The agencies:

Tom and Bev Goff, principals, Northern Insurance Agency, Fort Wayne, Ind.

Tom and Bev Goff started their business in 2007 as a captive agency of a large national insurer. Tom, an entrepreneur with an MBA from the Kellogg School of Management, and Bev, with a background in human resources, decided to sever ties with the captive insurer and go independent by shooting for an agency appointment with Erie Insurance.

“We knew what we were looking for; we want to do a good job for our customers and we're very service oriented,” Tom said. “When we first sat down with the district sales manager for Erie, we thought it was a perfect match. We started out with the right company and shared values, and the result has been very positive for us.”

They noticed the difference right away. As direct writers, their closing rate was 25 percent. After starting with Erie, they were “amazed” when that increased to more than 80 percent. “Winning creates a winning mentality and creates synergy,” Bev said. “It completely changes the dynamic of the agency.”

The agency's annual premium volume is now about $350,000, primarily personal lines, about 85 percent of which is with Erie. Tom and Bev are supported by a part-time CSR and a summer intern. The agency has 3 other direct appointments and several broker relationships for surplus lines and alternative coverages, but Erie is their lead insurer.

Part of the agency's growth strategy is to hire a full-time CSR and increase its commercial lines sales, which in turn will pay the CSR's salary. With his background in the corporate world, Tom is prepared to write bigger commercial customers, and is counting on Erie to support him in his goal. “We would like to grow to a $2.5 million agency in 5 years. A year from now we'll have more producers, and expect within 2 years to open another office in the Fort Wayne area,” Tom said. “There's no such thing as standing still; you're either growing your business or going backward because of competition.”

Erie can help by providing a loan for the Goffs to hire producers, do promotion and expand sales.

For the Goffs, the best thing about doing business with Erie is the personal interface they have–with the district sales manager, underwriters, marketing support people, even access to high-level people like the branch manager and regional vice president, Tom said. “They treat us like friends and valued partners,” he said. “I feel like I'm part of the team and we work together to be successful. You can't buy that.”

John McCrudden, vice president, Hardenbergh Insurance Group, Voorhees, N.J.

This generalist property-casualty agency has been an appointed agent of Peerless Insurance Co. since 1996 and over the years, has seen that relationship change for the better, McCrudden said.

Hardenbergh sells all of Peerless's property-casualty products, from small BOP policies to packages, auto, umbrella and workers' compensation, and “they are all successful,” he said. Of the agency's standard property-casualty business, approximately 15 percent is with Peerless.

For McCrudden, the best thing about doing business with Peerless is that they have a “generalist” appetite for business. “They have an attitude of trying to find ways to write business,” he said. “They make an effort to develop strong relationships with their agents and as a result have a trusting mindset in working on accounts. And they are just nice people.”

The agency also is happy with its relationship with Peerless' field reps and underwriters, he said. “It has helped that we have had the same people working with us for many years. It is our strongest company relationship. We consider them friends.”

If there is any area of the relationship that needs improvement, it lies in Peerless's BOP policy, which could stand an update in price and coverage, McCrudden said. He also said that Peerless could benefit from co-branding with parent Liberty Mutual.

Marty Beam, CPCU, president, WA Moore & Co., Kinston, N.C.
With locations in Kinston and Greenville, N.C., WA Moore's customers range from an individual with one auto to large corporations with more than 6,000 employees.

The agency was appointed as a Montgomery Insurance agent 5 years ago. Since then, WA Moore's relationship with Montgomery has changed dramatically due to the insurer's alliance with Liberty Mutual. “They are now a critical partner rather than just another market dealing with our agency,” Beam said. “The acquisition of Ohio Casualty added substantial volume to a book we were building from scratch. With the Safeco acquisition and Liberty's decision to use that carrier as the personal lines platform, we now represent Montgomery for commercial lines only.”

Roughly 20 percent of Moore's commercial standard book is with Montgomery, and 50 percent of its personal lines book is with Montgomery (now Safeco).

Moore has had success selling Montgomery's school and country club programs and its golf course product, as well as some lower-hazard
construction accounts, distribution, and retailers, wholesalers and restaurants.

