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... x No Thanks Loading.. Maximize Profits With Contingency Contracts 4/30/2013 by CompleteMarkets Editor , Chris Burand This content has not been rated yet. Make sure that you're getting all you can out of your contingencies. According to the Academy of Producer Insurance Studies, the average independent insurance agency with annual revenues of $250,000 or more spends between $1 and $1.08 in operating costs for every dollar of earned commission. So, how can agencies afford to stay in business? The answer: Contingency bonuses. Contingency revenue is pure profit. However, most agents don't use contingencies to their best advantage. By using contingency contracts strategically, agents can increase their bonuses by 10% to 500% . In essence, contingency bonuses are profit-sharing dollars that a contracted insurance company pays to an agency if the agency achieves predetermined premium volumes, loss ratios, and other objectives. Insurance companies offer contingency bonuses because they feel that agencies have a certain degree of control over loss ratios. The bonuses serve as an incentive for agencies to perform in-house underwriting functions before submitting applications to a company. Contingency contracts vary by company, and the best contract for one agency might not be the best for another. That's why it's important to analyze all contingency contracts and their possible outcomes thoroughly before selecting one. I started analyzing contingency contracts while working for an insurance company. A competing company offered one of my clients a commission percentage that my company couldn't match. However, I knew my company had a very good contingency program and that my client would probably qualify for a contingency bonus ...

... all former employers listed, even those from jobs many years ago. Ask references about their knowledge of the candidate's work history. During the interviewing process, ask the applicant if any of their past employers would be reluctant to provide a job reference. Ask them for written letters of recommendation. Learn if they've kept copies of their termination notice or performance appraisals. Finally, be sure to inquire about occasions when they had to deal with something "unfair" in their previous jobs. The response should help reveal their character. Don Phin, JD, CPCM is president of HR That Works, Inc., a firm specializing in management, employment law, and risk management. He serves as the Human Relations Key Consultant for IMMS.com. You can reach Phin, a past president of the American Academy of Employment Law Attorneys, at (800) 234-3304; e-mail [email protected] ; or visit www.hrthatworks.com . Login or Register (for FREE) to gain access to thousands of other great articles. Need more reasons to join? Need insurance for you, your business or your family? Get quality appointments - Save yourself a whole lot of time & money when you use our directory of carriers, wholesalers and service providers. Negotiate lucrative contracts with carriers and wholesalers. Net result. More revenue for your agency! Clients & Prospects will research you, your co-workers and your agency here. The most comprehensive online insurance industry reference library for - Personal Lines Professionals Commercial Lines Professionals Life/Health & Benefits Professionals Online newsletters and content that you can use for your clients and social media efforts ...

... PED future projections? If you can't answer these questions, you don't have an accurate picture of how every area of your agency is doing. You have a total picture through your P&L and balance sheets, but not an accurate one for departmental decisions. You need to know your profit in each area to make crucial decisions on issues such as pay levels, raises and bonuses, owner compensation, and expansion or reduction of an area. Without specific data, you're making decisions based on averages. This could be very costly. It's important that all expenses of the agency be allocated to an income-producing area. Don't have an administration department for expenses only. Agencies are given excellent guidelines to measure their total income and expenses through studies and reports by IIAA, PIA, ACORD, The Academy of Producer Insurance Studies, and others. But I haven't seen any that consider the PED. Some of these guidelines are also skewed by the use of consultants and outside contractors that agencies don't figure into their employee count. You'll need to build your own PED model. The question I'm most often asked is, How do you do this? ' Many agency-management systems will get you close, if your accounting area takes the time to allocate every expense and income item. The allocation of income is easy. It's the expense side that takes time, and changes regularly. I believe that the best way to produce the final product is with Excel or a similar spreadsheet. The nice thing about Excel is that it's easy to change, and can run what if' scenarios. The important ...

