When it comes to re-negotiating company contracts, if you don’t ask — you don’t get!
Suppose you own an agency in a non-catastrophe prone area with a good size book, consistent growth, and decent loss ratios. You know you have the best contracts with each of your companies, but you also know that one of your companies, Company X, pays substantially less in contingencies than your other companies. Would you try to negotiate with Company X for more compensation to make up for the lower contingency?
If you answered 'yes,' you’re on the right track to increasing your agency’s income quickly and easily, because companies need good agencies and they will almost always increase a good agency’s compensation. From an insurer’s perspective, companies make an underwriting profit and make all of their money on investments. To make this money, they need volume, which requires agencies with large books. This gives agents the opportunity to earn more income from their lower-paying companies that will negotiate better deals in a variety of ways, such as providing a better contract, increasing commissions, supplying additional marketing support, or negotiating a performance bonus.
However, many agents would never consider negotiating for additional compensation because they fear the company will pull out for rocking the boat. This is ridiculous paranoia. Companies need good agencies with large books to build their volume. They are not going to abandon a good agency or punish them for requesting more money. In fact, they will probably pay the agency more money if its request makes economic sense.
The only catch is the agency owner has to ask! As Anthony Robbins says, “What’s the key to getting anything in the world you want? ASK!” Recently I met with a large group of marketing representatives who agreed they would increase an agency’s compensation if a solid case was made. Additionally, they all laughed when I asked if they would pull out of an agency just because the agency negotiated for more money. Marketing representatives don’t get paid for running business off the books! As one rep recently confided, “We will always pay a good agency more than the standard amount if they ask. But they have to ask because that is the way we play the game!”
I frequently hear of companies cutting premiums by $10,000, $25,000, or more just to save one account. They’re not cutting premiums because the risk is any better. For them, the alternative is to lose your account to a competitor. It makes sense for them to pay at least another 1% in commissions to keep an entire book — especially when the other companies are already paying more. A few thousand dollars more means nothing to a company that wants to save an entire book.
Companies will negotiate for increased compensation if the agency:
-
Has sufficient written premium
-
Has decent loss ratios
-
Is in a non-catastrophic loss area (and some companies will even pay extra commission to the right agents in these areas, too)
-
Offers a logical and concrete position for increasing their compensation
-
Has the confidence to negotiate with the company for a better deal
Every agency that meets these criteria can increase its income by comparing what each company pays and presenting the lower-paying companies with a logical argument that shows their deficiencies. If you have a solid case, a strong desire to earn more income, and some sales ability, you can negotiate for more compensation!