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Developing A Marketing Plan In A Distressed Agency
It is an uphill battle for a distressed agency to get back on track and sustain any level of growth if it fails to examine what caused the distress in the first place. With perspective on the problem and with planning, however, the agency can become a viable force in its marketing area once again. The problem(s) that caused the agency to get in trouble in the first place normally fall in one or more of the following areas: Receivables Debt service Lack of planning Poor retention of business Poor use of automation Loss of markets Lack of new business development Poor agency acquisition Once the problems are identified, you can start the problem-resolution process and then begin to develop an agency plan. To develop a marketing plan, examine two broad areas in the agency: A. Identify Strengths Resources a. Markets b. Competitive pricing c. Demographics d. Staffing e. Expertise f. Use of automation g. Internal processing B. Identify Weaknesses Resources a. Markets b. Competitive pricing c. Demographics d. Staffing e. Expertise f. Use of automation g. Internal processing On the positive side, is there any combination of resources that can be identified and used at little or no expense? A distressed agency generally does not have the financial resources to devote to marketing and would not want to borrow the money to do it. But all agencies have some market strength that they might exploit. On the negative side, the agency should identify two areas they need to work on to generate some cash flow. Most distressed agencies also have receivables and debt service problems. Why not write an agency credit policy and start enforcing it today? Immediately start collecting the oldest receivables, and make collections an integral part of the activities every day until you've cleaned them up. By enforcing your credit policy, you will be able to keep them under control long term. Many troubled agencies use trust money payable in the near future to pay their current expenses. The wrong set of circumstances can get the agency in trouble quickly. With long-term negative cash flow, the agency is a candidate for failure. By controlling receivables, the agency can gradually move toward positive cash flow and begin to market aggressively. Once the agency has positive cash flow and can demonstrate fiscal responsibility, it should be able to renegotiate better terms for debt service requirements. You cannot borrow your way to financial stability. Borrowing is only a short-term strategy to be used to take advantage of opportunities that occur along the way. This represents only a small portion of the activities required to get an agency back on track, but positions the agency to devote some financial resources to the development and implementation of a marketing program. While the agency needs to recognize its problems, it must go to its strengths and zero in on areas where it can realize some short-term success. Success breeds success, and small, short-term victories can be built upon. First, let's start with markets. Identify a class of business for which you have a market or two with competitive pricing and enhanced Property or Liability coverage forms. This tells you the carrier wants that class of business. Build your initial marketing around that area. For example, let's assume the agency has a good program and market for family-style and fast-food restaurants and is located in a growth area. If the program is relatively new and the carrier does not have a large group of agents in the agency's marketing area, prices will probably be competitive. This class of business is a focused-strength area that you would do well to pursue for some quick-growth business. Once the plan is developed for this class, you can follow the same approach for other areas. By continuing this process, you will in effect position the agency for real growth and financial stability. While this process is more mechanical than creative, focusing on specific classes of business and methodically developing them will help you realize short-term growth and position yourself for revenue growth-which can be earmarked for the long-term creative activity that lies at the heart of planning for a stable, solvent agency, able to attract new and viable markets and carriers. By focusing on a specific producer and a support person for the program, the agency might be able to develop some growth and the revenue that goes with it, rather than 'shotgunning' business and going in many directions at the same time. The problem with this is that the agency never develops any expertise or opportunity to distinguish itself in a particular field. Now that the stage is set, let's take a practical look at the development of this specific class of business market for the distressed agency. The first step is to develop a hit list of eligible prospects. If the agency has a Sales Center, the responsibility for developing a list should rest with it. Yellow Pages, the local restaurant association, or one of the many business directory publications in your area can be the source of your leads. (The distressed agency at this preliminary stage of its recovery is probably not in a position to purchase a computer list or have a telemarketing firm start contacting them.) At the very minimum, the business name, contact person, address, telephone number, and fax number should be listed. If the agency has access to any information such as gross sales, number of employees, credit status, or specialty services, that information should be included, too. If the agency does not have a Sales Center, the responsibility should be assigned to a service individual or a producer in the agency. As in the case of the Sales Center, the development of the list should be time bound. The responsibility for developing sales tools for the program should be assigned as well. Most agencies (and especially a distressed one) are not going to be able to afford developing a personalized brochure, but you can use the carrier's brochure or design a coverage summary to print out on your word processor after the blanks are filled in. You can also get copies of the company's form and compare it to the competition on a spread sheet on your computer, if you have one. The responsibility for preparing representative quotes should also be assigned. Now that you have a prospect list, point-of-sale material, and representative quotes, you need to decide how to put it all into play. Some of your choices will include: 1. Direct mail with a telephone follow-up 2. Cold calls by the producer 3. Direct telephone solicitation by the producer or sales center 4. Group approach: through an association meeting or by an invitational seminar presentation 5. Fax solicitation You may already know which method will work best in your area. I recommend that you test the two or three that seem most viable and affordable, and that you consider the