Company Stability Survey

Do you regularly negotiate such contractual issues as commission rates, growth goals, etc. with your companies?

Congratulations to the 57% who responded, “Yes!” Based on those positive responses, it appears that agencies of all sizes are negotiating. Negotiations aren't limited to larger agencies. If these agents weren't succeeding in their negotiations, even in a hard market, they'd be giving up. Although 57% is a good percentage, I'd love to see this number keep growing. If you aren't negotiating contractual issues with your companies, isn't it time to begin? 

If your agency needed to replace one of its top companies, do you have the resources to make the change?

Nearly three in four respondents (74%) believe that they have the resources. This is an impressive percentage of agencies that are well positioned to pro-actively manage their companies. 

If not, what resources are you missing?

Some respondents said that they lacked the internal ability to research companies. I recommend hiring a consultant to do this for you. There are only so many hours in the day and you can't do it all yourself. Also, why waste opportunities to sell (which is something most agents prefer to do) while digging through the details of analyzing insurance companies? 

Other agents lamented the lack of good details and write-ups on companies. If you're set on doing an analysis yourself, Best's Insurance Reports contains all of the company information that most agents will ever need. This resource is available in hard copy or on CD-ROM for $1,500. For more information, go to http://www.ambest.com/sales/BIRPCCDROM/default.asp. 

Are early warnings of company stability issues important to you?

Every respondent said yes. Many expressed their appreciation of Burand's News to Use service. However, this service is not an early warning — it simply reports news releases that have already hit the media wires. We make this information more accessible and bring it to the forefront by delivering it to our subscribers' inboxes. 

A true early warning requires an in-depth analysis of a company's financials and operations. The examples we offered in the survey (for example, we had identified and informed agents of Kemper's stability issues as early as 1999) come from a separate service, our Company Stability Analysis, which can predict company stability problems six months to four years before rating services assign downgrades. 

If early warnings are important to you, do you prefer a simple warning statement or a complete analysis of the situation?

More than half the respondents (52%) thought that a complete analysis was important. Here again, I wouldn't consider Burand's News to Use a complete analysis — which would review break-even loss ratios, profit margins, combined ratio trends, expense and investment ratios, NWP and DWP growth trends, operating ratios, and results by line. The Company Stability Analysis deals with these categories. 

More than one in three respondents (36%) thought that something less than a complete analysis was sufficient. According to one agent, unless a company's rating drops below an A.M. Best A-, a detailed analysis isn't important. I agree, to some extent. However, in my opinion, many companies that currently have A- ratings are not stable. A complete analysis can give you advance notice of problems months before they affect a company's ratings. 

Some respondents felt that a basic analysis was all that was required because such companies as CIGNA and Commercial Union have survived bad times. However, although neither of these companies went bankrupt or was put in receivership, and their claims are being paid, they no longer do business as P/C carriers in the U.S. I believe that it's essential for agents to represent companies that not only pay their claims but stay in business. If you agree, I strongly recommend that you do a complete Company Stability Analysis every year on all of your key carriers. 

Do you inform your customers of your insurance companies' ratings?

The survey found that an outstanding 70%-80% of respondents keep their clients informed about insurance company ratings and downgrades. Informing clients is essential to building your credibility: If a client learns about a downgrade from another agent or some other source, their current agent doesn't look good. From an E&O perspective, many states hold agents responsible for advising clients about financially unstable companies and downgrades.