One of the most important responsibilities of agents to themselves and their agencies is to maintain positive, healthy working relationships with the carriers with whom they place business. Andrew Barile warns you not to overlook the maintenance of these relationships because of the other activities they face in their daily lives.
We've all seen this scenario: A carrier suddenly “goes under” after years of being in business. As an agent, maybe you had quite a few accounts with them. Perhaps the carrier's insolvency seriously affected your business. How did you handle this? What would you do differently if faced with the same situation today?
What about rating downgrades? Do you constantly monitor the ratings of your carriers? Do you know how to identify the telltale signs of a carrier in financial trouble? Where are you going to place all of those accounts if a carrier goes insolvent?
I've stressed the importance of assembling a Strategic Advisory Board, composed of several members who have expertise in a particular area. One such member should have expertise in agency/carrier relations. This individual will be responsible for maintaining the agency's relationship with insurance carriers on a full-time basis.
The Insurance Company Strategic Advisor's responsibilities will be to maintain carrier relations, while serving as your eyes and ears in the marketplace. With careful oversight, your advisor will be able to identify the signs of a carrier in financial trouble and to target a viable market if you need to replace any accounts.
THE AGENT-CARRIER RELATIONSHIP
When the market is soft, carriers are probably pounding on your door for business. But when the market hardens and availability shrinks, insurers sing a different tune. Suddenly, the phone stops ringing and the agency seems to be all but forgotten.
As a producer, you know that the market runs in cycles, and you need to be prepared for when the phone stops ringing. How are you going to maintain your carrier relationships when the market goes hard?
The answer: Get on a plane with a business plan and proposal and fly around the country to meet with the CEOs of the carriers you represent. Since that's probably not workable, consider bringing in a person to maintain those relationships for you. That person is the perfect addition to your Strategic Advisory Board. Working together with your specialists in Mergers & Acquisitions, Agency Growth, and Legal/Tax Advice, your Carrier Relations expert will enhance your agency's overall performance and growth.
BUILD YOUR AGENCY-CARRIER RELATIONSHIP
The first step to building agency-carrier relationships is to review your agency's operating budget. Although this might seem obvious, all too many agencies neglect to carve out a piece of their budget to maintain carrier relationships. It's important to allocate a certain amount of commissions in your operating budget to maintain relationships with carriers.
Next, select a member of your Strategic Advisory Board to represent the agency in fostering agency-carrier relationships. The candidate should have access to senior executives of insurers and reinsurers, as well as experience in dealing with executives at such major industry events as AAMGA, NAPLSO, and NAII meetings.
Your expert will also need a solid understanding of the reinsurance marketplace. Carriers often tell agents that their agency contract is cancelled because the carrier has lost its reinsurance, and has to stop writing business. Your Insurance Company Strategic Advisor will need an in-depth understanding of how carriers structure their reinsurance and how reinsurance drives the underwriting cycle.
Finally, look for someone who understands financial statements and insurer insolvency, as well as insurance company product development.
Now that you have your expert in place, the real work can begin. Your Insurance Company Strategic Advisor will spend significant time on the road making contact and networking with the heads of the carriers you represent. This will solidify your agency's presence and relationship with these carriers.
The Advisor will begin by examining the agency's relationship with a particular carrier. The expert should ask the carriers such questions as what have the loss runs been for the past two years, and how much money is the agency making for the carrier?
Also, take a look at your internal relationships with carriers. How many carriers are in your agency? Which carrier do you feel you have the most significant relationship with?
How much commission is this relationship generating? What works best about the relationship, and what can be improved? Has the carrier asked to change the contracts? Have they asked to extend the cancellation terms in the contracts? Have they asked for a bigger contingent commission?
MAINTAIN YOUR RELATIONSHIP
When your Insurance Company Strategic Advisor isn't on the road, they should be maintaining relationships through good old-fashioned telephone communication. They should also review rating agency assessments of carriers, monitor insurance company turnover, and follow when insurers are up for sale.
Your Advisor can also help with such activities as reading and litigating agency/carrier agreements. Expect them to keep up with what's going on in both the marketplace and with individual carriers. For example, does your carrier place a lot of business with your competitors? Who's retiring in the field? What's going on with carriers that they're not telling you? Your Advisor is responsible for gauging the marketplace and helping you make the best decisions for you agency.
Finally, your Advisor will be responsible for finding new markets when old ones leave the business.
They should always have “feelers” out in the marketplace to identify a source for a new program when needed.