https://completemarkets.com/Article/article-post/2058/WHAT-MAKES-A-GREAT-FIRM/
What Makes A Great Firmr> ...5-6565, Fax (707) 935-6515, e-mail catherine@oakandassociates.com, or visit www.oakandassociates.com. ...
https://completemarkets.com/Article/article-post/975/AGENCY-COMPENSATION-SURVEY-2/
Agency Compensation Survey 2r> AGENCY COMPENSATION SURVEY by Carol Hammes As of this writing, the government has determined that the insurance industry as a whole has 2.2 million workers who earn an average of $37,864. The Property/Casualty industry employs 1,340,500 people at an average salary of $37,844. The various P/C insurance companies have a total of 634,800 people earning an average of $41,273 per year. Agents and brokers employ 705,700 people and pay an average of $35,000 per year, which includes the return on ownership generally taken out by principals of privately held firms. Although the rate of increase in employment for insurance agencies has been comparable to the nation as a whole in the past decade (3.7%), the Alliance of American Insurers believes that the increase in available agency jobs will steadily decrease until 2005, when it will be only 0....s, the people who hold these positions are also agency principals, so it makes sense that the bonus amounts would be higher. Almost 80% of independent agencies nationwide give both owner and non-owner managers a bonus, with most of them paying on a discretionary basis. Of firms that use some kind of tangible criteria for determining the bonus dollars, a percentage of agency profits is by far the most common, distantly followed by a percentage of agency revenues. More agencies are now treating the agency principals as employees first and owners second when it comes to compensation issues. But the vast majority still uses some combination of performance measurement and ownership percentage to come up with salaries and bonuses. The two major factors cited in determining salaries are the size of the existing book and the ownership percentage, with rural agencies favoring the latter and urban agencies more oriented toward rewarding for sales performance. Management contribution is also taken into account in a large number of firms. Regardless of location, the primary criteria for determining bonuses was percentage of ownership, followed by the size of the book handled and management contribution. For both salaries and bonuses, each group indicated that longevity is no longer a major component for determining an agency principal's compensation. When a commission percentage is used to determine the owner's salary, 33% of the rural firms use the same rate used for non-owner producers, 50% have a higher rate, and 17% have a lower rate. The situation is quite different in the urban agencies, where 68% pay owner-producers the same percentage of commissions as they pay the non-owners, while only 11% have a higher rate, and 21% pay a lower commission percentage. It's hard to understand why any agency principal would want to make less money for handling the same job as a non-owner employee, but it might relate to the need to bring new people along for perpetuation purposes. Unfortunately, not enough agencies have perpetuation plans to help them make such a determination. Only 54% of rural firms said they have such a plan, down from 61% two years ago. And 67% of the urban agencies report having taken care of this most important element of planning, down from 71% in the previous survey. The late Carol Hammes, principal of the Middleton Group, was one of the Independent Agency System’s most widely respected management consultants. She will be sorely missed. Reproduced, with permission, from The Middleton Letter.
https://completemarkets.com/Article/article-post/2067/ASSESSING-YOUR-FIRMS-RESOURCES/
Assessing Your Firm's Resourcesr>ASSESSING YOUR FIRM'S RESOURCES by Bill Schoeffler and Catherine Oak Today, it is critical for insurance agents and brokers to plan their own destiny. One can never be quite certain what the future may bring. You can’t control the market cycles, legislative activities, or the strategies of your competitors. But you can control your own firm’s activities. As consultants,...motivated to sell. It must be a key characteristic of any good producer. Don’t hire anyone into production (or into the firm in any position for that matter) who does not have a sales personality and sales skills already developed. The firm can only create an atmosphere that is motivating to both producers and CSRs. CSRs should also receive incentives for their production efforts. The key to the producer compensation issues is to base pay on who is doing the work. When experienced commercial producers receive renewal commissions on direct bill personal lines accounts or small commercial accounts, profitability can suffer. This is true if the CSRs actually handle the majority of the work. When you determine what the firm can afford to pay producers, you need to take into account: who is doing the work; is marketing/placement assistance provided; is service support adequate; what is the local competition paying; what benefits and perks are paid to producers; and most important, what amount of profit is budgeted (before owner bonuses) for both new and renewal business. Some firms forgo some profits for new versus renewal business to encourage producers to write new business to reach the firm’s new business growth objectives. Your marketing strategy plan is essential to your firm’s ability to grow and prosper. The steps outlined in this article are the starting point for the development of an effective marketing plan. Your marketing resources need to be assessed before you can plan for the future. In this time of increased legislative activity and carrier pressure to meet volume commitments and obtain “preferred” status, you can’t afford not to plan your firm’s marketing strategy. Reprinted with permission from Oak & Associates, Glen El...