following: 1. If you select direct mail, do not mail more at one time than you will be able to follow up with a call. Call within three days of mailing. If you don't call them, you're wasting money on this program. Make every call an information-gathering activity, as well as a prospecting effort. Get a fax number, number of employees, expiration date or expiration month, current carrier and agency, etc. 2. If you or your producer are making cold calls, take along a camera and take a picture of each one you call on. While you are there, estimate the building size and other physical characteristics of the building: estimated age, existence of a bar or drive-up window, etc. Use cold calls to screen out undesirable and/or ineligible business and then update your prospect profile. Cluster cold calls in an area you need to be in anyway. Use the travel route as a cold-call route for prospects on the way to your appointment. If you are going to make only cold calls and have devoted a block of time to it, plan your route and stay in one area until you have covered it. 3. When direct telephone solicitation is being done, talk to whoever answers the phone. Have a prospect information checklist in front of you when you call so you can ask all the pertinent questions. If the owner or manager is in, try to get to him or her-but if you are unable, get the name and title and find out when the best time is to call back. If you get a fax number, you can always follow the call up by faxing some information or mail, or dropping off a brochure. 4. For a distressed agency, a seminar type of meeting might not be economically feasible. However, an association offers ways to approach a group. Consider sending a 'tip sheet' or an unsolicited newsletter or information item to the association's office for insertion in the association newsletter. Offer some free service to the association membership, such as a checklist for employment practices or pollution. This is a way to be very creative and contact a lot of people for very little cost. 5. Faxed solicitations, in my opinion, should be primarily a service to the prospect, such as an employment practices or pollution checklist with a fax response/request form attached. You can always add a byline that identifies you as a restaurant specialist with broad coverage and low rates. People get faxed solicitations all of the time, most of which get tossed. The secret to getting a response is to give them something that can be faxed back. By doing so, you are able to establish the first stage of a relationship with them. This is not a marketing plan in itself, but for an agency in trouble, it sets the stage for one. Just as the agency's healing process evolves and improves over time, so too does the marketing plan. A financial investment in marketing that does not include financial planning and some direction toward financial stability is wasted money. It's imperative that the agency reestablish itself as a viable, financially secure entity if it is to sustain growth through aggressive marketing. Once the agency is positioned for growth and able to take advantage of opportunities that always present themselves, long-range marketing planning extend the agency into the future.

Developing Broker Services Agreements
DEVELOPING BROKER SERVICES AGREEMENTS by Gary Griffin This document by Gary Griffin illustrates the detail with which you can draft a broker service agreement and paves the way for you and your insured to develop a meaningful and profitable service partnership. For many businesses, insurance represents a substantial percentage of their revenues. In most instances, one or more insurance brokers places insurance policies on behalf of the insured. The brokers’ income is usually derived from insurer-paid commissions, from a fee negotiated with the insured, or from some combination of the two. The insured pays — directly or indirectly — for the broker to perform certain services which might be limited to the marketing and placement of insurance; or they might include hands-on assistance with such things as risk identification and measurement, loss control, claims consulting, and actuarial studies. Although most businesses enter into some form of written contractual arrangement with many of their vendors, most don’t have such contracts with their insurance brokers. This can hold true for even very large organizations where brokers’ fees and commissions can range from several hundred thousand to millions of dollars each year. The benefit of a broker-services agreement is that it defines in writing the expectations of the insured and the responsibilities of the broker. This helps eliminate disputes that might arise. A written service agreement also provides benchmarks for measuring performance. Developing such an agreement nails down what the broker will do and requires the insured to focus on the services they actually need. If the insured simply needs placement of certain coverages, the broker’s compensation might exceed the value of the service provided; and the insured might wish to renegotiate the compensation. It’s unclear why more insureds don’t have formal agreements with their brokers. One reason might be that developing a contract requires a good deal of thought and effort by both parties. Insureds who have had many years of satisfactory service from their broker might feel that a service agreement is unnecessary, or they might not fully appreciate the benefits such an agreement can provide. Although most brokers will agree to a service agreement, they might resist sweeping hold-harmless or indemnity provisions, particularly those that involve risk identification. Even small accounts might warrant services in addition to the mere placement of insurance. Here are some functions you might want to incorporate into your own broker-services agreements: SUGGESTED BROKER RISK MANAGEMENT FUNCTIONS Risk Identification and Analysis. The broker should gather and analyze operational and contractual data for the insured or assist the risk manager in accomplishing these tasks as required. The broker also should help prepare a report identifying key loss exposures. Where the gathering of data requires a physical inspection of property or personnel interviews, the broker should identify and schedule these activities. Articulate Risk Management Objectives. The broker service agreement should articulate the insured’s risk management priorities, goals, and strategic plan with the purpose of designing a program to meet those goals. The agreement also should establish performance criteria to measure results in attaining the stated goals. Insurance Coverage Audit. The broker should determine the loss exposure responsiveness of each insurance policy’s terms and conditions and recommend appropriate coverage modifications. The coverage audit should review all insurance agreements to assure that they’re placed with reputable and financially responsive insurers. The broker should provide all findings and