One theme dominated the discussion–moderated by yours truly–and that was the need to stay the course on risk management, rather than revert to being a policy peddler on price alone. The focus, they agree, must remain on lowering the long-term, overall cost of risk, while serving as true risk managers for clients.

The participants cited a three-part process–selling the prospect on risk management, selling the underwriter, and selling your own staff. How do they do it? Highlights of the discussion follow:

Sam Friedman,

Editor, National Underwriter:

HOW DOES AN AGENT BECOME A RISK MANAGER?

How do you position yourselves as risk managers for your clients regardless of whether the insurance market is hard or soft?

Paul Hering,

Barney & Barney,

2006 Champion

It is tougher in some markets to keep your clients focused on risk management activities. It's very tempting just to think about it as a price decision.

But we find that most of our clients have a good memory about the market being cyclical. They can remember the tough times, and we help remind them of that. We try to encourage them in a soft market to plow some of their savings back into risk management-type activities and to position themselves for when the market is going to shift again.

For us, risk management is about trying to have our clients understand the concept of total cost of risk, and it's not just a decision about premium, but how we feel they should position their organization to keep their claims down. Again, it's not just about insurance premiums.

Sam Friedman:

Total cost of risk is a real buzzword these days. How do you define it for a client?

Paul Hering:

Again, it goes beyond price because claims and loss activities impact price, and maybe it's best understood with an example.

If a client invests in our loss control and safety program, and they spend $20,000 on that type of investment, yet at the end of the day that drives their losses down by $50,000, the net cost that they're actually paying after incurring some expense to put in the safety program is going to be $30,000 lower.

In addition, their overall insurance premium will be less than it would if their experience was not so favorable.

William Rothwell:

Universal Insurance Services,

2006 Honorable Mention

We show clients in dollars and cents how hiring us and putting in our systems reduced their cost of claims.

Once you have the systems in place, the accountability is important. If the client says, 'Show me the money. Where am I saving?' you have to be able to do it, or otherwise it's all talk.

Bill Henry:

MHBT,

2006 Honorable Mention

One thing we do is break down costs by operating units. We've had great success with that in businesses like restaurants and grocery chains.

Many times they might have a store in a particular location that they think is making tons of money. We've had our people allocate the cost of risk back to individual locations, and all of a sudden they wake up and see that this store is dragging the whole account down. After they realize what that store has been doing to them for 15 years, they see the value in a loss control program and individual accountability.

We've really tried to get on their wavelength and conveyed things back to them so they not only understand the savings of risk management themselves, but can pass it down to the people in the field and help them figure out where their problem areas are.

Alex Soto,

IIABA President

We track all activities that we do for the client–it's helpful to remind them of what you've done over a period of time, particularly in tough times. You just print it out–loss control and all the things beyond–and it's impressive, because they forget they've called you 22 times.

It also helps us to see whether it is somebody that we need to charge more, or we need to say goodbye to, or we need to train and teach a little bit.

Sam Friedman:

It isn't always easy to adopt a risk management approach for an agency. In his award essay, Bill Rothwell at Universal described a culture clash. How did you overcome that?

William Rothwell:

We had essentially grasped the concept of measurable cost of risk, and using risk management to create value for the client over and above the expense of insurance. Our goal is to market-proof our clients.

Not all clients are comfortable with that approach, or are more focused on the short-term price of coverage. So we actually choose our clients rather than the other way around.

We're looking for somebody who doesn't care whether it's a hard or a soft market. We're looking for someone who is willing to buy into the concept, put a little skin in the game, and create a partnership with us.

It's a win-win-win for everyone at the end–including the insurance carrier–where everybody's going to save money, and everybody's going to profit from the relationship.

But as far as the core cost-of-risk concept goes, we have a measurability guide where we can quantify the savings. We've gone as far as to share risk with the client. If we are unable to do what we promise, then here's what will happen. It isn't just going to be the client taking the risk.

Sam Friedman:

How do you “share risk” with the client?

William Rothwell:

It's based on our future fee. It varies with the client, but it can run up to one-third of what our fee is. We do not write checks that we return to the client, obviously, but we will adjust our fee in the future. So, it's not strictly the client and the carrier that has skin in the game.

