Characteristics Of Strong Agency/Carrier Relationships


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by John Jaques

The compilation of agency/carrier relationship characteristics presented in this article is based on observations from top performing agencies.

The characteristics discussed aren't necessarily present in all high-performing agencies, but an overwhelming majority of these traits will be present in most firms. (A high-performing agency is defined as one that falls in the top one-third of performance in three key areas: growth, profitability to owners, and employee productivity.)

In reviewing these characteristics, ask yourself how the agencies you serve perform and whether you anticipate making any changes. Consider the material from the agent's point of view, and tailor your responses accordingly.

Problem: The insurance industry today is under attack from consumer groups, the subject of political debate and radical legislative proceedings, and is suffering its worst public image in years. Independent agents are trapped under this oppressive cloak, causing market turmoil and damaging agent/company relations.

The development and nurturing of strong agency/carrier relationships can contribute significantly to moving out from under this cloak and allowing agency customers and prospective clients to focus on the quality services and products you provide.

Top agencies are basing their marketing strategies on strong agency/carrier relationships. Successful marketing in the 1990s will require agents and carriers to share 15 characteristics. Following each characteristic, you will find questions to pose at each agency you serve.

1. Compatibility of business. Your agency should begin identifying the types of risks it writes and matching its book of business to its carriers.

Action: Meet at least quarterly with each of your lead carriers' marketing and underwriting teams to explore the types of risks they want to write, their pricing philosophy, and volume requirements.

2. Agency commitment to sell on behalf of carrier. No longer can agencies go into their marketing area, sell potential clients on their merits, and then attempt to find a home for the client with one or more of their carriers.

Action: Your agency needs to profile the business its carriers want to write, then actively seek out those risks. Begin selling on behalf of your companies, as opposed to always selling a risk to your companies. The positive effects on your agency and carrier include improved hit ratios, higher retention, greater profitability, reduced friction, and enhanced ease of doing business.

  • As an agency, do you sell risks to your carriers or do you sell on behalf of your companies?
  • Do you have examples of accounts you went after because you know a company wanted the business?
  • Are 90% of the sales your agency makes now due to call-in or walk-in business, without a proactive attempt on the agency's part to develop specific leads?
  • If you answered 'yes' to this question, would you be willing to actively pursue and sell specific accounts if you were given clear account profiles to pursue?
  • If you answered 'yes,' what methods would you use to pursue the accounts?

3. Strong agency commitment to street underwriting. Top agencies feel very strongly about protecting their top five carriers and will not knowingly write a marginal or poor account.

Action: Regularly turn away new accounts that do not fit carrier underwriting standards. Direct them elsewhere or place them in markets specializing in those types of risks. Convince producers and staff that if they give up writing poor accounts today, higher growth and profitability will occur in the long run due to continued availability of favorable pricing, capacity, and solid relationships with the agency's key carriers.

  • Do you have stated, written, and communication underwriting acceptability standards in your agency?
  • Have you turned down new business in the last six months as poor underwriting risks (other than substandard Auto)?
  • Are your carriers aware of the level of 'street' underwriting (account selection) you do?

4. Agency has defined system/procedure for marketing placement. High-performance agencies typically have a designated head of marketing. Rarely a full-time, separate position, the role often is filled by an owner who has taken responsibility for overseeing company relations and establishing agency procedures for effective marketing and placement performance.

The head of marketing also leads marketing meetings, oversees dissemination of company information to staff, and ensures that staff training in marketing/placement and coverage on an ongoing basis. More and more larger agencies (those in the $5 to $10 million premium range) are establishing a central marketing person or unit to handle all new Commercial Lines placement and renewal remarketing.

Recommendation: Appoint an individual to assume the marketing/placement function in your agency.

  • Who is the head of marketing in your agency?
  • Do you have written procedures for marketing/placing new business and for remarketing renewals? Should placement be centralized?
  • Do you hold regularly scheduled marketing meetings to discuss carriers, products, coverages, who's hot and who's not?

5. Volume is heavily concentrated with few carriers. The lead carrier typically will receive 30% to 35% of volume, the second carrier 20% to 30%, the third 15% to 20%. This puts 80% of the agency's volume with no more than five companies. The goal for your agency is to become important individually to two carriers, while being important collectively to three others.

Spreading volume too thinly over seven to 10 carriers can make you unimportant. Review your top carriers' results-premiums, commissions, loss ratio history, etc., for the last three years. Consider consolidation opportunities, needs for additional markets, and be prepared to address threats of cancellation, loss of markets, or capacity.

  • How much volume (as a percent of total) is placed with each of your five lead carriers? How does this relate to the comparisons noted above?
  • Is your agency individually important (one of the leading agencies) for your top two carriers?
  • Does it appear your volume should be consolidated further into a few carriers?

6. Top agencies produce real growth each year. Growth is not measured in premium or commission volume, but in client count. Top performers increase client count 5% to 7% per year every year, regardless of marketplace conditions.

As a result, the agency's volume can be counted on to double within six to eight years in most cases, allowing the carriers to continue to grow significantly over the long run as well. Plan each year's sales activities goals with the intent of increasing client count by at least 5% to 7% each year.

  • What was your agency's Personal Lines client count increase (new accounts less cost accounts) last year as a percent of the carriers' total Personal Lines clients? What was the Commercial Lines client increase?
  • What will you do specifically to increase client count in the current year?

