the profile, take some time to talk with your employees. You may be surprised when their perceptions about what their jobs entail differ from yours. At any rate, this exercise will assist you in your planning efforts and in getting a better understanding on the proper allocation of responsibilities and identification of future needs.

A good definition also makes it much easier to evaluate an employee's performance.

Item No. 7:

What companies does your agency represent? List the current year's written premium (projected on an annual basis) and gross commission by carrier.

Items 9, 10, and 11 will elicit further data on your major carriers, with the same information provided for the first previous year in Question 10 and the second previous year in Question 11.

Item No. 8:

This item deals with restrictions (if any) placed on you by any of your existing carriers-a very important subject. It might seem to be negative, but often mitigating circumstances cause the problem through no fault of the agency.

This would include any account payment problems you have had with any carrier. Carriers have reporting facilities in place and exchange this information. By taking the initiative and addressing this issue up front, you won't be on the defensive. Bringing the situation up yourself will allow you the opportunity to explain it on your own terms.

Item No. 9:

Provide a breakdown of premium written by your major carriers for certain impact lines, and include loss ratios. This information should be provided for your major carriers only.

You may provide company production reports rather than the information shown here. What's important is that you show that you are aware of the specifics and have control. Unusual circumstances may exist: For instance, a bad loss ratio on a particular line might be an unpaid but highly reserved claim. There may be nothing paid on it, or the reserve may have been adjusted downward by the carrier and it is not reflected on the summary. If such a situation exists, make a special effort to explain the circumstances on a separate narrative to be included with the profile.

The key lines displayed on the question are for the largest premium lines and the lines that most carriers are concerned about. Carriers are concerned about the mix of business by line. If you are top-heavy in Personal Auto and Workers Compensation, for instance, you'll need to address this specifically.

Items No. 10 and 11:

Items 7 and 9 ask for information about carriers for the current year; Items 10 and 11 call for the same information for the first and second previous years, respectively. All in all, you should be able to display carrier information for about three years.

If you have had trouble with loss ratios or are currently having problems, you should make a special effort to address the problems in a separate narrative.

Item No. 12:

Is your agency automated? If so, what brand of hardware do you use?

Insurance companies have done a poor job with respect to automation, for the most part. Many of the systems that have been developed utilize IBM or IBM-compatible equipment. Is your equipment compatible with what your carrier uses?

The next area: Is the hardware you have adequate for your needs? Is it of sufficient capacity and quality to handle your book of business and all of the related support functions?

Many system vendors have integrated single-key-entry systems that permit activities critical to an agency's well-being. Having one consolidated database in your system will allow you to access management information, which will permit you to take the guesswork out of planning.

Item No. 13:

What software system is used? The same considerations outlined in Question 12 apply here.

You may be using a word-processing software program, separate rating programs, and several company interface programs. Even if nothing is wrong with whatever is being used, at some point you will need to look at an integrated single-key-entry system and hardware with sufficient capacity to accommodate your agency.

Some exceptional integrated systems on the market now can have a dramatic effect on your operation. If you are waiting for your carrier to do it for you, you may be disappointed: Most carriers have held back on agency automation to reduce expenses.

If you have a new system in your future, you may be able to support or integrate it with whatever hardware and software you have now. And, of course, there's always the possibility that you can more effectively utilize the system you have.

Item No. 14:

Did you design your own software or have someone customize it for you? If so, how long ago?

Many agencies have developed their own systems or applications, which may work well-but they should continually look at updated systems because of the improved and more affordable technology available. More important, so many fine, inexpensive 'shelf' software programs can be found on the market today that it doesn't make any sense to reinvent the wheel when it comes to agency automation needs.

Item No. 15:

What agency functions does your automation system perform? The profile lists a number of functions and activities, and explains itself.

Item No. 16:

What is your perception of agency automation? This is a personal question to be answered by the agency principal(s).

It may seem to be an unimportant question, but the attitude of a principal frequently affects the staff's attitude. If you are semi-automated, you may have concerns about going to a complete system. Whatever the extent of your perceptions, consider that most carriers are looking for an agency that has a good system and control of its operation.

If you have not taken advantage of the benefits of a good system, you may want to include it in your planning and make the carrier aware of your intentions.

Item No. 17:

Are you interfaced with any of your carriers?

This tells a potential carrier whether you have some experience with interfacing. Many carriers use similar systems, and yours may already be compatible. Some carriers require interface capability as a condition of contracting. This makes training more cost-effective.

Item No. 18:

Do you consider the agency to be particularly competent in a special field?

This question is designed to highlight special experience, talent, and competence, to elicit special agency expertise.

Some types of risks may be high-liability exposures and thus surplus lines risks. The property may be a very low exposure and thus very desirable to a preferred-risk company. With sufficient volume in a specialty, there may be a volume of other desirable business that can be accessed.

Item No. 19:

Does the agency have any formal, written arrangements for perpetuation?

To some carriers, this question is more important than any of the others. Today's carriers talk about a long-range relationship that will be profitable to both parties. (In practice, however, they may do something else.)

Any principal who is aging or has health problems poses a risk to a carrier.

If something happens, is the agency in a position to perpetuate itself? Carriers want to know that a relationship will continue and that they won't be forced into any decisions because of distressed circumstances.

Item No. 20:

Are there any ownership interests in the agency other than active principals?

Carriers want to know who is in control. They want to know who is responsible if the worst happens.

The question also provides you with an opportunity to highlight an association that may be able to produce a very good, controlled source of ongoing business.

Items No. 21, 22, and 23.

These three questions are designed to show some of the principals' attitudes about the agency business. They can provide an excellent basis for long-range planning. This enables each principal to perform the duties he or she is best at and likes most.

That concludes the review of the profile. Here are some further thoughts about profiling your agency:

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