This second article in a two-part series shows how to get a company appointment that can benefit you, your clients, and your carrier.
BEGIN THE SEARCH FOR A NEW CARRIER
Don’t waste all the sweat equity you’ve invested in getting ready by selecting any convenient carrier. This relationship must be as good for you as it is for your carrier, so be choosy. Wow!! I can hear it now! You’re probably thinking: “This guy is nuts. With all of the carriers reducing agencies, withdrawing from markets, and moving to niche markets, how can I afford to be selective?”
The fact is that in any market, if the customer can’t avoid, control, retain, or transfer the exposure to another party, they’re likely to require insurance. If the demand is there, someone will come along and fill it. For example, although many carriers won’t touch Non-Standard Auto exposures, Progressive pursues that market aggressively and makes a bundle doing it.
- Find out who’s most likely able to provide coverage and services to your selected customer segment and in your selected market location. A great place to find out is by going to CompleteMarkets.com.
- Call or write your agency association to see what companies and agencies are already marketing to this customer segment. While you’re talking to them, see if you can get an evaluation, or at least their opinion, of their most recent agency contract(s). They might give you some tips on things the carrier does well or they feel could be done better.
- Many agencies who aren’t direct competitors of yours are often willing to share their open and honest evaluation of the carrier. Contact a few of them and don’t be afraid to ask tough questions: What’s their opinion about the carrier’s appetite for providing coverage and services to your customer segment? How’s the service quality? Are the underwriters overly restrictive or flexible? Are they aggressive or passive in the marketplace? For example, while many companies might still be in the market they might not be accepting new business or require a specific mix of business (Property balanced by Casualty, Personal balanced by Commercial, etc.) or they won’t do business with you.
- The National Association of Surplus Lines Offices (NAPSLO) can also help by providing security and review reports that compile statistics from company annual reports. The group makes no judgments on the companies; it simply presents the information. There is a charge for non-members.
- Review such trade publications as the National Underwriter, Insurance Broker, Insurance Week, Business Insurance, Insurance Journal, etc. The National Underwriter Co. has publications such as the National Underwriter Profiles that provides five-year histories by company type, such as the property/casualty edition. Each profile gives the company name, states where they write, financial data, experience by line, etc.
- Once you’ve located a likely carrier look it up in Best’s Guide to determine its financial ratings, growth and experience in the given line. A.M. Best can be reached at (908) 439-2200. You might want to check out Standard & Poor’s at (212) 438-2400 (as well. Other organizations that can give you quality information include Conning & Co., Ward Financial Group, Moody’s, and Duff & Phelps.
- What’s the company’s experience in the line(s) where you have an interest? Are they growing? Are they profitable? Is their expense ratio in line? If they’re not successful then you might want to continue your search. Don’t overlook the regional carriers. They’re often better prepared to write in a specific market than the national carriers.
- If you need more information, try some of the large consulting organizations, such as Hales & Co., which does an excellent job of tracking what companies are doing and where they’re likely to head next.
What other services do your prospective carriers provide? Do their automated systems provide online interactive interface for inquiry or processing? Do they offer upload and download options? Are they aggressively pursuing automation and its benefits? How’s their claims service in the customer segment you’re pursuing? Do they offer a customer service program if your segment can use it effectively? Will they make joint calls with your producers if you need their input and expertise to help analyze the needs of certain customers?
CALL ON THE COMPANY
If you’ve done your homework, you’re well armed with information to begin building a mutually beneficial relationship. Begin by having an open-ended discussion with the local branch or regional manager. You have a ton of information, but this isn’t the time to reveal it. You want to have a conversation with a purpose. Your job at this point is to receive information, not to give it.
Ask:
- What are your company’s interests and in what marketplace (territories)? What customer segment(s) interest you most?? Are there any products or services you offer that you plan to discontinue or are definitely not interested in offering Do you have anything new that you are bringing to the market?
- What’s your current appetite for business? What are your strategic growth plans? How do you see your position in the marketplace today? What do you think your company will be doing five years from now? Where are your company’s’ strengths and weaknesses?
- If you’re currently appointing agencies what are your criteria for an agency appointment? Do you have production quotas for new agents? Do you have minimum production requirements?
You get the drift. This line of questioning should confirm and add to the information you’ve already collected. If there seems to be a fit, ask the manager if they’d like to hear about your strategic customer segment and how you can work together to attract, win, and retain those customers. If they have an interest, outline your plan. Believe me, so few agents provide this kind of preparation that your professionalism should come through loud and clear.