“The strength of the Liberty organization means this company is more likely to survive than some of their other regional and super regional competitors,” Beam said. “The local decision making capability and the quality of the leadership team, combined with stability of underwriting experience, mean for us that Montgomery is viewed as a long-term partner.”

Beam sees a possible challenge due to Liberty digesting its recent acquisitions, although “in our view they are doing an excellent job with this.

“This carrier's underwriters, field reps, service and staff people are excellent,” Beam said. “The president and the regional VPs are exceptional and in my estimation could successfully manage any commercial enterprise. They are as good as I have seen in the 33 years I have been in this industry.”

Terry Kelso, president, Kelso Consulting, Columbus, Ohio

As the former president of the PIA of Ohio and a former independent agent, Kelso has a unique perspective on the subject of agency/carrier relationships. He even started a agency/carrier relationships committee for PIA of Ohio, which visits companies to discuss the top issues on members' minds.

Top issues include aligning the wants and needs of carriers with those of agents. One top priority is for companies to improve ease of doing business, a subject Kelso knows from first-hand experience.

When it comes to differentiating factors, ease of doing business is most important, followed by compensation, which is typically between 15 and 20 percent of sales for most top carriers, Kelso said. Finally, there's the philosophy of doing business that must match between agent and insurer.

His former business, Associated Insurance Agencies, ran into trouble when its national companies decided to non-renew some customers because the carriers didn't want any contractors or churches professional liability insurance business. “Companies that do that make me nervous,” Kelso said. “Their response to a problem is to just withdrawal from a line.”

The agency had an especially good relationship with one big national insurer that made policy rating and issuing seamless and paid a 20 percent commission. “It was great, but then it shut down its local office, fired the regional VP, and let go of most of its field reps,” Kelso said. “And no one called to let us know about the changes.”

Kelso finds that regional insurers are more understanding and responsive and more in tune with the marketplace in general. “Nationals think they must burn their ways into a market through low price or lack of underwriting discipline, but then their reactions are '180' when something happens,” he said.

Automation is an important element in the “ease of doing business” category, and some insurers understand it better than others. Companies like Cincinnati traditionally were lax in the area, but are increasingly upgrading their efficiencies, Kelso said, while Grange Mutual and Westfield in Ohio are noted for a good grasp of technology.

Insurer field reps are the face of the company to agents, so a good relationship there is frequently a key to success, Kelso said. Relationships with underwriters, once a key driver in an agency/company relationship, have unfortunately been minimized in recent years due to more automation of the underwriting process on the company end.

In the final analysis, communication is essential to the health of the relationship. “The more you can communicate with your companies, the better off we all are; don't let something fester,” he said.

The insurers:

Erie Insurance

“This is a relationship business; we need to do all we can to strengthen and maintain the relationship we have with our agents and put Erie first in their minds. We realize it's incumbent on us to help them succeed,” said George Lucore, executive vice president of field operations, Erie Insurance Group. “When our agents succeed, Erie succeeds.”

Since the company's inception in 1925, Erie has marketed its products exclusively through independent agencies, which now number some 2,000 agencies in 11 states and Washington, D.C. Recognizing that each state and agency are unique for markets and agency saturation, Erie looks to grow market share in all jurisdictions, while concentrating on newer states such as Tennessee, Illinois and Wisconsin.

Erie's basic distribution strategy remains unchanged in spite of the economy, although the insurer recognizes that marketing assistance to agents is especially important in a down economy or soft market. In response, Erie has introduced additional marketing tools and programs to help agents sell and retain customers, including enhanced co-op advertising and customer contact programs.

In addition to an agents advisory council, Erie has formed agent task forces for personal lines, commercial lines, life and annuities, technology and marketing. “The input we receive from our agents through their task force representatives allows us to stay in tune with what's important to them, and it helps us focus our development efforts in areas that allow for the mutual success of our agents and Erie,” Lucore said.

For new agency appointments, Erie looks for “productive men and women with growing agencies and good loss ratios with existing carriers; people who are committed to delivering good advisory services to their customers and who are professional and dedicated.” There is no bias toward established agencies; more than half of Erie's appointments are start-up operations.