https://completemarkets.com/Article/article-post/674/The-Five-Ways-Agents-Get-Fired/
The Five Ways Agents Get Fired!r>Independent agencies and brokerages are facing a growing threat to their middle market Commercial clients. These firms are being squeezed from below by the commodity sellers and from above by the resource providers. Previously, the competition for these larger accounts has been based mainly on price, coverage, and a single relationship. But now, the determining factors in the selection process have shifted with the awareness that price does not differentiate brokerage firms except in the commodity environment -- and this shift is having some dire consequences.
Changing distribution systems have caused our clients to be more selective in the brokerage firms with whom they chose to do business. ...CONCLUSION
As competition intensifies for larger accounts, the successful agent/broker will learn how to match capabilities to buyers' expectations. Hopefully they will not experience the bitter lessons of Why Agents Get Fired!
https://completemarkets.com/Article/article-post/2631/Successful-Firms-Need-to-Master-These-Techniques/
Successful Firms Need to Master These Techniquesr>In a recent edition of The National Underwriter, Editor Sam Friedman recommended that risk managers begin to explore the capabilities of sophisticated regional and local brokerages. This recommendation was based on recent broker megamergers and the growing lack of choice available to buyers.
For an independent agency or brokerage to take advantage of this opportunity, it should adopt the consultative brokerage style. In particular, its managers must learn the techniques that these sophisticated buyers have come to expect. The stewardship report and the executive summary are two techniques that firms must master to be successful in large accounts.
STEWARDSHIP PROPOSAL
Brokers call it "stewardship"; others call it a mid-year client review. Whatever the name, it's the single most powerful way to protect your renewals against the competition. When executed properly, the mid-year client review provides your firm a tremendous opportunity to:
Cement client relationships for the coming year.
Determine the client's expectations.
Judg...ent will benefit. This could take the form of a simple display. Refer to the body of the proposal for details and an in-depth demonstration of these benefits. After all, the executive summary simply sums up the facts.
Finally, restate what your organization is proposing for the client, the time frames, and your unique qualifications for providing these solutions. Avoid making this closing too sales oriented. As a consultant, you need to be perceived as a partner, not as someone looking for a commission. Use statements such as:
"XYZ recommends this course of action to client."
"XYZ is prepared to implement these actions in the following time frames and with these expected results.
Effective use of stewardship reports and executive summaries is a critical skill that independent agents and brokerages must master. These techniques will allow an organization of any size to improve its perception in the buyer's eyes. The result will be improved success in the large-account marketplace.
https://completemarkets.com/Article/article-post/1652/PAYROLL-DEDUCTION-EMPLOYEE-BENEFITS-MODULEV-B/
Payroll Deduction Employee Benefits: Modulev-Br> PAYROLL DEDUCTION EMPLOYEE BENEFITS: MODULEV-B THE COVERAGE Payroll deduction employee benefits can involve a number of coverage products ranging from Term, Whole, or Universal Life to Disability Income products and 401 (k) plans. An agent can sell just one of these products on a payroll deduction basis, or a combination of them. The agent can also sell specialized payroll deduction plans such as Section 125 plans (these plans are discussed later in this campaign). The concept of payroll deduction is simple: An employer provides employees the opportunity to purchase these products by paying premiums out of each paycheck. Premiums are automatically deducted from the employee's pay. Most often, these plans are used as a supplement to the insured's company-paid Group plan. The variety and arrangement of plans available depends on the insurance carrier through which the plans are written and the type of plan offered. The agent's role in selling these plans can also vary-from just selling the idea to the employer and then letting an outside enrollment firm handle employee sales and administration to selling and administering the plan entirely alone. Most agents choose the former course because the administration of such a program entails specialized knowledge and much work. The plans themselves vary with carriers, as noted, but, typically, a payroll deduction employee benefit plan will have these features: Several coverages offered, such as Life, Disability Discounted premiums due to the Group sales volume Either guaranteed-issue coverage or liberalized underwriting with no medical examinations required Employee ownership of coverages-the employee owns the policy and therefore can keep it if employment is terminated Spouse-only coverage-an employee need not be enrolled in order to enroll a spouse or dependent Double Indemnity for accidental death Waiver of premium if the insured becomes totally disabled during the policy period Immediate protection-coverage begins immediately upon completion of enrollment forms and authorization for payroll deduction Agents can become involved in these