Abide by your company contracts

An excellent reason for reading your contracts is to ensure that your agency will not violate any provisions. Key clauses by which to abide include:

o Binding guidelines. All producers and CSRs should know their carriers' binding guidelines and limits. A cheat sheet showing binding authority is an excellent solution.

o Trust monies are fiduciary. Ensure that the agency is holding its trust monies correctly, according to the contract.

o Reporting claims. These contracts are usually crystal clear about the need to report claims. Ensure that your employees know these contractual provisions.

Do business with trustworthy carriers

It is impossible to have good relationships with untrustworthy entities. Good company relationship management means an agency must only do business whenever possible with trustworthy companies, no matter how cheap a fly-by-night carrier may be.

Examples of untrustworthy carriers include:

o Companies that will steal your clients through contractual loopholes. Some carriers are getting around the non-compete provisions, which stipulate they will not steal your clients, by taking advantage of inadequate confidentiality language in their contracts. Always pay attention to what is not in the contract in addition to what is in the contract. A good company contract severely limits the company's ability to contact insureds for any purposes other than agreed-upon purposes, such as non-renewals, policy changes, billing on direct bill, etc.

Good carrier relationship management includes prohibiting carrier contact for any other purposes. This absolutely also applies to service centers. Have you read your service center contracts regarding your carriers' ability to contact clients if you move them out of the service center?

o Carriers that are unstable. Are all of these fairly new carriers, especially the work comp specialists without ratings, going to survive? Even if they all survive, are they all adequately stable? Are they the best long-term solution for your agency and your clients? This industry's history suggests not all will survive. We have been through this cycle before. Good carrier relationship management involves doing business with stable carriers and carriers that will still be in business in five years.

Take advantage of your contracts

Good opportunities exist for most agencies to make more money by managing their contingency contracts and regular contracts, if they will read, study and act upon them. However, these are tough steps. Even if an agency owner hires someone to read and analyze the contracts, which I've been doing for many years for agency owners, I still find many agency owners will not take action out of fear of upsetting a carrier. The goal is not to upset the carrier, but to build stronger relationships, which benefit the agency and the carrier.

Limit your carrier relationships

Not enough time exists to effectively manage 25 to 100 carrier relationships. Some agencies are absolute carrier junkies. When an agency represents more than 50 carriers and brokers, they are junkies. More than 30 probably qualifies for rehab.

If an agency wants to practice good carrier relationship management, the number of carriers it represents must be manageable. Every study I have seen, including the current Best Practices Study, shows that agencies with fewer carriers have higher profit margins and often growth that is as fast or faster than average. These agencies are practicing better carrier relationship management.

Joining clusters is even worse for many agencies. The extra carriers erode profits even more for a huge proportion of agencies. If an agency cannot grow with the companies it has, how will it grow faster with even more companies, especially when all of the evidence suggests profits will decrease by doing more business with more carriers? The attraction is rarely profit, or even growth. The real attraction is escaping accountability to carriers for not building big enough books. Rarely, except with the smallest agencies, is small book size an issue if the agency practices good carrier relationship management.

For example, I know of two small agencies that started about the same time with the same volume. One never had more than four carriers and has almost tripled in size. The other has more than 10, many of which are weak, not including the plethora of brokers. This second agency has barely grown at all.

If the carriers are not good enough, find better carriers. Except along the coasts, there has never been a better time to get a carrier and roll a book for good money because the carriers are absolutely desperate. CRMM is prevalent when agencies do business with too many carriers and brokers. Gorging the agency with carriers delays accountability. When this does not work any longer, they join clusters.

All of the agencies I've worked with that have implemented strong carrier relationship management have prospered. When the market changes, which agency will be better positioned for a hard market: the agency with good carrier relationships and a few good carriers, or the agency with small books with dozens of carriers? Start practicing strong carrier relationship management now to secure your brighter future