Monthly Archives: February 2013

3 Reasons for Your Insurance Agency to Do A Book Transfer

 

Have you ever done a book transfer inside your insurance agency?  If yes, then you will agree with the following:

Book Transfers are a pain in the butt and should be avoided at all cost !

…unless

Your company has become unstable.  What do I mean by unstable?  The company is unable to remain profitable and is pulling out of the market.  Warning signs for this are downgrades by the rating agencies.  Massive agency cancellations.  Tightening of claim payouts.  Dramatic increase in rates.  None of these alone are red flags, but multiple ones can be indicators that something is going on.  Like your car’s “check engine” light, it may be no big deal, but it couldn’t hurt to ask questions.

Check Engine

 You have been cancelled.  This is not the death knell it may seem.  I have seen many companies cancel good profitable agencies.  There could be something on their balance sheet that necessitates shedding premium in a market, and you just hit their metrics.  Perhaps you got unlucky with storms or shock losses.  Just because they are CATs doesn’t mean they don’t count, someone still had to spend real money to adjust the claim. Whatever the reason, you felt the axe blow, and have to do something.

 The AxeYou have too many companies.  Over the years, I have seen many agencies become company collectors, believing the more markets you possess the greater your success.  This may be true for commercial lines, but not in personal lines.  At most, 3 to 5 companies are the most you really need.  If you have more, look at where your premium stacks up and I guarantee that most of it is spread among 3 companies and never evenly distributed among 5 or more.  One of the dangers of too many companies is that you dilute your ability to make profit sharing.  If this is the case, then consolidating some of the smaller carriers can help earn more profit sharing. 

Wall of Awards

 So, have you found yourself in the scenarios above?  What did you do?  Comment below.

P.S.  Next post:  How to Survive A Book Transfer

 

Theron Mathis

Why I Hate Non-Standard Auto

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If you are new agency, new producer, or have new agents in your office, then this post is for you.

I hate non-standard auto and so should you.

Non-standard auto is a dangerous siren calling out to agents with dreams of easy sales and fast money.

Her call is a half-truth, for as soon as you hook your boat to her rock and enter her lair, the sexy veneer wears off as you see the dangers you’ve entered.

As a new agent, you are hungry and need to produce, and the quickest way to find customers is to reach out to those desperate with the greatest need.  They are the customers with bad credit, no prior insurance, chronic cancel-ers, and dreadful driving records, but they are easy.

You can hang up a shingle advertising to the minimum limit customer, and they will find you, then eagerly tell their friends, but the goldmine you’ve found is a mirage.

Within months, you can write hundreds of policies and the cash flow seems miraculous, until the cancellations ensue, and this is but one reason I hate non-standard auto.

In case you are tempted, here a list of reasons to keep you from building your agency on this shifting sand:

1.  Cash.  Rarely do these customers have checking accounts, and they will load you down with cash.  Soon you will find that 30-50% of your time is spent taking payments preventing you from new sales.  You are making change, and multiple trips to the bank.  The amount of cash you have to keep on hand begins to create a fear of theft.

2.  Endorsements.  The non-standard customer, while seeming to have little risk with low limits and fewer cars than the household account, is endorsement heavy.  They change cars and drivers more than the preferred customer.  People are moving in and out of their house, and cars are breaking so new ones need added.

3.  Billing.  These customers are always on the verge of cancellation, and you may find yourself chasing payments.  If you don’t chase payments, then you will be answering call after call explaining billing nuances and payment amounts.  You may spend minutes on the phone explaining billing, and then never see the customer again.

4.  Referrals.  Like attracts like.  Birds of a feather flock together.  This is where this type of business can become really dangerous.  If you have an established preferred agency, then attracting these customers will begin turning you agency into a non-standard shop.  They will send their friends and slowly your preferred customers will leave as these high maintenance clients eat your time causing you to neglect your best customers.

5.  Profitability.  There is a theory that because the non-standard customer carries lower limits, the potential claim payouts are lower.  This may be true on individual risks, but the frequency of claims and potential for fraud becomes the bigger reality.  Over time, agencies focusing on non-standard auto slowly become unprofitable, and create greater risks to company contracts.

6. Value.  One day you will want to sell your agency or book of business, but there will be nothing to sell.  Non-standard auto creates no equity.  The value of a book of business is based on it’s long-term revenue potential.  Another agent will never pay 1-2 times revenue on a non-standard book, because retention is so low that the revenue will not exist in a year.  At most, you could garner 50% of your revenue.  That is a lot of blood, sweat, and tears without any value to sell at the end of your career.

Take this a warning.  Protect your book.  Protect your customers.  Protect your future.

Do you agree?  Share with your new insurance friends and comment below.

 

 

How to Get More Money from Your Insurance Companies

Money in the Cookie Jar

Do you need more money in your agency?

Of course!

Even if you didn’t, would you admit?  No!

There is extra cash hiding in the pockets of your companies, but there are a couple tricks to finding and securing it for your business.

So where are these hiding places, and how can you access them?

1. Profit Sharing Contracts.  It’s been my experience working in and consulting with insurance agencies, that most don’t optimize their profit sharing.  The biggest reason that this happens is that most of us are sales people and not accountants, lawyers, or actuaries.

The other reason is lack of standardization.  You have too many companies to keep up with the nuances of contract language.

Make sure you get your reps to explain the details at least twice during the year: when you make stop loss selection (if offered), and mid-year so you have time to adjust focus if needed.

Stop-losses can lose you a lot of money, primarily due to their cost.  Every company is different and some charge against your loss ratio, while others deduct points from your payout factors.

2.  New Business Incentives.  Company goals are different.  Some need more auto, others want to build their specialty book, umbrellas may be a focus, and others are looking for demographic targets.  Ask companies where they are wanting to grow and if there are any incentives for specific business, you might be surprised and could end up with a couple extra points of commission.

 3.  Marketing Money.  Whether a company has a formal co-op program or not, they all have budgets to spend on marketing.  First find out what kind of programs your companies.  If there is a co-op program, max it out early.  Budgets can change throughout the year, and will disappear if results deteriorate throughout the year.

 If there is no co-op, ask what their agency budget is.  This will give you a starting point so you know how much you can get.  If their budget is $4000 for their entire territory, asking for a $2000 sign will get you a no.

Here’s the real secret for getting marketing money.  Present a plan: how much you want to spend, how you will measure it, and how much it will return.  If you bring them a plan with real numbers attached with a realistic ROI, then you will get money.

The reason this works because your company rep has to make a business case to his superiors to get money for you, and you have made the case for them.

Remember, if it’s not measurable it will be hard to secure money.

4. Company Loan Programs.  Many companies have loan money, and you can use this to leverage their money for your growth.

What is even better is that many of these loans can be forgiven, if you hit certain production targets.

5.  Staff Incentives & Contests.  Whether advertised or not, companies have money that can help you incent your staff to round out accounts, cross-sell other departments, or sell new lines.

These can come in the form of gift cards, online money, catalog points, etc.

The great thing about these programs is that they allow you to give extra compensation to your staff without having it come from your pocketbook.

This comes with one big warning.  If you want to pool the incentives for the agency, rather than  it going to individuals, most companies will balk at the offer.

Did you notice the secret found in each tip?

ASK, ASK, ASK.

Be shameless about asking, and get creative.

What are your tips?