It may be time to trim your carrier relationships
Out of the thousands of U.S.-based insurance carriers, how many of those does the average independent agency really need?
Independent insurance agents are collectors. They stockpile metal cabinets, old customer paper files, fax machines, ISO forms, Post-It notes, plastic pens and fridge magnets.
They avoid replacing the shag carpeting in the conference room. And they love all those snazzy fire marks and carrier plaques on the wall.
There’s a reason for the plaques: Once agents get a carrier appointment, they don’t like to lose it. Unless the company merges, leaves the state or behaves completely insanely, it’s marriage for life, baby.
Of course, most carriers try hard to develop and maintain good relationships. It’s not always easy. Some agencies may not be a match. But I’ve watched carriers make boneheaded moves over the years, like entering product lines and states only to — whoops — discover they can’t make money and need to bail out.
They rush out to appoint 7,500 agencies when they really can’t support more than 2,500. Or a new CEO sees the light: The company really does stink at personal lines. “We’re sorry, Smith Agency, but unless you can roll over a few hundred new commercial accounts this quarter, we’re gone!”
Related: 5 tips to maintaining great carrier relationships
Too many choices
According to the 2016 Agency Universe Study published by the Independent Insurance Agents & Brokers of America, agencies represent an average of eight carriers for standard personal lines, two for nonstandard auto, two for specialty personal, five for standard commercial, two for excess and surplus lines, three for life and health insurance, and two for bond and surety. These are averages, and the “average” agency is small, with 12 employees, so there are larger firms with dozens of relationships.
But here’s the real question: Out of the thousands of U.S.-based carriers writing average personal and small commercial lines, how many of those does the average agency really need to demonstrate options in choice, coverage and terms to the vast majority of personal and small-commercial lines customers? Four or five trusted relationships, max?
The “generalist” carriers seem to be the most inconsistent — the number-one frustration point for agencies. Niche players seem to do well. The same goes for agencies — the ones that specialize are more profitable and grow faster.
Niches mean more profit
Where can you create more niches, even with standard personal lines? Your employees will be happier and more confident, because they can write more business more accurately and in less time. This also may explain why three out of four agencies rely on market access providers like managing general agents and wholesale brokers, which are niche program players. (And a fast-growing segment are joining clusters and aggregators, because they often can’t leverage the carrier relationships financially otherwise.)
Smart agencies watch their numbers carefully when it comes to carrier relationships. They don’t take the partnerships for granted, and they’re not complacent about them. They’re proactive about sharing information (see sidebar). They’re involved in their carrier-agency councils for strategy, technology and service. They pilot new technology with carriers. (Speaking of which, what are your carriers doing there to innovate? If they have the same old claims-handling system from the 1980s, because Steve in IT won’t fix it, then it’s time to move on.)
Turning the tables
Those familiar visits from carrier field representatives serve a purpose, sure. But maybe your agency would benefit from another kind of visit: one where you rent a conference room and invite all the reps to your meeting. At this presentation, you can outline:
- Where you are going as a firm;
- How you will maintain relevance in the future;
- What your brand and culture are all about;
- What you’re doing to improve the customer experience;
- Niches you intend to expand or explore;
- New technology you’re implementing; and
- Your growth plans and the sort of carrier relationships you’ll need to support that growth.
In this environment and presentation, you maintain control over the relationships.
Related: When is it time to leave a carrier relationship?
Keeping score
Want to make decisions about company appointments that are likely to be embraced by your entire team? Ask the staff to rate each carrier via a confidential online survey or a paper ballot. Anyone with knowledge of the company’s performance week-to-week should be eligible to vote.
The ratings should be on a scale 0 (absolutely sucks) to 10 (rock solid), based on each of these factors found as important to agents in the 2018 Channel Harvest Research study:
- Customer service
- Underwriting responsiveness
- Financial strength
- Underwriting appetite
- Competitive pricing
- Claims service quality
- Financial strength
- Technology “ease of doing business”
- Underwriting flexibility
- Training and education
- Overall “feeling” that it’s a productive, two-way partnership
- Agency compensation (CSRs may not care as much)
- The “PITA” factor (CSRs will love this one)
When you have the scores, have a meeting and announce the, ahem, winners and losers.
If you decide to leave a carrier, can your other markets pick up that business for you? If so, can you as the principal make the tough decision?
Sometimes the decision to leave a carrier is also a decision to leave a product line entirely. That way, you can get the staff aligned to pursue lines of business that are more profitable, growing and more enjoyable for the staff to write.
Take an honest, critical look at your carrier relationships. What’s working? What is not working? Life is short. Prune the rose bush: The entire plant will perform better.
Peter van Aartrijk (peter@Aartrijk.com) has worked on marketing challenges for independent agents, brokers and carriers for nearly 40 years. He is co-author of a new book, “The Powers: 10 Factors for Building an Exponentially More Powerful Brand,” available on Amazon.
The opinions expressed here are the author’s own.
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