programs on different levels. Basically, there are three options. An agency can design, sell, and administer the voluntary benefits program itself, sell programs that are designed and administered by an insurance company, or sell the program to employers and engage the services of a firm that specializes in selling and administering these programs on the employee level. Each approach has its pros and cons. With the first option, the agent has total control of who talks to the client when, and receives full commission for his or her efforts. But this method also means a lot of work. An agency needs a strong 'back room' staff to handle the administrative work for a program like this. An agent's staff must also know or learn how the enrollment process works, and should work at enrollment full time. Without proper administrative support and knowledge, the program is likely to fail. (You'll find more information on this under the subtitle 'Cons.') Choosing a plan administered by an insurer eliminates some of the work to be handled by the agency, but means no choice of markets and a lower commission to account for the work the carrier is doing. (You'll find more information on this under the subtitle 'Cons.') If an agent chooses to use an outside firm, he or she will again pass on some of the workload, but will also have to share the commission. The outside firm will also have access to his or her client's employees. If they don't do a presentable job, the agent won't look good. The key is to choose the right firm. (More on what to look for in an enrollment firm later in this campaign.) PROS Payroll deduction employee benefit programs offer advantages to the agent, the Commercial client, and the client's employees as well. For the agent, the advantages of selling such a program are added commission income and client retention. According to estimates by firms in the business, a 300-employee group can generate $15,000 in commission income to the agency in the first year. Re-enrollment a year later can add new employees and those who didn't sign up the first time around, which adds new commission to the agency. On those who continue the program, renewals will usually be paid. Most carriers will also pay renewals for the lifetime of the employee's participation, either within the company or on direct bill should the employee terminate employment. An agent can also benefit from a payroll deduction program through client retention. Number one, you're offering a service that many people are talking about these days as costs of Group benefits rises. If you haven't offered it, chances are fairly good that someone else will at some t... cannot pull out at a whim. Once pay is reduced, it is permanently reduced until renewal of insurance. WHAT TO LOOK FOR IN A PAYROLL DEDUCTION ENROLLMENT FIRM As noted previously, the right payroll deduction enrollment firm can be instrumental in an agency's success with a voluntary benefits payroll deduction program. The agent who chooses to use a provider instead of doing the administrative work in-house should choose carefully to ensure that insureds will get the best service. These basic characteristics of a good payroll deduction service provider should help you make your choice: 1. Specialization: The firm should specialize in providing payroll deduction services. It should be well-versed in all the options, including Section 125 plans and their applications. 2. Exceptional References: The firm should be able to provide references from carriers, agents, Commercial clients, and individual insureds. 3. Good Service: This is an absolute necessity. Check references and ask about quality of service. 4. Multiple Carrier Access: More than one carrier should be available through the firm, and these carriers should be top-rated and reliable. See the following section on 'How to Choose a Payroll Deduction Carrier' to find out some of the qualities that constitute a good carrier in this market. Ask the service firm about the characteristics of the carriers it uses. 5. Procedures: The firm should be able to provide you with step-by-step procedures that are followed for the enrollment, reenrollment, and persistency processes. 6. Automation: A computerized system should be in place to help the firm efficiently administer any size group, and all paperwork between the insurance company and the employer should be screened through the firm to detect and correct any errors or omissions. 7. Flexibility: The firm should be flexible as to the size of group it can handle. Some handle as few as two or three lives. If the firm's lowest threshold is more than 25 or so, that's going to narrow your prospects down considerably. 8. National Operations: A firm that operates nationally will be able to install a program anywhere across the country, opening up possibilities for Commercial clients with branches in more than one location. 