... is not just about making money, but also about having fun and building relationships along the way. Ask yourself this question: "How can I do a good job of branding and selling our agency to current and prospective employees?" All you have to do is open up any good book on sales or marketing and replace the word "customer" or "client" with the word "employee," – and you'll gain a great deal of insight about how to be a better leader and manager. Don Phin, JD, CPCM is president of HR That Works, Inc., a firm specializing in management, employment law, and risk management. He serves as the Human Relations Key Consultant for IMMS.com. You can reach Phin, a past president of the American Academy of Employment Law Attorneys, at (800) 234-3304; e-mail [email protected] ; or visit www.hrthatworks.com .  Reproduced, with permission, from Rough Notes magazine. Login or Register (for FREE) to gain access to thousands of other great articles. Need more reasons to join? Need insurance for you, your business or your family? Get quality appointments - Save yourself a whole lot of time & money when you use our directory of carriers, wholesalers and service providers. Negotiate lucrative contracts with carriers and wholesalers. Net result. More revenue for your agency! Clients & Prospects will research you, your co-workers and your agency here. The most comprehensive online insurance industry reference library for - Personal Lines Professionals Commercial Lines Professionals Life/Health & Benefits Professionals Online newsletters ...

... teach the basics of money management. Purchase the Accounting Game or Robert Kiyosaki's Rich Dad Poor Dad board game so employees can learn how to do more with less. The Fatigue Trap. If you feel worn out on the job, when's the last time you did anything to invigorate or inspire yourself? What about your dietary and exercise habits? Stress creates burnout and burnout leads to personal and business failure. As employers, we have to realize the dangers of workaholism for ourselves and for our employees. Learn to recognize the warning signs of these traps so you and your employees can steer clear of them. Don Phin, JD, CPCM is president of donphin.com, inc., a firm specializing in management, employment law, and risk management. Phin, a past president of The American Academy of Employment Law Attorneys, can be reached at (800) 234-3304, fax (619) 437-0143, e-mail [email protected] , or Web site www.donphin.com . Login or Register (for FREE) to gain access to thousands of other great articles. Need more reasons to join? Need insurance for you, your business or your family? Get quality appointments - Save yourself a whole lot of time & money when you use our directory of carriers, wholesalers and service providers. Negotiate lucrative contracts with carriers and wholesalers. Net result. More revenue for your agency! Clients & Prospects will research you, your co-workers and your agency here. The most comprehensive online insurance industry reference library for - Personal Lines Professionals Commercial Lines Professionals Life/Health & Benefits Professionals Online newsletters and content that ...

... human error. We all make mistakes. In one case, a CEO asked if he should fire one of his warehousemen for throwing a cigarette into a tire pile, which then ignited and burned down the warehouse. If you face a similar situation, consider signing a "do one more stupid thing and you're out of here" agreement with the offending employee. As a last-ditch effort to defuse a possible claim, consider doing an exit interview. Following these guidelines should go far to reduce your exposure to employee lawsuits. Don Phin, JD, CPCM is president of HR That Works, Inc., a firm specializing in management, employment law, and risk management. He serves as the Human Relations Key Consultant for IMMS.com. You can reach Phin, a past president of the American Academy of Employment Law Attorneys, at (800) 234-3304; e-mail [email protected] ; or visit www.hrthatworks.com . Login or Register (for FREE) to gain access to thousands of other great articles. Need more reasons to join? Need insurance for you, your business or your family? Get quality appointments - Save yourself a whole lot of time & money when you use our directory of carriers, wholesalers and service providers. Negotiate lucrative contracts with carriers and wholesalers. Net result. More revenue for your agency! Clients & Prospects will research you, your co-workers and your agency here. The most comprehensive online insurance industry reference library for - Personal Lines Professionals Commercial Lines Professionals Life/Health & Benefits Professionals Online newsletters and content that you can use for your clients and social media efforts ...

... . Independent Agencies On Slippery Slopes?4/30/2013 by CompleteMarkets Editor , Victoria Pasher This content has not been rated yet. INDEPENDENT AGENCIES ON SLIPPERY SLOPES? by Victoria Sonshine Pasher There's no letup yet for the independent agency squeeze that's persisted throughout the 1990s. Facing numerous challenges, agency principals often depend on contingencies from insurers to make any sort of profit. Even so, that's being chipped away, too, as insurers and agencies alike grapple with industry trends such as consolidation and Internet marketing competition. As Chris Burand, agency consultant at Burand & Associates (Pueblo, CO), explains, average producers don't produce enough business to make a profit. They break even at best, ' he says, even after three years with an agency. Citing industry averages obtained from the Academy of Producer Insurance Studies and The Middleton Letter, Burand illustrates the problem with the following example: Annual commission-based revenue averages about $150,000 per producer. If the producer receives an average 40% commission, that's $60,000 on the $150,000 book of business. CSRs, on average, receive a salary of $35,000, so add that amount. Add 13% for benefits, another 8% to 12% for business development and training expenses, and another 20% for rent, office supplies, and so forth. The grand total comes to $152,000 on a book of $150,000- and that still doesn't include compensation for the agency owner, receptionist, or bookkeeper. The average producer should be generating $200 ...