But when it comes to accountability–to demonstrate how we come through for the client–we can show they paid this much in premium, took this much in retention, paid this much to us for our fee, paid this much for outside services at our recommendation, and the result in claims and loss costs.

With our risk management approach, we get the client beyond somebody knocking on their door and claiming they can save them 50 percent in premiums. We can show sustainable savings for a long period of time.

Bill Henry:

We try to find clients who are really looking for something more than just a “broker”–for somebody to help them control their exposures going forward. We explain to them that probably 80 percent of their costs is going to be in their losses, and if we can make a major impact on that, that's where we're really going to save them money.

Then we do everything we can after that to educate the customer and make them a better consumer in terms of market-proofing them going forward–in other words, convincing them to stick with their risk management plan regardless of what's happening in the general insurance market.

This works great because customers can see the results in their costs going down as we help them control their losses, so that you can get a buy-in to where you really do become their outsourced risk management department, and they would have to think long and hard about leaving you. You have so many of your people touching the customer, it's difficult for that client to leave all those relationships.

The reason we started in the first place with a risk management approach is that it's a concept we can sell to our insurance company partners as well as our customers–about how we were going to be proactive.

Paul Hering:

As a broker you have to ask yourself what kind of a relationship you want to have with your client, and if it's all about price. You may win on price, but you will obviously also lose on price.

The way we've looked at it, rather than being insurance peddlers, I think we'd like to view ourselves as a trusted adviser and part of the client's professional service team–maybe the way they view their lawyer or their accounting firm–to really help them understand their business and drive a better result for their overall organization.

That's the kind of relationship that ends up being a lasting one in this business, as opposed to something that's just focused on the bottom-line price.

Sam Friedman:

WHAT DOES IT MEAN TO BE A TRUSTED ADVISER?

It's interesting that you're talking about trying to position yourself as the trusted adviser, given the fact that we have the president of the IIABA here, which features a Trusted Choice branding program. How do you sell that role to clients?

Alex Soto:

We did a lot of market research before we launched the Trusted Choice brand. We did focus groups, putting consumers around a table and segmenting them into personal lines consumers, small commercial and medium-sized buyers.

Interestingly enough, there was very little difference in what they told us. They said what they wanted in the relationship was choice, customization and advocacy. They wanted a whole bunch of other things, but those were the three most important components.

In terms of advocacy, they want a champion–somebody who will sit next to them and help them navigate the market and the claims process. That's precisely what you guys have been talking about–positioning yourselves as their consultant and trusted adviser to walk them through and point out what the real, ultimate cost is–not only in terms of the losses as well as insurance, but the soft costs that are not covered by insurance, such as the morale price, the administrative time.

It's like that bumper sticker I see from time to time–'Hit Me! I have insurance!' Unless you have chicanery in your heart, having a loss is not a good deal–even if it is fully insured–because it's going to take a lot of time and energy and focus away from what the client is supposed to be doing. So I think you guys have hit it on the head–that it's really about the whole process of risk management, and we found that in the creation of Trusted Choice.

Sam Friedman:

HOW DO YOU 'MARKET-PROOF' AN ACCOUNT?

It's easy to talk risk management when insurance premiums are rising, but how is your pitch playing out in a softening market?

Charles Haake,

Haake Companies,

2005 Champion

The soft market, I will admit, has been a little bit of a challenge for us, but we try to keep driving home to our clients that we want to help them control their short- and long-term cost of risk. Long term is risk management, safety programs and so on. But we can't ignore our short-term responsibility, which is matching up the client with the best insurance carrier in the environment today at the best price possible–whether it is a soft or a hard market.

We learned pretty quickly, when things start to turn [soft], the clients say, 'Look, you know, I get the long term, but what about today? I've got a broker coming in and saying he's got all these wonderful programs at competitive prices.'

So we make sure we are communicating our entire message–that is to say we're also going to help clients control the short-term costs of what they're paying today because of the current market, since we can negotiate a very competitive program very effectively because carriers like our overall risk management approach. We simply can't lose focus on the total cost-of-risk approach.