9. Administrative Capabilities: The firm should take on as much of the administrative work as is possible, relieving your Commercial insured's personnel department of the burden. Payroll deduction service firms will vary in the types of services they provide, so check this out carefully before signing any agreements. This administrative work includes billing, re-enrollment, correspondence, and much more. 10. Easy-access Service: Individual insureds should be provided with a toll-free or local telephone number they can call when any policy service problems or claims arise. A full client service center should be in place at the firm's office. This prevents insureds from having to deal directly with an insurance company's office, and prevents you, the agent, from having to deal with problems you're not equipped to handle because the service firm has provided all administrative and policy support to that point. WHAT TO LOOK FOR IN A PAYROLL DEDUCTION CARRIER If an agent chooses to use an enrollment firm to provide payroll deduction services, that firm will usually provide the carrier for the coverages. The agent in this situation need not go searching for a carrier, although it's still wise to know those qualities that constitute a good payroll deduction carrier and to question the enrollment firm if these qualities aren't apparent. When looking for a carrier to provide products for the payroll deduction market, and perhaps to provide service on those products as well, an agent should keep in mind that this is a specialized market that requires some specialized work and service from carriers. When choosing a company, the agent should consider the following points: 1. You should mistrust a carrier that will give out guaranteed-issue coverage carte blanche. A carrier who is solidly in the market will require prior underwriting approval beyond a maximum guaranteed-issue threshold via a request form. 2. The carrier should have previous marketing expertise in this area from previous case experience. 3. The carrier should prepare the preliminary bill after applications are submitted. This saves the agent work and cuts down on the probability of errors. rdan
https://completemarkets.com/Article/article-post/2346/CHANGING-ENVIRONMENT-MAKES-HIGH-VALUED-AGENCIES-EASIER-TO-RECOGNIZE/
Changing Environment Makes High Valued Agencies Easier To Recognizer>CHANGING ENVIRONMENT MAKES HIGH VALUED AGENCIES EASIER TO RECOGNIZE by Robert Smith Stories are starting to circulate around agency/brokerage meetings, 'Did you hear what the ABC or XYZ Agency sold for?' Some of the multiples being discussed are actually accurate. However, many describe an inflated price or fail to address the earn-out elements of the transaction. Despite the partial truths about value, the prices many acquirers are willing to pay for the best agencies are higher today than in many years. But the value of many agencies hasn’t increased significantly, while the value of good agencies has grown dramatically. Acquirers have created the potential for bidding wars for quality agencies. Agencies that are profitable and growing with a strong management team command significant prices in the marketplace. Firms with these characteristics, however, are also the very agencies that control their future because of the way they run their business. The prices paid for many agencies are quite high compared with both historic multiples and with many under-performing agencies. But when you consider the opportunity for the acquirer to leverage the operational and intellectual capabilities of the acquired firm, the price paid for the quality agency is usually quite reasonable. What are the business characteristics of high-value firms and what steps can an agency owner take today in order to position the agency for the future? How does a local or regional agency make the decisions that will enhance its value? Although there are a variety of features common to the best firms in the nation, the most prolific buyers of agencies have identified a number of characteristics that are vital to them: High valued firms continually reinvest in their production force. The agency/brokerage business remains a sales and service business. Acquirers have identified sustainable new business and predictable account retention levels in the best firms. Many agencies arrive at a point where the production force is tapped out, burned out, or ineffective. When a potential acquirer begins discussing the value of the agency, management realizes the importance of growth to the value of the firm, to the insurers it represent, and to the overall corporate culture. A Midwestern firm was growing at a modest 2% rate when a local bank president asked the owners if they’d like to discuss an acquisition. The bank was publicly traded and sensitive to the impact of the buyout on its earnings. The agency could deliver an earnings contribution that would support a premium price in the first year after acquisition through aggressive expense reductions. However, when the bank realized the impact of the agency’s anemic revenue growth on its ability to sustain earnings growth at a level consistent with the bank’s, it discounted the price it was willing to pay for the business. High-value agencies engage in automation strategic planning. Leading agencies develop a focused and balanced approach to automation. These firms regularly find themselves on the leading edge of technology that works. The purpose of automation is to create improvements in productivity, client service, and information management. Some principals make the initial investment in computer technology, but don’t change their way of doing business to maximize the value of this outlay. Many firms have made automation purchases only to be ensnared in a maze of duplicate systems and procedures. The lack of standards for operating in an electronic environment leads to minimal, if any, improvement in the way they do business or serve their clients. An agency in the Southeast recently bought a new automation system. The purchase required new hardware and