No matter how much management, budgeting, staff training, or sales activity an agency or brokerage undertakes, its success will be limited to the pricing, appetite, and underwriting flexibility of its carriers. As leading agencies evolve, carrier relations and planning will become an increasingly crucial part of their activities. Successful agencies and brokerages tend to:
- Have a marketing/placement person to handle placement-or, if producers/CSRs deal with placement, a quality-control and technical-resource person to review applications and coverage needs before marketing to carriers. (An agency principal may perform this function in mid-size firms.)
- Designate one of the agency principals as the executive in charge of carrier relations and product development (just as one principal is usually responsible for sales management, someone is responsible for customer service management, and someone is responsible for financial management).
- Designate 'relationship managers' for each of the agency's top Commercial Lines carriers and top three Personal Lines carriers. Each manager oversees carrier communications, meetings, and problem solving, and tracks contingency agreements, loss-ratio, and product development for his or her carrier. The managers are then responsible for communicating this information throughout the agency.
- If an agency's loss ratio begins to exceed the carrier's branch average by more than 10%, actively seek to discover the reasons and give the carrier a game plan for correction.
- Set up a New Business and Remarketing of Renewals Committee to review all new, non-program business opportunities and approve carrier selection for remarketing of renewals.
Here are recommended targets for carrier concentrations:
Commercial (C) or Leading Agency Industry
Personal (P) Lines Target Average
Preferred Agency Programs C 3-4 1
(such as HPA, Top Brass) P 1-2 1
Volume with largest carrier C > 20% < 20%
Volume with 10 largest carriers C 80% < 65%
Volume with largest carrier P > 40% < 40%
Volume with 3 largest carriers P > 90% > 70%
Volume with E&S wholesalers 15%-20% N/A
Contingent/Profit-sharing 8% 6%
commission as % of P/C commission