7. Agency assumes responsibility for loss-ratio correction. Whenever your agency's loss ratio with a carrier is 10 points worse than the carrier's branch-average-loss ratio, the loss problem probably reflects your firm's book of business and not the carrier's underwriting. Take the time to isolate loss-ratio problems and take corrective action.

  • During the latest year, did your agency have a loss ratio 10% or more higher than a carrier's branch average?

If yes, have you isolated the problem and begun corrections? If you haven't taken action steps yet, who will be assigned to investigate the problem? By when will an action plan be put in place?

8. Agency handles carrier tasks whenever possible. In addition to simply sending an application to the carrier, more agencies are taking additional responsibility for rating and underwriting risks. The underwriter is left with more time to make the proper accept/reject decision.

Policy issuance, database maintenance, and claims-draft authority also are being assumed by agencies. The result is less duplication, faster response, and lower costs for the carrier. Unfortunately, agencies often have assumed these duties for defensive reasons . . . it being the only way tasks got performed.

Analyze the activities your CSRs and producers perform relative to rating and underwriting. Look for opportunities to increase the ease of doing business. Review your agency's automation system's rating and policy issuance capabilities and update where necessary.

  • Do you now maintain and use rating capabilities in both Personal and Commercial lines?
  • Do you now perform any functions previously left to a carrier?
  • Are there any functions of your top three carriers you would be comfortable assuming?

9. Effectively use telephone screens with underwriters. To reduce paperwork, heighten the ease of doing business, and increase hit ratios, your CSRs, producers, and marketing personnel should no longer send an application in blindly to their carriers. New accounts and large, complex renewals are run by the underwriter first via phone, then followed up with the applications (or proposal) once the account passes the telephone screen.

  • Does your agency ever send an application to two or three carriers at the same time without first screening the account with underwriters?
  • Can a telephone underwriting screen with underwriters be established in your office? If yes, who will be responsible for establishing the procedure, and by when?

10. New business and expiration reviews. Take the lead here. Agency representatives and owners should begin meeting face-to-face with their lead underwriters on a regular basis to review new business, upcoming renewals, and accounts with other carriers the agency is considering moving.

  • Are regular underwriter meetings held to review new accounts and renewals?
  • If not, do you see any benefit trying to schedule such meetings?
  • With which carriers do you feel the meetings should be held? How often (monthly or quarterly)?
  • Who will be responsible for organizing and conducting the meetings?

11. Establish personal relationships at all employee levels. Begin to develop opportunities for Personal Lines CSRs, Commercial Lines CSRs, and producers to meet socially or informally with their carrier counterparts in order to help build closer ties. Joint picnics, breakfast meetings, underwriter-of-the-year dinners, open houses, etc., can be used to open communications and strengthen positive agent/carrier relations.

  • What informal events or opportunities are now being used to foster better relationships between agency and company personnel?
  • What events will you schedule in the future to better facilitate communication and familiarity?

12. Assist carriers in avoiding excessively low pricing. When a risk has been quoted by two other carriers or competitors at $14,000 and $12,300, do not let your key company quote and write the account for $6,500. Instead, tell the carrier a $11,500 price will be fair and sufficient to win the account.

Your agency can do its part to smooth the cycle slightly and improve agency and carrier profitability in the long run. Your agency will develop leverage opportunities so when an additional price break is needed on another account, the carrier may respond favorably.

  • Have you informed a carrier in the last six months their price was too low?
  • Have you encountered situations in which a carrier's price was lower than needed, yet you went with the price?
  • How will you handle low-ball pricing situations in the future?

13. Top agencies penetrate target markets. These agencies are developing one or two target markets (classes of business) making up 20% or more of their total volume. Form an agency task force to identify a potential target market, develop a differentiated product, work with a carrier to provide the product, pricing, and marketing support, then market the product actively over a wide geographic territory.

  • Do you write more than 10% of your volume in a specific class of business?
  • Do you feel your agency has a better-than-average level of expertise and knowledge in one or more classes of business? If yes, which classes?
  • Do you feel a differentiated product could be developed for the class(es) of business identified above? Would you be willing to work with your three lead carriers to design a product and a marketing plan?

14. Track the results of carrier submissions. Begin today, maintaining a log of submissions (by carrier) noting the type of business, the pricing, whether the risk was accepted or rejected, and why. The logs are referred to during your agency reviews to ensure the company is meeting its commitments and to further cultivate those risks the firm and company can successfully work on together.

  • Is a log of submissions to each carrier kept now?
  • Would such a log be valuable in company discussions to your agency?
  • Will a submissions log be started in your firm? If yes, who will be responsible for design and implementation?

15. Maximize the use of automation, interface, and direct-bill. Rating, policy issuance, policy database, interface, direct billing, and continuous policy maintenance all are automated to the maximum degree in your agency. Your systems need to be updated continually and refined with carriers' programs, products, and procedures in mind.


Independent insurance agencies and their companies must coordinate their planning, share and utilize their strengths, and work to overcome each others' weaknesses to accomplish their own individual objectives. Strong agency/carrier relationships serve as the foundation for coping with market and price changes, meeting consumer demands, and growth and profit in the face of reduced commissions and rising expenses. Solid agency/carrier relationships ensure the availability of quality products, competitive prices, and responsive service to satisfied customers.

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