recommendations to the insured in a written report. Risk Control Evaluation. Traditionally, risk-control services have been insurer provided. However, a broker can review the insured’s risk-control programs and help develop risk-control objectives. Once they establish those objectives, the broker could develop a plan for future servicing through a specialized insurer, broker, outside service provider, or consultant. The broker should establish risk-control criteria to measure its effectiveness. Risk-control services such as these might be outside the normal scope of service and incur additional costs. Risk-Financing Alternatives. Where agreed on, the broker can provide loss projections and statistical risk analysis. This might include identifying appropriate risk-retention levels based on loss exposures and financial data. Where appropriate, the broker should evaluate historical and current risk financing plans to assess their adequacy and effectiveness. The broker should develop risk-financing alternatives and report the relative advantages or disadvantages to the insured. SUGGESTED BROKER ADMINISTRATIVE FUNCTIONS Service Plan and Risk Management Administration. Some brokers might provide little or no service beyond renewing an existing policy, issuing certificates, and collecting full commission. To better serve your clients, make sure your service agreement contains the broker’s promise to fulfill these administrative functions: The broker should acknowledge that they’ve read each policy, binder, endorsement, or other documents, and that those documents are accurate and provide the coverage intended. Insureds would be appalled to discover blatant errors or omissions, poor grammar, or frequent misspellings in their policies. Insurance policies are legal documents; make meticulous policy review mandatory. If the insured’s risk manager doesn’t perform these functions, the broker should issue, record, and track insurance certificates, binders, auto identification cards, etc. The broker should verify rates, premium amounts, and audit results. As an optional service, the broker might review and analyze contract risks. This task usually requires the broker to develop a strategy for reviewing all contracts to ensure compliance with insurance requirements, noting any uninsured exposures. In addition, the broker should keep the insured abreast of pertinent insurance industry developments — both current and anticipated — and develop effective strategies for aggressively managing those developments. Claims Management. For some insureds, claims management is time consuming and expensive. Some brokerages have entire departments devoted to claims service. An insured expects such service as part of a broker’s normal commitment. The service agreement should reflect these needs and elaborate the insured’s claims philosophy. At a minimum, the broker should review and establish the insured’s claims-management needs. This should include a review of the adequacy and timelines of all loss runs and reports, and making changes as needed. The broker should help resolve all outstanding claim disputes and process all future claims to achieve timely payment. Where claim service providers are employed, the broker might be able to monitor and audit the effectiveness of those services. Ownership and Confidentiality of Records. All information, records, and data provided to or accumulated by the broker should remain the property of the insured. The broker should also agree to keep confidential all such information and material. The broker should agree not to disclose such information or records to any party without a direct underwriting need to know. Service Measurement and Stewardship Reports. The service agreement should schedule periodic services-evaluation meetings to determine whether the broker is accomplishing its service commitments as measured by pre-defined criteria. Periodic meetings also allow both parties to identify existing or potential problem areas and to deal with them before they get out of hand. Such meetings help foster an efficient and cordial working relationship between the risk manager and the broker service team members. Before renewal, the broker should give the insured a stewardship report that chronicles the activities during the service period and projects or recommends activities for the coming year. The report should detail the hours spent and expenses incurred by each service team member. Provide a summary for each policy showing the earned premium, incurred losses, and loss ratios. This summary also should include a full accounting of premiums and fees paid by the insured including all commissions or other income earned by the broker. SUGGESTED BROKER MARKETING FUNCTIONS Program Design and Specifications. Develop a risk-financing plan that includes a description of the proposed program structure, the desired terms and cost, a description of the desired services, and who’ll provide them. Be sure to prepare and present all insurance underwriting submissions to the insured for approval before you submit them to the markets. Marketing and Negotiation. Although marketing and placement of insurance is often taken for granted, establishing a plan can increase the likelihood of achieving the insured’s objectives. Having your insurance program successfully marketed and placed under the best terms is usually directly attributable to one or a few individuals in a brokerage who can get the best deals. Although it’s important to let them do their jobs, insist on certain milestone dates so you can deliver proposals with ample time to make informed decisions. IMPLEMENTING THE AGREEMENT The purpose of the broker service agreement is to identify the needed services and to make a commitment to provide them. The agreement doesn’t have to be complicated, but it does require some thought and effort. On existing business, and where a long-term relationship exists, there might be little if any urgency to finalize an agreement. You should set a target date to ensure that a hurried and inadequate agreement isn’t implemented. Key renewal dates often are good times to finalize such contracts, as they’re periods when the insured should already be focusing on risk management and insurance issues. Too often, insureds don’t know what to expect from their broker other than the placement of an insurance policy. A formal agreement documents the insured’s expectations, states the broker’s promise of service, and establishes a sound basis to determine the value of the relationship. Although these elements won’t be appropriate for all circumstances, they illustrate the extent to which such agreements can pave the way from which you and your insured can develop a service partnership. Gary W. Griffin, ARM, is principal consultant of Warren, McVeigh & Griffin, Inc., an independent risk management consulting firm based in Newport Beach, CA. He can be reached at (949) 752-1058, fax (949) 955-1929, e-mail [email protected], or visit www.griffincom.com.