For years Independent Agents have longed for the holy grail of quoting–the comparative rater. It is here! Prior to comparatives, it could take an agency hours to quote one small personal lines account because the data had to be reentered into each company’s rating software. If the account manager really did this, the hit to revenue becomes truly apparent. You pay the CSR $15/hour and it takes him 2 hours to quote one policy. He only sells 1 out 3. So for three quotes it would cost you $90, and on average you make $80 to $100 per auto policy. This is depressing. Thankfully most CSRs did not follow this path. Due to experience, many learned what companies were better on what types of risks. Also, they gravitated to whatever ever systems were easier. So instead of quoting your 7 – 10 companies per risk they might be only quoting 3 -5.
Today comparative raters have changed this. Insurance Scoring has made it very difficult to determine company niche and get a bead on what company appetites were. As a result, there could be a lot of competitive opportunity lost if all companies were not quoted. Because of internet based quoting systems, comparative raters can pull from multiple sites and aggregate the data in one place ensuring accuracy. One company rep told me that in his state, nearly 80% of all their quotes are now coming through comparative rates. This has helped tremendously agency workload.
This trend toward comparative rater use has caused agents to be less hesitant about picking up multiple markets. At one time an agency might limit himself to 3-5 carriers, now he is willing to pick up 7-10 because he can quote them all and hopefully create a competitive advantage in the marketplace. However, this is where a hit to revenue can begin to occur. If an agency does not train their staff well, the presence of the rater can further ingrain their staff that price is king, and the cheapest always wins. What can begin to happen is that profit sharing is diluted, and staff may slowly move business to lower commission carriers. Staff do not think of these concerns. Ease of doing business is their master. If the price is low it is easier to sell.
Now your 5 million dollar personal lines book that was split between three carriers is now split between 7 carriers, and you no longer qualify for profit sharing thresholds. Your revenue has dropped by a third because previously most of your business sold at 15% commission and now a majority is being sold at 10%. This is dangerous especially in this market.
Bottom Line: Comparative Raters are good, but keep your eye on where they are taking your business. They could create more revenue problems than they solve.