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Thrill Seekers

With Expectations for Aggressive Growth, Agencies and Carriers Look to Technology

By Dave Willis

Ask a dozen agents about the state of agency-carrier affairs, and you’ll likely get a dozen answers. Maybe more. Differences may surface based on geography. Agency size may affect answers. Product focus and client mix may even come into play. But all agree the landscape is changing.

In the midst of this environment, many agencies are taking a closer look at their businesses, how they serve their customers, and what drives their carrier selection – now and into the future. By understanding these issues, carriers can work to boost their value and strengthen their relationships with agents that do – or could – represent them.

The environment

Many changes agents face involve markets, customer expectations, and agency operations. According to Tom Greco, CPCU, CIC, principal of Greco Insurance Agency, Papillion, Neb., among the most significant changes is an increased call from carriers for higher volume commitments and aggressive growth targets. “Just about every carrier out there, especially in Nebraska, wants a minimum of a quarter million to half a million dollars in production,” he says. “It’s not just national carriers. A lot of regional carriers want these volumes, too.”

That’s putting a lot of pressure on smaller agents to either consolidate representation or merge with other agencies, something Greco calls a lose-lose proposition to agent associations and consumers in general. “We’re taking a business out of the community and merging it with another,” he says. “I don’t think that’s the way it should be going.”

Along with higher volume commitments comes a call for more growth. “No longer can you sit on a book of business,” Greco notes. “Companies want to see growth of 10 percent or 15 percent a year.”

There are some factors helping certain agencies meet volume and growth targets. One is an aging agency management force, which has driven mergers and acquisitions. Several years of rate increases in many property/casualty lines also help. And in today’s market, increased carrier appetite for certain lines also makes volume and growth targets more attainable.

Take auto, for instance. “Insurance companies are almost falling over themselves to write auto insurance,” says Dan Reid, CLU, ChFC, principal in the Reid Insurance Agency, in Upper Sandusky, Ohio. “I remember when monoline auto was the scourge of the earth.” Many carriers would accept auto, but only when accompanied by a residential policy. “Today, some companies would rather you just write the auto and skip the home,” Reid adds.

Price firming in auto, coupled with negative developments in residential, fed this dynamic. The attractiveness of the auto business has not been lost on Internet- and 800-number-based carriers. “Turn on the TV, and companies are clamoring to write auto,” Reid notes.

Technology’s role

Fortunately for hometown agents, technology changes have helped to make them more competitive. “Technology plays such an important role,” says Tom Helmstetter, CPCU, PE, president of Lighthouse Insurance Group, a 140-person agency headquartered in Grand Rapids, Mich. “It’s hard to do business with a carrier that isn’t fully automated, especially on the personal lines side.” Specifically, he says, real-time interface, carrier websites and comparative raters help his agency run more smoothly.

Greco agrees. And he actually did something based on it. “Over the last three or four years, we’ve streamlined our carriers,” he says, noting a tremendous differentiation between companies that embrace technology and those that don’t. “We’ve moved business toward companies that are the most highly automated.” Ultimately, he believes, workflows could be improved even more by allowing agency-carrier interface to start and end in the agency-management system used by his half-dozen or so employees.

Reid, who leads a two-person shop that operates without an agency-management system, also values carrier technology. Access to company systems through an agency Web portal – in his case, one offered by Columbus-based Grange Insurance – helps to make selling and servicing business much easier. “You can do everything through the portal,” he says. He uploads applications for virtually every line of business the company offers, processes payments, makes inquiries, and even accesses forms and manuals.

Technology also helps agents respond to customer demands for faster response and better information. “Expectations are so high now,” Helmstetter says. “The burden to respond falls mostly on the agency.” He notes that customers want clear and accurate information, and they want it quickly.

“When a customer calls with a question, I can go online and get the billing inquiry or claims inquiry,” Reid says. “I can print information off – a PDF off the exact bill they saw. Or I can simply check the status of it.”

Technology also helps with growth. “What drives our growth is our ability to do things more effectively,” Greco says. “We can’t grow if we have to do everything manually every time. There’s no way we can meet a carrier’s desired premium targets without technology.”

Core strengths

It takes more than just good technology to build and sustain healthy agency-carrier partnerships. Well-defined markets and risk appetite are part of the mix, too.

According to Helmstetter, some companies have this fairly well nailed. “Grange, for instance, is easy to do business with because they have a good system set up,” he says. And it’s not just technology. It involves underwriting and processes. The company knows their guidelines for risk selection, he says, and sticks to them.