... adamant that every agency owner should sell ASAP to avoid higher tax rates. They allow for almost no exceptions. However, the reality is that while a small percentage of agency owners should sell soon to avoid higher taxes, most should not sell this year or next. The logic is simple: even with higher tax rates in the future, the agency owners will make more money by not selling today. There are two common scenarios in which agency owners will make more money by not selling today. First, consider the following example: Suppose an agency's owners are making the equivalent of 25% of revenues annually as a combination of their sales and dividends/bonuses. This is a reasonable, even conservative, assumption. (The most recent Growth and Performance Standards by the National Alliance Research Academy shows that the average agency with revenue of $3 ,000,000+ averages a 10% profit margin and executive compensation equals 16% of revenue. Assume the agency has $3 ,000,000 in revenue, a 25% pro forma EBITDA and the agency is valued at 6.0 times EBITDA. This means the owners are today making $750,000 annually, and the agency is valued at $4 ,500,000 (assuming the balance sheet is neutral) . Assume the sellers get a 15% tax rate (which doesn't apply to all sellers) . Their tax bill is then $675,000, making their net $3 ,825,000. If the owners don't sell for five years, the tax rate goes to 35%, the ...

... case scenario?" I said that in the best case scenario, $150,000 commission might be breakeven. His response, "$ 150,000 commission? I thought you meant $150,000 premium! Hah! $150,000 commission isn't possible in five years or even 10 years. It took me 20 years to build a $150,000 commission book! Your standards are ridiculously high!" More recently, an agency owner told me he was "proud" of his producers who, on average, had 10 years of experience and wrote only $150,000 each. That is far below the norm and yet it is far better than what the owner in the previous example thought possible. According to the new Producer Profile by the National Alliance Research Academy, the average commercial producer has between $300,000 and $350,000 commissions. It varies by age, location, experience, agency size, and other factors, but the overall average is $300,000 to $350,000. Should an agency owner be proud of producers who are not even doing half of the industry average? So how much production can a producer produce if a producer can produce? Before going further, let me clarify the question by stating that it does not matter how much new business a producer generates. New business only matters relative to retention so both metrics combined or a net new measure can be used. Another agency owner expects all of his experienced producers to grow their books by at least $50,000 annually, even ...

... accomplish this, an agency needs to establish processes that incorporate four cornerstones to effective procedures: Efficiency, E&O Protection, Perceptible Customer Service, and Ancillary Sales Opportunities. Most agencies that I visit aren't doing this. A high level of agency profitability is achieved only when focus returns to the customer and agency profitability. The steps to achieve this level of success are Analysis, Structure, Written and Enforced Procedures, Full Implementation and Utilization of Available Technology, and Accountability. To devise an action plan, the agent must determine where the agency is. A first step could be to determine where you rank with other agencies of your size in your area. You can find excellent peer group comparisons in the Best Practices Study published by the IIABA and the Growth and Performance Standards published by the Academy of Producer Insurance Studies. Next, audit your existing systems and procedures. This requires a systematic analysis of all agency operations. Occasionally agency personnel can accomplish this, but outside assistance is often required. I've seen many agencies in which the owner and personnel have never worked for another agency. The old adage, You don't know what you don't know' applies here. Agencies waste time and money because we've always done it that way. Why? Because agency personnel have never seen another way. Analyze every agency activity to answer these questions: Is this necessary? Does it provide perceptible customer service? Is it so time consuming that it penalizes a majority of the customers? Is it profitable for the agency? Can we simplify or automate the process or procedure? Once this is accomplished, ...