How does your profitability compare with that of other agencies in your area? What about your salary structure? How do your current assets compare to your payables? What is your receivables/payables ratio? Are you spending too much on clerical costs? Too much on communication expenses? Is your personnel file up to date?
You can have the answers to these questions at your fingertips with an integrated agency computer system. An integrated system can help you get a firm grip on your financial reins while meeting a wide variety of your agency needs from, simplifying every procedure, generating concise management reports, to improving agency profits. And as those profits translate into growth, your system should grow with you.
With an integrated policy-based management system, your customer service representatives can handle a series of tasks simultaneously, without leaving their workstations to search for missing information. When a client calls, the CSR retrieves the proper file quickly by using the customer's or company's name. Complete policy information is displayed on one screen and the system automatically pulls the necessary information from the original policy file.
The CSR won't have to page through endless screens, change sub-systems or disks, or return to a menu screen. The account summary will also show the lines of coverage you're handling or not handling for the customer.
As the requested function is performed, all transactions register instantly system-wide, without duplicate entry or additional steps that could cause errors. The system generates all related documents, schedules follow-up, and updates appropriate accounting and management reports. The CSR can then sell the missing coverages to the client, easily completing the entire transaction and sale while the client is still on the phone. All related forms can be printed together or, if the transaction involves a carrier with which your agency (and vendor) interfaces, the information can be transmitted electronically.
Stay on Top of the Numbers
To assess your agency's operations and pursuit of goals accurately, you need to be able to review both revenue and cost statistics. Because you can't manage what you can't measure, a complete system will schedule follow-up automatically, pull together suspense entries, and record additional valuable information with every completed transaction. As a good management tool, it should be able to give you statistics by producer, company, line of business, type of policy, billing method, type of transaction, department and individual employee.
The Professional Insurance Agents Agency Cost Study has validated a mathematical model that indicates not only the actual time spent on various agency functions, but also how much time should have been spent, in productive hours, in an efficiently run office. In addition to being told precisely what did happen in your agency, you can find out what did not happen. At a glance, you'll see backlog status by employee, producer, and insurance company, together with the exact number of days your agency is behind or ahead on renewals, endorsements, claims, and collections by line of business.
Your system's special management reports let managers know how their business and employees are progressing. In addition to premium statistics, the system generates work statistics, the nature of each transaction, people participating, the number of steps and follow-up involved, and backlog. Efficiency analysis reports provide complete and detailed information for productive hours worked by each employee for each producer, company, and line of business. True costs and margins can now be allocated to each agency department and producer. Costs can even be measured by insurance carrier and line of business.
With the appropriate numbers just a few keystrokes away, you can calculate your financial ratios at any time. You'll be able to compare commission incomes for various employees, pre-tax profits per employee, and compensation per employee. Get answers to these questions: 'Who's most profitable? How do these numbers compare with last year's? How do they stack up with the numbers from other agencies? Where do we need to improve?'
You'll be on top of the numbers and as you notice changes, you can plan accordingly to avoid unpleasant surprises. For example, when commission income drops, you can plan to make up for it elsewhere: Perhaps by collecting early and investing the income.
You might also be interested in a quick up-to-date balance sheet for a total picture of how you're doing and where you're going. You can compare your assets to liabilities, knowing that as a well-managed privately-owned agency, you'll want to maintain a minimum ratio of 1.1 to 1. Or to determine how well or how fast your agency handles collections, you can keep an eye on your receivables/payables ratio simply by dividing your accounts receivable by accounts payable, striving to maintain at least a 55% ratio. You can also keep a steady eye on your liquidity, making sure it doesn't fall below 120%, by dividing your current assets by accounts payable.
By updating vital statistics with each transaction and always having them at your fingertips, you'll bring the luxury of time to your side. You can forecast how premiums are changing, where any problem areas lie, and how you're doing in terms of cancellations and renewals. You can create a float by monitoring X-dates with your computer and pre-billing before expirations, issuing binder bills and making sure your customers know in advance how you'd like them to pay. (Does your correspondence catalog include a statement of your premium payment policy?)
Also, examine your clerical costs. Have you fallen victim to the human tendency of stretching the workload to fill available time? This tendency costs money. Within three months after employees have learned the fundamentals of your system, you should begin to see an improvement in efficiency. After six months, you should see a radical reduction in the agency's backlog. As in any period of change, if everyone maintains a positive attitude, the transition can be handled with ease.
This might be a good time to realign your agency and for you to become a real business executive, not just a sales manager. Where possible, think about promoting employees and planning for attrition. Attempt to eliminate any repetitive tasks. And try to decrease your communications expenses (the costs of doing letters, certificates, binders, etc.) by making it a policy to type all correspondence just once. Store all of your successful letters for follow-up, confirmations, prospecting, renewals, marketing, and collections.
Special management reports also let you ask yourself, 'Are we realizing the full efficiencies of our system?' With the maximum utilization of your agency's automation functions, you can not only streamline your day-to-day procedures and provide better customer service, but you can also become more effective in your role as agency manager. Multiplying your productivity with automation will give your agency more time to do what it was established to do: Sell insurance.
Automating Marketing
Now you can think about establishing a sales center within your agency. Make a commitment to marketing by appointing or hiring a person to take charge of the effort. The person you select should also be active in your vendor's user groups, through which your agency can learn about innovations or specific applications that were successful for other agencies, and how these techniques can enhance your own operations.
You can learn how to accumulate a prospect list and key X-dates into your computer for direct mail, mass marketing, or target marketing. For example, if you were to classify your accounts by SIC (standard industry classifications) codes, you might be able to determine a pattern, promoting your agency as experts in these areas and building marketing programs around them.
The computer system, including any integrated third-party programs for rating, etc., can also be used for insurance quotations and proposals and to help you monitor your marketing progress. Track the success of your sales campaign by running various production reports: By client, line of business, producer and company, and by cross-referencing. For a different approach, run a report to show your loss information and market this to a carrier for which you'd like to be writing business.
Employee Management
The computer system can also simplify your employee management duties. For example, you can store confidential personnel information in a file that is accessible only by management. The word processing functions of the system can be used to store your agency manual, weekly status reports, and employee review forms so that updates can be handled quickly and easily.
You can create a new employee checklist that helps you keep track of where new staff members stand as they get acclimated to your agency. This way you'll be sure that they've met everyone, received a policy manual, and know your vacation policy, when payday is, and how reviews are conducted.
To ensure consistent handling of automation applications, you should stipulate that all new employees are trained by the same person. Continuing education updates should be available from your vendor for use as needed by your agency. These steps will help ensure that your entire staff is using your system efficiently and that data is entered consistently. Determine in advance, as a management decision, what data should be kept: e.g.: SIC codes, birthdays, children's names, etc. If employees adopt random input methods, you run the risk of omitting some pieces of information or double-counting others. Data consistency assures you of accurate readings when reports are run.
Finally, as a manager, exercise your liberty to experiment with the computer. With an integrated system, you can run reports by all types of criteria to determine what functions are being used by personnel, which seem most useful, and which need to be implemented or improved. Make sure all functions are automated and that you have access to update management data. Constant monitoring will help keep you in control and increase consistency, efficiency, and profitability.