A significant change has been the additional work and service that insurers demand from agents, such as more underwriting information—although the differences in carrier systems create data uploading inefficiencies for agents. Insurers also expect agents to generate policies for clients, provide loss-control services and shoulder additional claims-handling responsibilities.

“The days of just handing a policy to people are over,” said Ken A. Crerar, president of the Washington, D.C.-based Council of Insurance Agents and Brokers, which represents producers ranging in size from $10 million of annual revenue to the world's largest brokers. “Consolidation at the smaller end of the industry is about not being able to make the investments” to deliver those services, he said.

Although some agents negotiate “an additional override” from clients for providing services such as loss control, “good producers do that on the front end to present a risk in the best light to an underwriter,” Cunningham said. “I see that as good agents being proactive.”

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But agents do not have to resign themselves to more work for the same compensation, Cunningham said. Agents can negotiate additional compensation by presenting sound data that demonstrates an agency's increased workload and effectiveness. For example, show how the agency expanded its producer team and premium volume, committed substantial additional hours to client loss-control services and reduced policyholder losses.

Conflicting Agendas

As agents cultivate premium and compensation growth, insurers' cost-cutting and profit-enhancing measures jeopardize the agents' efforts.

For example, after contending for years with soft market rates and reduced commission income, agents have seen rates firm over the past year, Wepler said. While that's good news for compensation, agents are frustrated that many insurers are focusing rate hikes on existing clients while wooing new business with big discounts.

“Carriers expect the agent to be able to pass on rate increases and that the agent should have allegiance to the carrier,” Wepler said. “It's not a fair and equitable way of dealing with an agent's book of business.”

Some insurers might not understand that their strategy has caused tension, Wepler said. In other cases, insurers' regional and field office representative are fully aware of the problem but will not address it because of their own premium growth dictates.

Meanwhile, rumblings of a move by insurers to rework agents' personal lines commission structure have raised concerns at the Big I. The idea that insurers have floated over the past 6 to 8 months involves revising the commission structure to provide incentive to write more new business and depend less on renewal commissions, said Madelyn Flannagan, vice president of agent development, research and education for the Independent Insurance Agents & Brokers of America Inc. in Alexandria, Va.

“If this happens, it would have a negative impact” on agent/insurer relations, she said. But now, there is no way to tell whether this idea will manifest or exactly how it would take shape, she said.

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New, Sustainable Business

Insurers, meanwhile, are frustrated that most agencies do not have a predictable and sustainable new-business plan—a producer reinvestment strategy of recruiting and training additional producers, Wepler said. “So growth is lumpy.”

In turn, insurers are hiking current policyholders' rates to drive up premium volume while aggressively pursuing new business, Wepler said. “So there's a disconnect between the two” grievances that producers and insurers have lodged against each other.

Insurers cannot avoid this problem by restricting agency appointments to those with producer reinvestment strategies because so few agencies have them, Wepler said. Insurers would prefer to, but they cannot afford to jettison so much of their business along with those agencies, he said. Insurers “have the foresight but not the fortitude.

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“The real issue at the end of the day is growth” for insurers, and they cannot grow if they cut loose all appointed agencies without producer reinvestment and perpetuation plans, Wepler said.

With so few agencies investing in producers, “most carriers don't have programs to help agencies develop a better business,” Wepler said.

Insurers that do have agency business-development programs generally restrict their offerings to better performers—the few willing to invest in producer recruitment and training—“so that doesn't solve the problem,” he said. Those insurers typically are regionals, which are more selective in their agency appointments, Wepler noted.

But that is not always the case. For example, CNA runs two producer schools that focus on sales and technical training: one for new producers, and the other for experienced agents. CNA plans to launch by year's end a program designed to assist agencies design perpetuation plans, said Roger M. Nulton Jr., the Chicago-based senior vice president for producer and product development.

Agency representatives say the lack of producer recruitment hinges on minimal recruitment material and a lackluster industry image, according to agent representatives.

Flannagan noted that although 10,000 people retire from the industry every day, only 2,500 college graduates with risk management degrees enter the workforce annually.

“Generally, one reason that young people are not coming into the agency business is that insurance is not sexy,” said Augusto Russell, president of the Professional Insurance Agents Connecticut and a partner at May, Bonee & Walsh in Glastonbury,Conn.

Both the Big I and the PIA are working on promoting the industry as a career path for young adults.

Compounding the problem in insurers' eyes is that most agencies do not have a perpetuation plan. As a result, insurers are not sure what will happen to key pieces of their distribution system after those agencies' senior managers have left the business.

Of the nation's approximately 38,500 agencies, only about 30 percent have perpetuation plans, Flannagan said.

To enter the Assurex network, agencies are required to have “a multi-sided perpetuation plan,” said James Hackbarth, president and chief executive officer.

“But the best perpetuation plan, without the talent, probably isn't worth the paper it's written on,” because growth in talent and premium volume feed a perpetuation plan, Hackbarth said.

The Road Ahead

How can producers and insurers ease any tensions they might have with each other?

Assurex's agents “want the carrier to come in and ask, 'What is your plan, and how can we support it?'' If the agency's and insurer's plans do not align, they might not be a good match and should consider splitting, Hackbarth said.

Part of that plan should include how the agent will modify its business to account for the upcoming changes in its benefits business, Crerar said. About 70 percent of The Council members produce both P/C and benefits business. Although P/C accounts for 60 percent to 70 percent of their total books, benefits business generates a stronger profit margin, Crerar noted.

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“All that is changing,” he said. Insurers likely will want to know about an agency's new business model in the nation's new health insurance marketplace.

“The role of brokers on the benefits side will be more of a consultant, as it always has been on the P/C side,” Crerar said.

How wonderfully that works out for producers is too soon to tell. But at least it will not be a strange position for agents to be in.