software, as well as a substantial amount of training to standardize workflow procedures. The firm’s stress on consistency and standards allowed it to maintain revenue growth rate without hiring new staff. The result: an increase in revenue per employee in the year of the automation conversion. High-value agencies run their business like a business. Most local and regional agencies are family owned and/or closely held. The principals of top firms recognize the 'duality' of their relationship with their agency — as both investors and employees. As investors, principals are entitled to economic returns based on the risk associated with their investment. As employees, they deserve appropriate compensation for the job they do. Even though their total paycheck reflects both investor returns and compensation for their job, the principals of top agencies are well aware of the difference between the two. A firm in the Southwest had three principals who began the agency at a time when they were all totally committed to work. They also paid themselves equally because of their common devotion to the firm. However, as time went by, one of the principals grew increasingly disinterested in the business. When his partners wanted to adjust compensation for each of the owners based on their relative contributions to the firm, the partner who had lost interest vetoed the change. Failure to address this issue led to a significant inequity in compensation and ultimately forced the sale of the agency at a price much lower than it would’ve been worth otherwise High-value agencies are developing an Internet strategy that, as often as not, is a sales strategy. Although many local and regional agencies won’t conduct a s...iness online, most high-value agencies are creating an Internet strategy. The Internet can be used to sell products and services, provide marketing or service information, and/or reinforce existing client relationships. Local and regional agencies should focus their Internet strategy on the areas that add value to their existing and future client relationships. An agency in the Mid-Atlantic region developed a franchise program that focused on businesses in 22 Eastern and Midwestern states. The firm put coverage and application information on its Web site so that franchisees could download the appropriate information and return it to the agency for further underwriting. As a result, the penetration rate on the franchise program came in twice as high as the initial projections, with retention rates of nearly100%. The changing environment has created an immediate payback for many of the investments and business practices that define the nation’s best agencies. Owners and managers of these high-value firms are making decisions today that will maximize the value of their businesses. This article originally appeared in The National Underwriter, Property/Casualty Edition, and is reproduced by permission. Robert Smith is a Principal with Reagan Consulting, Inc., an Atlanta-based management consulting firm that serves insurance agents, brokers and companies, as well as financial institutions. Please send your comments to tom@reaganassociates.com.
https://completemarkets.com/Article/article-post/1721/Outside-Telemarketing-Firm-Use/
Outside Telemarketing Firm User>Instead of hiring telemarketers to work within your agency just for you, you could choose to pay an outside vendor to provide telemarketing services. These vendors generally charge a per-call fee or an hourly rate per telemarketer. An additional fee is sometimes charged for each successful contact (X-date received, appointment set). There may be other fees for services such as having to look up a telephone number.
Using an outside vendor has advantages and disadvantages. Let's run through them so you can make a more informed decision:
ADVANTAGES
DECREASED COSTS: Unless your own in-house program involves a massive and steady volume of calls (in the range of 100,000 or more per year), you may find it hard to match the price offered by an outside telemarketing firm. By combining your volume with other clients, the firm can reduce overhead and labor costs.
QUICKER, CHEAPER START-UP: A good telemarketing vendor has experienced telephone representatives and state-of-the-art telephone equipment already in place, so your program can be established quickly without your having to purchase any specialized equipment or new telephones.
MANAGEMENT KNOWLEDGE AND EXPERTISE: A good telemarketing unit will be run by experienced capable managers in the telemarketing field. An in-house operation may find itself with a management problem once telemarketers come on board-telemarketing is labor-intensive, employing people on a part-time basis and often at a base minimum wage. A different set of supervisory strategies apply to these people than apply to your salaried staff. Use of an outside telemarketing firm avoids these problems.
SIMPLIFIED MONITORING AND TESTING: An outside telemarketing firm is often the best place to conduct a test of a new program. Vendors may be able to use advanced techniques to pre-test a campaign to discern the effectiveness of telemarketing as the marketing method employed.
DISADVANTAGES
FREQUENT BUSY SIGNALS: If your prospects want to return a call from a telemarketer, they may find themselves frustrated trying to get through. Telemarketing firms can provide economical service only by maintaining call patterns that result in many busy signals when people c...l in.