It helps to include the underwriter(s) when you get to this point so you can begin to get a read on how they view your customer segment. Too many companies let the marketing department strike a deal then the underwriters refuse to play. Get them on board from the get-go so that everyone clearly understands what to expect.
UNDERWRITE THE UNDERWRITER
Get the underwriter to tell you how they see this segment. What will they be looking for? What do they want to see on your request for quotes? When do they want to be involved: before binding, before quoting, during the final pricing and coverage packaging process, etc.? If you don’t have a fit, walk away. This will save you time and money in the future. If the underwriter isn’t enthused about your customer segment, most submissions will be a battle. Because no agency can afford to handle submissions more than once, if you can’t communicate what’s needed to the underwriter on their terms, it might cost too much work with this carrier.
If you’re satisfied that the carrier wants to do business, lay out your business plan. Tell them that you want them to be a strategic partner and are looking for a mutually beneficial relationship. If you’re going to use two or three more markets for this customer segment, be honest and tell them up front. All you are doing is letting them know that they don’t have to take everything, yet you’re going to give them a generous slice of the pie. The key is to give them a meaningful reason to do business with you.
GIVE THE COMPANY WHAT IT WANTS TO KNOW
Now it’s the company’s turn to take a look at your agency. They want to know who the producers are, their backgrounds and expertise, and what gives them the skills to work effectively in this segment?
If your agency has a highly trained and educated staff, tout it. Be certain to emphasize professional designations and years of tenure with you and in the industry.
The company will want to know what your agency has done well in the past because it’s a great predictor of what you’re likely to do well in the future. Tell them about your successes, your business plans, and where your agency plans to be five years from now.
SHOW THAT YOUR AGENCY IS FINANCIALLY SOUND
Provide them your financial statements, income statement, and balance sheet. I know some agents think this is their private business and don’t what to show this information to anyone. Folks, this is no big deal. Before I enter a partnership with anyone I want to know if they have the resources to do what they say they’ll do. I want to know if they’re good managers. Few companies will do business with an agency in financial trouble.
Calculate your performance ratios to show them how you compare with other agencies of your size. This should include revenue per producer, revenue per employee, and marginal profitability. Give your selling expenses, operating expenses, administrative expenses, and pre-tax profit as a percentage of revenue. What’s your current ratio, your trust ratio, receivable ratio, and tangible net worth ratio? The idea is to demonstrate you’re your agency is financially sound.
If you have had any Errors and Omissions losses, step up to the issue; tell the company what they were, how they occurred, and what you have done to ensure that you have adequate quality controls in place to prevent E&O losses.
Don’t be afraid to tell them what your loss ratios have been in the past. If possible, provide five-year back-to-back and three-year cumulative loss ratios. This demonstrates your ability be an effective frontline underwriter.
REVIEW THE CONTRACT
If your agency has been around long enough, you know how to evaluate a contract. If you have doubts, use the IIAA or PIA format for analyzing contracts. For an independent opinion ask one of the IMMS “dream team” to review it for you. Be certain to negotiate for company services such as co-op advertising, joint call objectives, access to broker services for London or Bermuda markets, etc. Don’t overlook the contingency agreement. If your strategic customer requires more than routine selling and servicing you might be able to negotiate a special contingency agreement.
Once you have the appointment, don’t stop. Shepherd each new submission through the process, from first customer contact until final product or service delivery. Look for the weak spots and shore them up. If someone in your office isn’t doing their part to provide complete and accurate information to the underwriter, take corrective action immediately.
If underwriters aren’t following through on what they said they would do, get involved. Clarify the issues and get them resolved. If you resolve issues and smooth out the bumps up-front, the relationship will only strengthen. Everyone likes successful outcomes and that is what your active participation will accomplish. Once the entire team, company, and agency are working well together, you can leave more of the day-to-day operations in the hands of your producers and the company underwriters.
CONCLUSION
If you’ve already defined your strategic customer segments and developed economic models for each, good for you. If you have enough mutually beneficial relationships with your carriers, that’s even better.
If you haven’t done either, it’s time to get to work. Unless you act, you’ve wasted your time and money. Don’t let this opportunity pass you by. Get your team together and start developing your growth and profit models now. Then begin create the best company/agency relationships in the industry. I’m sure that you’ll find it mutually beneficial. Once again the three-way test works: The company appointment should be good for the customer, the company, and your agency.