This first article in a two-part series shows how to get a company appointment that can benefit you, your clients, and your carrier.
It used to be that getting a new company appointment wasn’t very difficult. Many agents had access to more companies than they could use. In fact, many companies tried to gain market position by actively encouraging agents to reduce the number of companies in their office. Times have changed. Companies are far more demanding and selective. Many are targeting markets more carefully and are actively reducing the number of agents representing the company. The remaining agents must often commit to specific performance requirements. So how does an agent go about opening new markets? Here’s an approach that works:
CREATE A MUTUALLY BENEFICIAL RELATIONSHIP
Before we go into the “how to” let’s clarify one point. When I work with agents and companies I’m often amazed at the adversarial relationship some develop over the years. It’s like a bad marriage: Neither party is happy, but the benefits of staying together outweigh the loss of parting, so they stay together.
Let me make this point clear: Neither the agent nor the company can maximize the relationship unless it rewards both parties. Both have the goal of attracting, winning, and retaining customers. The agency/company relationship needs to leverage its combined strength to serve customers better than the competition. In this business, it’s the customers you retain that make money. So the relationship should focus on how the agency and the company can keep customers forever.
Both the agency and the company are in the game to make money. No matter what you do or say, unless you can tangibly demonstrate how the relationship will make money for both parties, forget it. If you’re going to do this at all, do it right. This requires some hard thinking and some demanding work — but most things of value do. So let’s get to it!
RE-VISIT YOUR BUSINESS PLAN
Don’t even think about looking for a new carrier until you decide exactly what you want to do. What do you want your agency to be? Agencies come in all shapes and sizes from small mom-and-pop agencies to the mega-brokers. Just how large do you expect your agency to become? What are your growth expectations? How many producers do you expect to have? How will you manage them? Can you demonstrate to a new carrier that you have an aggressive marketing and sales management program? If not, why would a carrier want to do business with you?
It costs a company money to maintain an agency appointment. Unless the agency knows how it’s going to develop and send business to the company, why get involved?
DEFINE YOUR STRATEGIC CUSTOMER
Agencies serve a wide variety of customers. Does your business plan define your strategic customer adequately? Does it focus on Personal Lines, Small Commercial, Large Commercial, or Specialty Lines: Workers Compensation, Construction, Ocean Marine, Aviation, etc.? Don’t even think about a new carrier until you’ve defined your customers and their wants and needs.
You must define your customer’s wants and needs clearly to understand their exposures and what coverages and services they’re most likely to need. Think beyond product and price. Think about managing the entire risk for your customer. This will help you create a model that shows how exposures are likely to be addressed — risk avoidance, financing, control, or transfer. This helps you define the specific coverages needed from your new carrier.
DEFINE YOUR MARKET TERRITORY
Where are your customers located? Are your strategic customers concentrated in your city, or located nationwide, state-wide, regional, or international? This is important because you need to define the market territory so you can look for companies that choose to write business in these locations.
LEARN WHAT YOUR STRATEGIC CUSTOMERS REQUIRE FROM CARRIERS
Are your Commercial Lines customers likely to have specific criteria for insurance companies; i.e., often companies won’t accept carriers without an A+ rating. What are their needs for loss control services, safety inspections, claims service, etc? You need to define what your agency will do and what services you expect from the carrier. Do not assume that every carrier can provide all services.
DEFINE PROJECTED VOLUMES FROM THIS STRATEGIC CUSTOMER SEGMENT
Do this in terms of number of accounts, premiums, commission, and fee income. I often recommend creating an economic model for each customer segment that defines its anticipated revenue, marketing and servicing expense, growth and profitability. This doesn’t have to be complicated; it’s a logical allocation of agency resources. Again, you want to demonstrate how this customer segment will benefit the agency and the carrier.
For example, many large brokers have abandoned Small Commercial and Personal Lines because they feel they can’t make sufficient profit servicing these customers. Yet many mainstream agencies do quite well with this segment. Very large accounts do generate more revenue, but they’re also very expensive to service. Before you talk to a new carrier you should be able to demonstrate the premium volume you expect to write and the rate of return you plan to get from each strategic customer segment. This demonstrates just how serious you are about pursuing this line of business.
INVENTORY YOUR AGENCY EXPERIENCE AND COMPETENCIES
Does your agency have the skills and expertise to meet the expectations of your customers? What can you provide and what will you need from your carrier, or can you outsource to a broker or strategic partner? Outsourcing offers a highly effective way of attaining skills without the overhead and other costs of a permanent staff.
Listing the skills and experience of each producer, account executive, CSR, and support staff will show the carrier that you have the skills to represent it professionally. I’m often amazed by how few agencies bother to take stock of their internal resources. One broker I worked with was expanding its risk retention and financing analysis services. Before recruiting an analyst it looked inward and discovered a fellow with an MBA in finance within the agency. With some additional training, the agency had an underutilized resource available without spending an additional dime.
ASSESS YOUR CURRENT CARRIERS
When we help agencies create their current operating model we inventory the carriers, the volume placed with each of them, loss ratios, etc. We often find carriers who are underutilized, where the agency is missing contingency opportunities, etc. Many agencies have too many carriers in terms of numbers and not enough carriers with a meaningful, mutually beneficial relationship. If you can serve your strategic customer segment by leveraging an existing relationship, why not do it? If the fit isn’t there, then you’re ready to begin your search for a new carrier.