William Rothwell:

One of the things we try to drive home is the fact that in addition to the long-term risk management program, we are also talking about actually dressing that client up so they look best to the market–that getting their losses down will get them better insurance pricing in all kinds of markets.

Sam Friedman:

What if the client just keeps hammering away at you about the price of insurance, especially as they hear about premiums falling in general?

Paul Hering:

It is very hard for a lot of agents and brokers to understand, but you need to know when to walk away, and we won't do business with every insurance buyer out there. There are some that are just not a good fit, and there are agents and brokers out there that can serve them.

But you have to know when there's not a good fit between what your objectives are as an organization, what you're trying to accomplish on behalf of the client, and what motivates them. So it's tough to walk away sometimes, but if we didn't, it would undermine everything we're trying to do.

Sam Friedman:

How does that play out with individual producers? Is there some sort of protocol involved to determine that you're not going to do business with certain prospects?

Paul Hering:

I think it ends up being a kind of a statement about the culture of the organization and what you're trying to create. It's very hard for young producers especially who are hungry and are trying to make a name for themselves to walk away from business, but that's where agency leadership needs to step in and just help them understand the pitfalls of selecting clients that are price-only buyers.

They may have that client for a year, but this business is about building lasting relationships, and you just have to work with the young producers and help them try and understand.

Bill Henry:

About a month ago, a really good, young producer got a referral on a big real estate account. He went out with the account manager, and in the first 10 minutes, the prospect's telling him about how he's bringing in three or four agents and he'll beat them up and may the best man win.

Our guy just folded up his portfolio and said, 'Mr. So and So, I really appreciate you having us out, but I don't really think we're a cultural fit with you.' Then he got up and walked out of the room.

Alex Soto:

I use this expression quite a bit: I'd rather turn you down than let you down.

Ultimately–if these are their expectations, and you cannot sell them on the way you are going to counsel them and handle their account, their expectation is something else–it won't work out, and I'd rather turn you down than let you down, because ultimately by the standards you set, I'm going to let you down, and so we might as well not go into it or we'll both be unhappy.

William Rothwell:

The cost of delivering what I think everybody here does in that first year or two is pretty high, with all the loss control services we provide, so it's tough to make money unless you keep that client for a reasonable amount of time.

So we're very careful in that interview process. We'll walk away if they don't look like they're buying into that [risk management] culture–that commitment that will drive sustainable reduction in their costs, whether it be for a one-year reduction or the long haul.

Tim Templeton,

Senn Dunn,

2004 Champion

I think when you walk away, you really help the credibility with the underwriter, too. We've had situations where we called an underwriter and said, look, it's not a good situation–it's not the right kind of client for you and not the right kind of client for us.

A lot of times they'll say, 'Thank you, I appreciate where you're coming from. Next time you have a good prospect, I'm here with you and am going to do what it takes to write the business.'

Rather than just having the copier running with the underwriters getting stacks and stacks of submissions that don't mean much, to say I've got a real opportunity, they perk their ears up because they know that you walked away from two before we got to that real opportunity.

Bill Henry:

You get credibility with the underwriters, you get credibility with your own people, and you get credibility with the prospects that you walked away from. They know you mean what you say.

Paul Hering:

I don't think customers understand that they can develop a bad reputation in the marketplace when they're price-shoppers year in and year out.

I think our role is to help educate them that, look, you don't want to be known in this industry as a price-only shopper because there aren't going to be that many carriers interested in participating, and that's going to hurt you in the long run.

William Rothwell:

The carrier has to be confident that the broker is going to bring in solid risks.

Once they're at that comfort level, they don't need to keep being convinced. They know you'll go to the wall for them because you've proven it time and time again.

Charles Haake:

It requires some education on our part to let the underwriters know we are different in our approach, because sometimes we've had an underwriter come into our office and say, 'We haven't seen very many submissions from you.' Well, the whole idea is not to see very many submissions. But when we do bring one, pay attention, because it's a good one.

So it's not only selling your risk management approach to the prospective clients, but also selling it to underwriters that what we're doing is different than what they're probably seeing from other agencies.