FINANCIAL INSTABILITY: Most telemarketing firms are relatively new businesses, and their nature is sometimes difficult. Phone companies have been known to shut off a center's phone lines with no warning, resulting in a damaging backlash if any advertising has been placed before the center is shut down.
NO DATABASE OR CO-WORKER ACCESSIBILITY: Outside telemarketers don't have access to your company records and client files, or to other employees who can serve as a valuable source of information. If a prospect contacted has an insurance question, there will be no one else to turn to.
NO PRODUCT OR AGENCY KNOWLEDGE: Telemarketers from an outside vendor will be a lot less loyal to you and your company. They're paid to get the information, no matter who it's for. You will not be able to train these people at all on your own products, services, and agency goals.
https://completemarkets.com/Article/article-post/2071/MANAGING-THE-CLAIMS-HANDLING-PROCESS/
https://completemarkets.com/Article/article-post/968/AGENCY-COMPENSATION-SURVEY-3/
Agency Compensation Survey 3r> AGENCY COMPENSATION SURVEY by Carol Hammes Doing what you’ve always done in terms of raises and bonuses might not be giving you the 'bang for the buck' that it used to. This document by Carol Hammes tells you how to improve employee loyalty in ways that are fair to everyone. The average independent agency spends between 62.2% and 66.3% of revenues on compensation. Because this is your firm’s largest single expense, it’s essential to make sure that you’re spending it wisely. Although the bloom on the dot-com rose has faded, plenty of firms can still afford to offer salaries far higher than the average independent agency can afford. As a result, agency principals must be prepared to sell prospective and existing employees on the benefits of working for their organization. This means you have to offer something beyond monetary compensation. In general, people don’t take a job just for the money, nor do they leave one solely for a higher salary. An entire package of items and emotions goes into these decisions. The key is for management to determine the needs of the individual prospect or employee and then try to meet them. This is easier said than done when dealing with younger people who might have needs and values that seems alien to anyone over 40. But it’s not impossible. Over and above a decent living, the needs of today’s workers include: a sense of fairness, room to grow, the trust and respect of management, professionalism in the environment and reputation of the agency, and an opportunity to participate in decisions. Most importantly, employees want to know that what they’re doing is making a difference. They want to be rewarded both for the agency’s performance and for their own performance. They don’t want to be treated like every other employee, especially those who are simply coasting and who have 'retired on the job.' This situation is insulting to good performers and counterproductive for the entire organization. To avoid the morale problems and higher turnover caused by long term but less productive employees, you should establish a performance-based compensation plan that ties in with meeting your employees’ other needs. In addition to those listed above, these might include flexible working hours, job-sharing, switching from sick days to personal time off, an exercise room, a choice of employee benefits/cafeteria style programs, and so forth. A compensation system with salary ranges, bonuses, and commissions that remain competitive while reflecting each employee’s functions and level of responsibility will complement the total employment package that you offer. The compensation system should provide written job descriptions that include the responsibilities, functions, education, and experience required for the position. Link salary ranges and bonuses programs to the job position and the individual’s eventual performance level. Because automation enhancements or organizational restructuring might change job responsibilities over time, review all job descriptions and salary ranges each year. Although most agencies raise salaries about 4% a year, location and agency performance might affect that percentage. For 17 years, we’ve been conducting national Compensation Surveys to give agency managers an idea of what other firms are paying for comparable positions. Managers can compare this information with local salary levels to facilitate the annual review process. Web sites that provide data on local salary ranges for comparable jobs include www.jobsmart.org, www.wageweb.com, and www.bls.gov/ncs/ocs/compub.htm. This article includes The Middleton Letter survey results for 2000, divided into rural and suburban/urban agency groups. These results represent averages, not medians, from throughout the nation. Aside from top management positions, agency size has very little bearing on the results because smaller agencies in a marketing area have to offer salaries competitive with the larger ones. In reviewing the survey results, be sure to take into account adjustments for nontraditional job descriptions, as well the fact that job positions in insurance agencies aren’t standardized. What a Customer Service Rep does in one agency might be entirely different in another, ranging from strictly clerical work to that of a highly educated professional. According to Department of Labor salary data, a number of states have average per capita incomes significantly higher or lower than the norm. This table will help you adjust the national results to fit your marketing area. States not shown on the chart have per capita incomes within 5% on either side of the median. ... New 56%/Renewal 16%&