SEVEN MUSTS FOR INSURANCE AGENCIES
TO SURVIVE AND THRIVE
by Bobby Reagan
Some independent agents wonder, 'What will it take to be around for another 100 years?' This seems a little grandiose. Let's ask ourselves, 'How can we survive another 10 years?'
To answer such a question, we first must understand how the decision will be made as to who will and won't survive. In my opinion, four parties will make that decision:
- Consumers. You must have customers to generate income.
- Insurance carriers. You must have insurance companies to provide product (at least most agents must have this).
- Agency employees. You need to have employees to sell and service.
- Competitors. Your success or failure hinges on theirs.
If I'm on track, an agent who wants to be successful over the next 10 years must find ways to meet the needs of consumers, insurance carriers, and employees, and outperform their competitors in the process. Although there may be room for debate, I feel that at least seven crucial business practices are needed to achieve this objective. With apologies to Steven Covey, I call these the 'Seven Habits of Highly Successful and Surviving Insurance Agencies.'
1) Agencies must be sales organizations. If you're going to increase the value of the organization, satisfy your insurance companies, create opportunities for your employees, and grow your profitability, you'll have to increase your revenues. With the loss of business through customer consolidations and competition, this will require much more focused and aggressive sales organizations. Agencies will have to create a sales culture, make a significant commitment to sales, have well-thought-out strategies, and imbue management with the skills and commitment to achieve results.
2) Agencies must find ways to gain a competitive advantage. Consumers today are much better informed and have many more options available to them. For this reason, insurance agencies must find ways to gain a competitive advantage to attract and retain them. Although providing a competitive price is important, I believe that competitive advantage will more frequently be found through specialization, greater creativity, more aggressiveness, better service, and higher value.
3) Agencies must improve operating efficiencies. If insurance agents continue doing business the way they always have, I'm convinced that their profit margins will diminish. Insurance agents are being squeezed by carriers and customers, and find it difficult to maintain profit margins when revenues are flat. Improve your operating efficiency by improving the quality of your people, systems, procedures, and your methods of training and education. Moreover, provide better tools for your people, including technology. Greater efficiency can also come by operating more intelligently: focusing your business-development efforts, carefully selecting the insurance companies you want to do business with, and getting serious about managing your operations.
4) Agencies must manage their carrier relations. If an agency wants a competitive advantage, it must make sure that insurance companies want to do business with it more than with its competitors. More than ever before, insurers are willing to do more for those that do more for them. You're well advised to make sure that insurance companies think of you when making plans for the future distribution of their products and services. Find a way to help them accomplish their goals. Get meaningful communications going with them. Be strategic in your relationship with them. Play to their strengths and to your own. Raise the expectations for each other's performance. Build in a high degree of accountability.
5) Agencies must make meaningful investments in people. Clearly, your people are the most valuable asset you have. They also represent your most sustainable competitive advantage. Top-quality employees are good for customers, insurance companies, and operating results.
Begin investing in your staff by making recruiting a priority. Look inside and outside the industry. Develop your hiring skills, and set high hiring standards. Once you've hired the right employees, train and support them. Get them to plan and to set goals.
6) Agencies must provide effective management and leadership. Your ability to accomplish the first five of these objectives is not enough if you don't have effective management and leadership. Get to know yourself and the world around you. Define and communicate your mission and purpose. Think strategically. Invest in people. Get people thinking and working together. Set high expectations. Communicate. Make it fun.
7) Agencies must not forget about perpetuation and succession. The ability to carry on the agency's ownership and operations through the years is crucial to your customers, insurance carriers, and employees. These issues aren't easy to address. Begin by defining your objectives. Only then can you determine the options available to you. Address these issues early on; don't put off addressing these issues or your options will be limited, making your ultimate objectives less likely to be accomplished. Put a plan in place and execute it.
What do the next 10 years hold for independent insurance agents? In my opinion, your customers, insurance companies, employees, and competitors will decide this question. Your survival will be greatly affected by your ability to address these seven issues.
Bobby Reagan is president and CEO of Reagan & Associates, an Atlanta-based management consulting firm. Reagan & Associates publishes the annual 'Best Practices Study' in conjunction with IIAA and now publishes the 'Study of the Leading Banks-in-Insurance' with the Association of Banks-in-Insurance. Reagan & Associates provides consulting services to many of the leading agencies in the United States, and has served more than 50 of the 100 largest U.S. insurance agencies. This article originally appeared in the National Underwriter and is reproduced with permission.