Tim Templeton:

Down by us in Greensboro, N.C., we have a smaller client normally than what the rest of you here would probably have, so that adds another dimension to the challenge we face in selling risk management.

The client wants to know they're getting a good value. We've kind of steered away from the price conversation today, but we keep emphasizing how they'll get a good value if we're containing their losses and managing their claims and using our resources and our markets and our process.

Larry Roland, our chairman now, 10 years ago stood up in front of the group and said there's a three-way test of somebody being a client of Senn Dunn: Do they run their business in a business-like fashion? Do they pay us on time like they should? Do they value what we do like they do their lawyer or accountant?

If they meet all those tests, they're a great client, so let's go get them.

Alex Soto:

There are times when you go into a client relationship and it really is not a good match, so you have to be willing to let them go. I have told one personally that I wish I had 10 accounts like theirs–because I have 50, and they're driving me nuts. So you end the relationship and wish them well.

One of the things I like to tell my people is that you really have to look at the relationship as sort of a bank account. You're making deposits any time you do things that they particularly like, but at some point the relationship is going to hit some bumps. It may very well be that you're delivering the bad news of a steep increase.

But if you've deposited enough goodwill into the account and into the relationship, they will give you the latitude–they will not change for a price that otherwise may seem attractive.

It's also about the little stuff. We tell our people that it's the details that are very important. When you promise somebody you're going to call them back, call them back, and you call them back at the time you told them you would–or earlier. The little things are incredibly important. Big accounts have walked away over the little stuff.

Sam Friedman:

How do you sell your staff on a risk management approach, and how do you keep everyone on board?

Paul Hering:

There's an evolution when you're committing to a risk management culture in the organization, so you have to take a long-term view.

First of all, it's hard to find good people and the right people to come in and run that practice for you, but you have to be patient, you have to look hard, and you have to make sure you're finding the right folks.

There's often reluctance among your account executives or producer staff, as they can be extremely protective of their client relationships, and when you're introducing other loss control people into that relationship, it scares them a little bit.

But I think what's happened in our organization is over time our producers understand that their ability to retain the business is so enhanced by the services that these risk management and claims folks are bringing to the table, that they love having those people come out there.

So if a producer at the end of the day concludes that he can write business more easily and can retain it more easily because we're making the services available, then it doesn't become a tough sell after that point.

But you don't get there overnight. If you're not doing this now, it's something you've got to be patient about. You have to take the time and invest in it, and understand that you'll see the results down the road.

Bill Henry:

When the young ones come in, we start them out right away–the first thing they do is sit in on a meeting or two when we're making our presentations to a customer or prospect, so they can see our risk management approach in action.

William Rothwell:

It's not just the upfront funding, the upfront hiring, the initial investment. What happens over a period of time is we try very hard to get the right people on the bus, get them in the right seats on the bus, or get them off the bus.

We need to have people in all levels of the team who are capable of working a strategic program with the clientele. It can't just be the producer out there with the country club type of relationship expecting that is going to keep a client around today.

The clients are a lot more astute at all levels of the industry and the marketplace than they were five, 10 years ago. You need to bring value from the account manager, the producer, any technology people you have involved, from the pre- and post-loss people–all have to prove those values, and that's what'll keep them.

Charles Haake:

I'm almost embarrassed to say that five or six years ago I would hear one of our producers say to a client, we're going to shop your account every year and with every market that we possibly can. That was supposedly a good thing–that we were going to aggressively market an account.

So the culture changed in our organization. It was kind of a 180-degree shift, and it's not easy. Communication and overall acceptance regarding a change in culture like this is really difficult. But it is something that has just got to filter down and throughout all of the organization.

I like the bus analogy–that's kind of what we went through. Some people got on the bus and got in the right seat; others didn't get on at all. But it was not easy. However, once you start to see some success with this approach, and the ability to retain accounts, that's when it really sinks in.

Also, it goes beyond producers. It's account execs, account managers–they hear what you're doing, they like that approach, they like helping businesses, being consultants. So once it gets into practice, it's wonderful, but getting there is a little bit of a challenge.