To help these new agencies succeed, Erie accelerates its commissions with a financing package and one-on-one training with district sales managers. Erie also supports an active insurance education department that delivers programs both in person and online, a new agents orientation at the home office, and Erie Agents College, a 3-day program where participants can learn about Erie's major lines of business, marketing and agency management.

Zurich Financial Services

Everybody wants to be No. 1 to their significant others. “Zurich wants to be the market leader with selected broker locations,” said Robert Rheel, head of distribution and regional management for Zurich in North America. “We don't look at minimum volume requirements; rather, we want to be the market leader with our brokers. Because of our size and the number of offerings we have, there are lots of products we can underwrite for them.”

Zurich unveils a new or refreshed product or market segment every 4 to 6 weeks. Recently the insurer introduced Zurich Integrated Products, providing solutions for customers with revenues of between $5 and $25 million, as well as new D&O and environmental forms.

The insurer stresses a business development approach that speaks to understanding each broker's customer set and delivering specific value propositions that help both the broker and Zurich grow, he said.

The second component to the agent/insurer arrangement is to create an effective trading relationship. Zurich uses metrics to measure each broker location to determine how well the company is doing on quote-to-submission or bound-to-quote ratios. If the numbers are not aligned to benchmarks, they must figure out why. “If a broker is sending us a thousand submissions and we're not writing anything, it's not efficient for either of us,” Rheel said.

Zurich also aims at improving service levels for its agents. “One theme we're hearing is that the error ratio on policy issue for the industry is very high,” he said. “It takes several rounds before we have a policy we feel comfortable delivering to our customers, so we're investing in shooting for an error-free ratio on policy issuance.”

Zurich recognizes that claims handling is an important element of agent and customer satisfaction. Under its HelpPoint brand strategy, the insurer routinely calls brokers well ahead of anticipated catastrophes, asking if they need assistance and letting them know their availability in the area. “We believe we have the best close ratio for cat claims than anybody else in the industry, which is great for customers and creates efficiencies for brokers as well,” Rheel said.

Over the next 18 to 24 months, Zurich plans to scale back the number of broker locations. “We're focused on understanding what locations and brokers we want to do business with and position ourselves to be a market leader within those areas,” Rheel said. “It's not about the numbers but creating a strong and effective relationship,” he said. “Our strategy is not to have an appointment in every U.S. city, but of being selective in productive broker relationships with a mutual understanding in the way deliver to our customers.”

Liberty Mutual

“Agents are struggling with their top lines and revenues falling off due to the economy,” said Scott Goodby, executive vice president, Liberty Mutual Agency Markets, and president, regional companies group. “We're trying to help them write business by providing them with operational support, whether it's hiring new producers, helping them enhance their technology through a loan program, or assisting with setting up a Web site. From a soup to nuts standpoint, we support our agents, especially in times like these.”

With its recent acquisitions of Safeco and Ohio Casualty, Liberty Mutual Agency Markets now has more than 8,000 commercial lines agencies. Its 8 regional companies will likely be more selective in making new appointments in the future.

“Our distribution strategy is a depth play rather than breadth; when we make appointments, we want to be in the top 3 of the agency's preferred carriers. In turn, we try to offer franchise value to the agency, forge deep relationships and differentiate ourselves with greater connectivity and local decision making–our underwriting and claims processes focus on serving the agent,” Goodby said.

Under its current structure, Liberty owns 8 regional insurers that write commercial lines and Safeco, which offers personal lines. Although there is a shared distribution philosophy, each company is responsible for its own distribution plans, product pricing, commission levels and bonus-sharing agreements. Liberty changed its profit sharing, now based on combined performance that allows agents to maximize their bonuses by placing profitable business in both commercial and personal lines.

Agency Markets is transitioning the legacy sales and processing systems of its companies to a single policy administrative platform, targeted for rollout by year-end. The company hopes this provides flexibility, workflow, speed to market and adaptability in the event of future acquisitions.

