Choosing The Right Market For Your Agencies

CHOOSING THE RIGHT MARKET FOR YOUR AGENCIES

After the work that goes into finding and qualifying prospects, getting in the door, and gathering the proper data to quote a risk, it is very frustrating when your agencies discover there isn't a market to work with and they can't get the business on their books.

While it would be too much to expect for your company to write everything, you should be able to anticipate its market appetite enough to help agencies avoid spinning their wheels.

An even worse scenario is when an agency learns that one of its markets is eliminating a particular line of business or pulling out of its state entirely. We have all been hearing these stories with more regularity and frequently more than we would like.

After several exasperating experiences like these, agencies are forced to start looking for fresh markets. The process begins by agents questioning their marketing managers about 'who is hot,' asking employees about markets they have worked with in the past, or considering markets that have recently 'blown them out of the water' on a piece of business.

These all are good ways to start the ball rolling toward the establishment of a company prospect list. Industry associations are also an excellent source of leads for potential markets.

Before an agency approaches any market, it is important to do two things. First, seriously evaluate current markets to be absolutely sure they need another agency. Second, if you decide to approach the marketplace, be sure you have put together a packet of information about the agency that includes its history and background, agency philosophy, technical data, and future growth plans.

The next step is to define exactly what the agency wants from a carrier. List ideas in order of priority. Here are a few items you might want to consider just to get started. Present them to agencies, and examine the answers.

Agencies should be prepared to ask potential markets specific questions and compare them in a spreadsheet fashion. During the meetings with prospective markets, try to determine their needs; at the same time, learn as much as possible about them.

Here are some key areas agencies should examine:

Financials: Ask for a copy of the company's latest annual report and read it. This is a good source to develop further questions.

Products: What does this carrier want to sell? Ask for copies of their forms, rates and underwriting guidelines. Do they have any target marketing programs? Ask for coverage and price comparisons of their competitors. If they can't give you this information, you have reason for concern.

Service: What is the typical turnaround time for quotes, changes and policy issuance? What office will handle your service needs? Sometimes a local office ships work to remote locations. This can be lead to bottlenecks, confusion, and lost information.

Quality: Most companies have quality standards. Ask how their programs work. No one will tell you their quality control is poor, but what they do tell you may give you important insight into what you will receive in the future.

Reporting

Structure: Ask for an underwriting organizational chart. Find out who your contacts would be. Is there a field marketing staff? Find out a little about the experience and length of employment of the people you would be expected to deal with. Who makes the decisions? Is there local authority, or are many decisions made in the home office? Most local offices do not want to reveal their authority levels, but with a few carefully chosen questions, you should be able to gain a strong handle on this.

Support

Departments: Use the same process as above to find out about all departments you will need to communicate with, e.g., claims, loss control, audit, accounting, Group, Life.

Automation: How much of the carrier's functions are automated? What are its interface capabilities? How many agencies are they interfaced with, locally and nationally? Does the company own its system, or have an affiliation with an outside vendor? Are there any agency financial-assistance packages available?

Agency

Support: Many companies have a wealth of programs available for their agencies. Find out about cooperative advertising, financial assistance for new producers and CSRs, money market funds, consulting services, education programs, special plans for high-producing agencies, lead programs, and contests.

Money

Matters: Ask for a copy of the commission schedule and bonus contract. Then ask what you have to achieve to attain the preferred status. What type of billing system do they use, account rendering or company billing? What are the terms? How does the direct billing plan work? When do you get your commissions, up front or as paid?

And, at last, the topic we usually place first . . .

Pricing: This is definitely an important consideration, and often the bottom line to whether or not we land an account. But it needs to be kept in perspective with all other issues. Of course, you can ask a company to give you actual rate comparisons in Personal lines and BOPs.

Some companies will do Commercial test quotes, but that may not do much for the agency. Ask for figures on the number of submissions per month and what the hit ratios are for various lines. Be sure you know on what basis the hit ratios are determined. They could be used on written policies to the number of submissions or they could be written policies to the number quoted. Many prefer to see the latter. Also know the declination ratio, the average number of risks quoted to the number submitted.

How a company prices its products is critical, but not so critical that it should always be the sole determining factor in taking on a new market. The big picture of a company's products, quality, service, and support are the key.

One last thing-be sure to ask a potential market for agency references. If you can find out the names of other agencies that represent the company, they also would be an excellent resource for you.

Just as in any relationship, there are no guarantees. But, once the deal is struck, this process and mutual commitment should be a sure-fire recipe for success.