Sam Friedman:

SHOW ME THE MONEY!

How does risk management play out in terms of compensation?

William Rothwell:

Our fees are set from experience, through time tracking and what we know about similar accounts. Then as we go through year by year with the account, we show them the activity–this is what we've done, and also the end result. It can be adjusted as need be.

But if there's an industry that has an inverse relationship between an intermediary doing their job and their compensation, it's this one. If we do our job–we drive the price down, commissions come down–we get paid less. Yet prices go up because of whims of the industry out there, whether it be Wall Street or capacity–then our income goes up. It doesn't make sense.

And once you have explained that to a client or prospect, they pretty much understand where you're going with it. And then the idea is you can get income beyond that for services rendered–that is as transparent as you're going to get.

It's our capabilities versus your current agent's capabilities, and here's what we're going to do for your money. And if the other agent hasn't disclosed their compensation, we will do it for them. It's pretty easy if you figure 10 percent is a fairly conservative number that an agent makes. That's where we're going to start.

Paul Hering:

We do a fair amount of fee business, but still the vast majority of the way we're compensated is through commissions. We may be a little unusual, too. When it comes to the risk management services that we provide–loss control, safety, claims management–virtually all of what we do there is on a value-added basis. We don't charge for it.

There are special projects we get involved with for certain clients where we have to charge, but basically, not to get overly complicated, we can commit to offering a certain amount of hours through our risk management consulting.

We do that, we think we can afford to do it, and for us it's a significant investment. We probably have somewhere between a million-and-a-half to two-million dollars invested in expenses each year in these risk management consulting services we provide–but we believe that it enhances our ability to write new business and retain business, so it pays off.

Tim Templeton:

We build in hours for our loss control person. He's in there and he's done some good work, but if we really have a project that we'd like to have his help on, well, we're glad to help that client, but we need to switch over to a fee.

Paul Hering:

That's what we do as well. And if the hours go beyond what we've allotted, we'll actually do a charge to the commissions on the account so that it's coming out the producer's pocket a little bit.

William Rothwell:

Do any of you get into a situation where you're charging fees for risk management services without placing the account's insurance?

Bill Henry:

It depends. If it might get us in the door to work on the whole account, then we might consider it, but normally you have to buy the cow if you want the milk.

But not many agencies will let us in the back door like that for fear of losing the entire account.

Charles Haake:

We're doing some human resources consulting, and that's not quite as much of a threat, I think, to the existing property-casualty broker. However, when you talk to a prospect about providing claims and loss control services on a fee basis, that becomes a real threat to the existing broker.

Alex Soto:

The overwhelming majority of compensation in the independent agency system is by commission. It's only when you get to a larger, more sophisticated account that you try to isolate those other functions, such as risk management.

We put it in writing, and we deal with a separate service contract. In our state you have to be very careful, because you cannot charge a fee and get commission.

The other issue is disclosure. That's being spotlighted now, after the recent regulatory probes into the national brokerages. We disclose our remunerations, but I think it's improper for the focus to be only on our fee or commission, because it seems to imply that there's something nefarious or something wrong with that.

Also, I find that when you indicate to clients what you make, overwhelmingly the majority of them go, 'Is that all? You mean you're only getting 10 percent?' I think they're used to hearing from a plaintiff attorney that it's 35 percent, and all the expenses are coming from your side.

William Rothwell:

That's the point, Alex. If we're holding ourselves out to be trusted advisers–as their attorneys are, as their bankers are, as their accountants are–there's total disclosure on that side.

If we're going to hold ourselves up in that same way, transparency should not be an issue. That has to take place. It's what makes the value you're getting tangible.

Charles Haake:

It's much easier to justify your level of compensation when you're providing all these additional services. With the price-shopper, as we outlined, you're going to have a pretty hard time justifying whatever your revenue might be.

Sam Friedman:

WHAT IF YOU NEED TO GO OUTSIDE THE INSURANCE MARKET?

Could you all talk a bit about how you integrate the alternative risk-transfer markets into your risk management programs?

William Rothwell:

If you're going to maintain that consultative approach, it's the next obvious extension of what you're providing. That's where you're taking them.

