MANAGING FOR PROPER SERVICE
by Catherine Oak
Follow these guidelines to boost retention rates — and earnings.
Due to the costs of producing and servicing an account, the average agency must retain this business for three or four years to earn a profit. Agencies with a high retention ratio recognize that good service virtually guarantees account renewals.
STRATIFY AND ANALYZE
Although the organization of client service depends on account size, firm size, and number of employees, two elements apply to any agency that wants to maximize account retention and profitability. The first is staff stratification: The delegation of service to the least costly qualified employee. When discussing the expansion of staff, begin by considering what the CSRs or producers can delegate to an assistant instead of adding a higher-salaried CSR.
The second element is the analysis of your book to determine the servicing needs of properly defined segments. This analysis should include the number of accounts and commissions involved in various size ranges. Once completed, management can work toward matching the skills and technical experience of the CSRs with the service needs of the firm’s accounts. After this analysis, many agencies set up a separate small accounts department to relieve producers and experienced CSRs from servicing this business.
ORGANIZE YOUR SERVICE STAFF
There are two common options for servicing medium-to-large Commercial accounts: An alphabet split or the producer/unit approach. Most smaller agencies use the alphabet concept, especially if there are few producers and the CSRs are equally competent. In managing an alphabet split for Personal and Commercial Lines, it’s essential to keep the workloads of the CSRs as evenly balanced as possible.
The producer/unit concept, in which CSRs are assigned to service and market the accounts of certain producers, is more common in larger agencies and brokerages. However, this “firm within a firm” system can be harmful to team spirit; CSRs might be reluctant to help producers in other units if there’s turnover or if an employee is absent.
Producer/units can work well if either an office manager or Commercial Lines service manager is involved in hiring, training, managing, and firing all CSRs. The producer/unit concept should not be used in Personal Lines.
SET PERFORMANCE STANDARDS
What are acceptable standards of performance for CSRs in the average versus well-run agency? The average commission per account in both Personal and Commercial Lines greatly affects the amount of commissions a CSR can handle. In Personal lines, there is not as wide a spread in average account size as in Commercial lines. This means that it’s more common to judge performance based on the number of accounts rather than commissions handled.
MANAGE SERVICE COSTS
The best way to analyze your agency’s servicing costs is by comparing your CSR payroll and operating expenses relative to commission. Servicing costs range from 30¢ to 45¢ per dollar of commission. Managing these costs properly will boost your agency’s profitability and value.
Catherine Oak can be reached at Oak & Associates, P.O. Box 2047, Glen Ellen, CA 95442, (707) 935-6565, fax (707) 935-6515, e-mail [email protected], URL:www.oakandassociates.com/catoak.