Observing growth or contraction by geographic region, “Colorado Casualty is an up-and-coming company…our Arizona, Nevada and New Mexico book of business will grow dramatically in the coming years,” Goodby said. American First Insurance in Texas is making a marketing push in Arkansas and Missouri, and Indiana Insurance is doing well in Iowa and the Dakotas. Liberty Agency Underwriters, which provides excess casualty coverage, is expanding distribution to all Liberty agents.

The regional companies maintain local claims operations that service area insureds and agents. The companies have rolled out best practices to all of these claims operations to ensure measurable performance levels. They also have expanded their service center capabilities, adding a new center in Spokane, Washington to better serve agents and customers in all time zones.

Wants and needs
It's a no-brainer: insurers want market access, and agents want commissions. To achieve these goals, agents need good products and services to sell and decent compensation for doing so. Beyond that, what are the driving factors for each party?

What insurers want:

o Top ranking. “If we deliver on our promise of products, service, relationship and competitiveness, we expect the right to earn our way to be the first company within the agency,” said George Lucore, executive vice president of field operations,
Erie Insurance.

o Good loss ratios with other carriers. For new agency appointments, Erie looks for “productive men and women with growing agencies and good loss ratios with existing carriers,” Lucore said.

o Agency growth and perpetuation plans. “Our first question to prospective agents and brokers is what are your growth plans and how can Zurich help you to achieve them,” said Robert Rheel, head of distribution and regional management, Zurich Financial.

o Professionalism. “We look for agents who share our fundamental values and conduct their business with integrity,” said Scott Goodby, executive vice president, Liberty Mutual.

What agents want:

o Ease of use. Providing a seamless process from quote to policy is the best way for an insurer to get an agency's business. IIABA's most recent agency universe study shows that across all lines of business, making it easy for CSRs to write business is the most important and improved area in agency-carrier relationships.

o Marketing support. “Many companies' idea of marketing is a nice, slick brochure they put our name on. We're looking for a lead generation program that allows us to qualify prospects in advance, but little of this is available,” said Terry Kelso, president Kelso Consulting.

o Trust. “Agencies need to rely on carriers to be honest about the type of business they want and be consistent with their behavior so the agency can fairly represent their appetite and capabilities. Agencies must appreciate the service level and commitment of their partner carriers with respect to placing business and keep their markets limited to those carriers who demonstrate partnership, not just the best 'deal,'” said Mark Robinson, vice president, UPS Capital, President UPS Capital Insurance, Cargo, Credit, Insurance, International Trade.

o Stability. “Companies that withdraw from states or lines of business take the chicken way out. All states and coverages are a challenge from time to time. Cutting and running creates havoc for agents,” Kelso said.

Tips to a good relationship:

o Communicate. “Great partnerships learn and grow by collaborating, sharing open and honest dialogue and remaining committed to the essential and foundational aspects of our industry,” said Jill Lowder, chief operations officer, RJF Agencies Inc.

o Plan ahead. “We gave Erie a 37-page business plan as part of our appointment process, and we continue to update that plan,” said Tom Goff, principal, Northern Insurance Agency.

o Put the customer first. “The most important aspect of a successful carrier relationship is trust, which starts when the insured's risks and tolerance for risk is understood and correctly communicated between the agency and the carrier. In a strong relationship, neither the agent nor the carrier will over promise and under deliver,” said Mark A. Chestnutt, vice president, J. Smith Lanier & Co.

o Develop relationships. “We're working to improve our visibility because relationships don't happen by e-mail or phone; they happen in person,” Rheel said.

Confessions of a “marriage counselor”

Insurer field reps are key in cultivating relationships

If the agency/insurer relationship is like a marriage, then the insurance company field representative is the marriage counselor. Whether their official title is field rep, territory manager or district sales head, they're in the business of working with both sides of the equation to optimize the relationship. And although their pay comes from the insurance company, good field reps know the importance of earning the trust of the agencies in that company's distribution force.

Elizabeth Schenk, field representative for Ohio Casualty, has been in the business for 20 years, spending the last 5 with the Liberty companies. Over the years she's learned that her main priority is nurturing a good relationship between the insurer and its agents. “Any agency will tell you that the most important factors for success– theirs and yours–are relationship and ease of doing business,” she said.