If you want them to assume more risk, you have to show them how to accomplish that and show them why it makes sense.

Paul Hering:

Innovation and creativity are part of our core values, and if our clients ask for us to put creative solutions on the table–whether they end up choosing to go in an alternative program or not–our role is to put the options out there, educate the client, help them make a good decision about their business.

We're in a pretty soft market, so alternative markets become less desirable. But I think we still have an obligation to talk to our clients about alternative risk-transfer mechanisms.

Bill Henry:

What you're really trying to do is get clients to where they're not exchanging dollars with insurance companies. You're trying to get them into a position where they can control their losses. Without control of their losses, you would buy more insurance. If they're in control, then you would have to buy less insurance, depending on what the marketplace is.

Right now the market's so soft, alternative markets are not for everybody. But if it's a situation where you have a very specialized risk–if the market does not want to write it, or write it affordably–that could still be a viable option.

Charles Haake:

Clearly, if you're going to be a consultant–a trusted adviser to your clients–you have to at least offer those kinds of alternative approaches, but you had better know what you're talking about.

Still, it's an option you have to offer if you're going to complete that entire risk management approach.

Sam Friedman:

WHERE DO YOU START?

What kind of advice would you have for an agency that admires what you all are doing, and wants to shift to a risk management approach?

Bill Henry:

They have to understand they're going to have a substantial investment in people and time–maybe three or four years.

But that said, in my opinion, long term, unless you're just going to be a marginal player with smaller accounts, you're not going to be in our business five years from now if you can't provide these kinds of services.

Paul Hering:

Bill hit the nail on the head. The advice I would give somebody is to ask yourself what kind of company you want to be, and what kind of relationships you want to have with your clients.

I echo the point that this is not something you can do where you evaluate the results in six months and say, there's all this expense going out and I'm not seeing any revenue or return on it, because it's not that kind of investment.

What you're talking about here are typically non-revenue-generating expenses that you're incurring, and you have to have a very long-term view. You have to look at it two years, three years, even five years down the road and understand the potential impact on your retention, your business and your bottom line. You can't go in and look at it as a short-term project.

William Rothwell:

It's a five-year track to see much of a return at all. But it has to be done if you want to go out and play in the new world with the large, national carriers, and if you want to target more of these lower, middle-market accounts. You also have to be willing to take risk yourself.

Tim Templeton:

If I were a smaller shop and I were thinking how do I start taking that first step, consider what we did five or six years ago. We partnered with a safety consultant. Specific clients have specific needs, and we'd like to have this consultant on retainer, and we'd like to set up a relationship.

And he loved it. He still had his other clients. We at the time couldn't use him full-time. We weren't there yet. But as we started developing that process and we saw more clients were interested, we needed that service full-time, and we needed administration behind him.

Charles Haake:

This approach may not be for everyone. For agencies that are working with heavily personal and small-commercial accounts, this may not be the best approach for them because of the resources required, and it may not be what their particular clientele is interested in.

But you have to take a step back and say, what do we want to be? Do we want to do this or don't we? And then things start to fall into place. If this is an approach an agency wants to take, and everyone realizes the resources required, it may well be worth it in the long term.

Alex Soto:

Tim is absolutely correct–you do it in an incremental fashion. You can't forget that a number of the risk management tools can fit any level of account. If you are smart about it, you can afford to deliver value-added services to keep your relationship with clients.

What we aim for, what I tell my people, is that I want the client on his deathbed to say as his last words, 'Call Insource.' And I want their children and their children's children as our clients–if it's a good relationship.

Sam Friedman:

HOW DO YOU GET NEW BLOOD INTO YOUR AGENCY?

How hard is it to recruit young people into the insurance business? How do you go about it, and how do you retain them?

Tim Templeton:

We always believed you had to have that next generation coming into the business, and that was a tradition in our company. This has snowballed for us.

We find that if you have half-a-dozen 30- or 35-year-olds who are successful, they attract other 28- or 29- or 35-year-olds who want to be part of that. So it's been nice to see the younger producers attracting their peers. They have success in our business and they call friends across the country.