Sheboygan, Wis.-based Acuity is another firm that has it figured out. “They’ve got an appetite that’s well-defined, but it’s outside of the pack so to speak,” Helmstetter says. “And they’re very automated. They’ve been able to blend that personal touch and focus with a high degree of efficiency.”

For Reid, clear focus and local presence fill some important gaps. “Ohio Mutual is a very strong farm carrier and very close by,” he says. “They’re good people, they are among the top three or four farm companies in the state.” Reid looks to the carrier, which is based in Bucyrus, just 20 minutes from his office, for expertise and experience with a range of farm-related risks, especially farm auto. “They understand the market really well,” he adds.

Of course, product and technology mean little without responsive claim service – something Reid has experienced first hand. “In a small town, you live or die by your claim service,” he says. “We had a horrible storm go through here last June – one of the worst we’ve ever had. We were headed into a weekend, so I called the vice president of claims for Grange.”

Adjusters showed up and camped out all weekend. And by Monday, half the claims had been settled. That’s the kind of responsiveness that cements agency-carrier relationships. Reid notes that one of the settled claims was for a body shop, where the owner had her personal insurance with another carrier – a carrier that called her on Monday to tell her it would be two weeks before an adjuster would arrive for her non-business losses.

Some aspects of agency-carrier relationships leave room for improvement. For instance, Greco cites a decline in carrier training for new agents. “Companies are putting tremendous pressure on agencies for growth, but we’re not getting training to help drive it,” he notes. “When I first came into the business, a lot of carriers offered training for new agents. That’s our expense now, but we don’t have a lot of money to devote to that.”

That said, some carriers are stepping up to the plate in other areas. Marketing and retention are key focus areas. “Companies are giving us a lot more marketing ideas,” Greco explains. “Reps are coming in and giving us leads for commercial and personal lines. And they’re offering newsletters – either through email or direct mail – that we can use for customers and prospects. That’s something we’ve never had before.

“Companies are giving us more incentives for retention, too,” Greco adds. Two of his carriers even call his customers if there’s a late payment. “They’re trying to see if they can bump up that retention four or five points,” he notes. “If you can bump it up from an 85 percent retention rate to 90 percent, that’s huge.” The carriers are using regular phone calls, and are even testing email and cell phone text messaging.

Management matters

Agents recognize that carriers that partner best with agents and make it easier to do business often have one thing in common: management commitment. “Over the years, I’ve seen how leadership can make a difference,” says Helmstetter. “I look at the leaders of the different carriers, and each one – as amazing as it sounds – reflects the leader’s personality and focus.” Helmstetter is even willing to name names – ones that are easily recognized in the property/casualty and NAMIC communities.

Such leaders, he says, are driven to make sure they get the best technology and the best people. “It’s not just the underwriting or claims or processing or any one area,” Helmstetter notes. “It’s the whole culture flow.”

Helmstetter sees companies with strong leaders making real gains in today’s marketplace. “Carriers need to be invested in the future in many ways – including technology,” he says. But it’s more than that. They need constancy of purpose – a trait many companies miss. “Some companies change their officers around so often the company never really gets the flavor of the leader,” he warns.

At the other end of the spectrum, some carriers never experience change. They’re comfortable with how things have always been. “The status quo becomes too easy to maintain,” Helmstetter notes. He says mutuals must be run by an active board that’s willing to bring in the right people. “Companies that don’t have a succession plan and are not actively looking to develop their leadership concern me,” he says. He sees some companies in that position right now.

Strong leaders can impact not only an organization, but its partners, as well. However, this requires some effort. That’s where a regional focus can come into play, whether or not a carrier is officially ‘regional.’

“We’re seeing somewhat stronger relationships between agencies and their regional carriers,” says Greco, who is state national director for the Independent Insurance Agents & Brokers of America. A big part of that is borne out of proximity. “With regional carriers, we’re able to have a personal relationship with people at the top,” he notes.

It’s not uncommon for an agency owner to have a one-to-one relationship with the president of a smaller, more local company. “If you have a regional golf outing or meeting or state convention, a lot of times the president of that company will be there,” he says. “It’s like he’s one of us.”

And that – the feeling that a carrier executive is “one of us” – is something agents hope will never change. end

Dave Willis is a freelance writer and regular contributor to IN magazine.

Posted: Thursday, May 31, 2007 12:00:00 AM. Modified: Thursday, June 28, 2007 3:48:11 PM.

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