Each of those agency relationships are unique, and the field rep's job varies depending on agency need. One agency may need to grow organically by hiring a new producer, so hiring and training may be important to them, while another agency may need to work with new business incentives. In other cases, the field rep may be asked to put together producer loans where they help the agency hire and pay for a new producer. And in today's tough economy, there are more cases where vulnerable agencies may need to consider merging, selling or perpetuating. Whatever the need, it's all in a day's work for the field rep.

Schenk works with about 50 Ohio Casualty “master agents” and about 150 actual office locations, primarily in central Pennsylvania, although her “beat” spans the entire eastern half of the state.

Topics of discussion at these regular agency visits vary, depending on both the individual agency's unique needs and who she is meeting with. “With agency principals, we talk about overall operations, review results, and look at critical issues such as acquisitions, hiring a producer, the agency's business plan and how they're working with us,” she said. “If we're meeting with a producer, we talk about new business flow and relationship they have with our underwriters. With CSRs, it's more of a service and relationship conversation.”

The conversation may vary, depending on whether she is working with a seasoned Ohio Casualty agency or a new appointment. “With a new appointment you're dealing with the unknown, including policyholder needs. You also have to build their trust and your own credibility over years,” Schenk said. “The key thing is the momentum you have with an existing agency. With a new agency, the TM must build excitement and enthusiasm, and this can take months or years. It's our job to make sure going in that we analyze the agency and determine whether they'll be the right fit for us.”

Agency meetings can cover different topics and depending on size, can involve a single meeting or three different meetings, she said.

Schenk usually averages about 5 to 10 agency visits a week, or more or less frequently depending on the agency's needs. Ohio Casualty is within the top 3 companies for all its agencies, and “the ultimate goal is for us to be their first choice and last look,” she said.

But although priorities may vary, Schenk finds that most agents today are concerned with the lack of new business coming in the door. “We're not seeing the growth in business because of the economy, and many of their customers are shrinking or going out of business,” she said. “On retentions, there's an incredible amount of competition, so more agencies are focusing on holding onto existing accounts rather than going after new business. But so much of retention really boils down to the relationship an agent has with its carriers, with an edge for those that are willing to work with them to retain accounts.”

These relationships don't happen overnight, so much of the success in an agency revolves around the relationship it has with the carrier's commercial lines underwriters, she said.

As part of the ease of doing business, technology provides both carriers and agencies with an edge, and Ohio Casualty is no exception. “We provide Internet access to what we call an agency portal, where we make anything and everything accessible to them.”

To improve ease of use, Ohio Casualty also assigns its agents to their own territory manager, underwriter and agency specialist, who makes sure the agency has full access to the company's offerings and training, “so they're comfortable with accessing information and are familiar with our rating system,” Schenk said. “Quite frequently, the quality of our technological offerings differentiates us from our competition for our agents.”

For example, if a CSR gets stumped when working on a quote, it's unlikely they will come back to that carrier, so ongoing training is essential to grow relationships, she said.

The agency's relationship with the company's underwriter is also important. “The TM can drive business into the carrier, but if the underwriter relationship isn't there, we'll hit a brick wall,” she said. “Before I joined Liberty, I was a territorial manager for a competitor. The attraction was the quality of Liberty underwriters, which is first and foremost in the agency relationship. Agencies always spoke favorably of them because they worked so well with the team, without any internal disconnect. At Ohio Casualty, the TM is in constant communication with the underwriter, and we work together with the agency.”

Good underwriters can take direction from the agency principal and can prequalify an account, making turnaround time quicker. “Because the agents know our interests they have the ability to apply credits and if they're uncomfortable with the quote, can submit directly to an underwriter for review and feedback,” she said. “They can go from submission to issuance on the spot.”

A good TM is much more than simply a liaison between the insurer and the agency. “Territory managers must be effective for the agency to build their trust and credibility, so we're more on a consultant level,” Schenk said. “We bring the message of the carrier to the agency, and they rely on us for just about everything, whether they're hiring a producer, generating a loan, negotiating a book roll or educating a new hire. We're pretty much the conduit to all the other arteries within the company. Our success really falls on the trust and credibility we develop with an agency.”