Sam Friedman:

Are you recruiting people with insurance backgrounds or without?

Tim Templeton:

Both. We've had a lot of success attracting folks who have a sales acumen and bringing them into our industry. We have a strong marketing department and a mentoring program.

So we brought folks in from IBM–they have great field sales. We brought in folks from banking, where they're relationship managers. They had business relationships in the community, and they've got those relationship skills, and then we teach them the insurance piece.

The big thing is they energize the whole company. We get excited seeing their success, and then it gets everybody's competitive drive fired up.

William Rothwell:

We have personally found in the past five years that our success has been recruiting people from outside at any level of the organization, whether it's top managers, assistants or producers. We're finding very good success with 30-somethings who have had some disappointments in their chosen vocation.

Some of our best young sales people have come from areas where they're selling intangibles–services, mortgages–but they do not have a renewal source of income like we do. They see that, and it's like they've found the pot of gold.

Some of the best recruits we've hired have been teachers–especially for the account manager's side, which is your support side. They're detail-oriented, they're bright, they learn very quickly, and they thrive on spreading their knowledge within the organization. We've hit two or three home runs hiring teachers.

Paul Hering:

In the 22 years I've been at Barney & Barney, the thing I'm most proud of is starting a college recruiting program 10 years ago–which is pretty unusual for our business, and especially on the broker's side. We're at a point now where organizationally we're probably hiring anywhere from five-to-eight people a year right out of school.

And we've got people that I hired 10 years ago who are sitting around the ownership table today with some of our most talented producers.

Tim talked about how it absolutely changes the energy level in an organization, and it's true. Getting a bunch of young professional folks in your shop is unbelievable in terms of just the energy level, motivation, enthusiasm.

There's a little risk involved, but we've actually had tremendous success. Very few people have not made it. Most are still in the organization–they've grown up in our culture.

We've put together a training program, depending on the position. We started out doing this for producers only, and now we do it with support staff. But we lean on our carriers to help us out with that.

A lot of it is on-the-job training. We establish mentoring programs for each new person who comes into the organization, where you have a primary mentor and a secondary mentor, and it's their responsibility to look out for you and take you out and help you learn the business.

A huge part of it is the professional education piece. The minute somebody walks in the door, we get them started toward a designation of some kind–whether it's their CIC or CPCU or AAI or other such program.

But one of the keys is that you've got to keep them busy. You don't want people coming in and sitting there and kind of wondering what they do next. But it's not hard, and I think it's one of the best investments we've made.

Sam Friedman:

What are your expectations for new recruits?

Paul Hering:

We want a producer trainee that we've brought in raw, out of school, to have validated the investment we've made in them after a two-year period. We calculate that to be probably about $100,000 between what we're paying them in salary and benefits, training expenses, and travel and everything else.

After two years we want them to generate $100,000 of new business income for the agency. We might have had one producer fail to do that–and most, frankly, are pulling away and they're past that margin at the 12-to-18-month mark.

It's amazing how much talent there is out there. These young kids are getting out of school with great degrees, a lot of energy, and they're bright. You don't have to pay them a lot of money to start out–the job market being what it is. They just want a place to be.

If you have a professional organization, they can walk in the door and very quickly learn that, hey, I can make a career here.

This worked so well on the sales side that we're bringing in support people as well and moving them up through the ranks. We'll actually start people in clerical-type positions and move them up into CSR, or what we call our agency account administrator positions and account management roles.

One of my motivations is that I was always frustrated about our industry having a poor public image. So there was a little bit of altruistic motivation here that I wanted to get out and tell these young people what a great industry this is. It's the backbone of capitalism.

There are thousands of great jobs in the insurance industry. We contributed I think in some small way to overcoming that misperception a little bit.

I want to thank all of our panelists for speaking so frankly and insightfully about the state of the independent agency system, and offering such sound advice about how to develop a risk management organization.

National Underwriter encourages agents who feel they have a unique approach and philosophy to share their story by entering our award program in 2007. Who knows? You might be part of our “State Of The Agent” Roundtable next year!

Details will be available in our magazine and on our Web site in early February.