As the insurance industry continues to mature and change we have seen specialty agencies arising around specific industries or specialties. 50% of the commercial insurance premiums written in the U.S. are now written through Special Programs. And, while many agencies place specific clients into special programs a greater number of specialty agencies are arising who understand the risks and how to insure them for specific coverages like Professional Liability, for industry niches with high profile or represented clients like the sports or entertainment industry, and for specific market niches like Accountants or Antique and Sports Cars.
A New Form Of Marketing Company Arises
Last year we participated in the creation of a new company, Monday Morning Markets (www.mondaymorningmarkets.com ) dedicated to over 750 specialty programs to access the prospects for all of these programs to local insurance agents through their websites and to selling more insurance for local agents through these specialty markets. We are proud that over 250 agencies have signed on to Monday Morning Markets and the numbers are expected to rise dramatically since every agency has a dedicated territory for all of the 750 specialty programs available.
Specialty Agencies Arise
However, each year we also encounter more dedicated agencies that specialize in writing one or a few specific market niche and the corollary business that is generated around that customer base. And each of these agencies has significant problems around the treatment of corollary lines of business and friends and relatives of the VIP clients represented by the agency’s special program.
For every Special Program prospect who needs specific coverages for the demands and risks of his career, there are significant amounts of other commercial, personal, specialty, and life and health insurance that are required by the same clients for themselves, for their families and for their associates and friends.
Some specialty agencies have gone to the extreme of refusing all but the specialty line for which they have built significant expertise. However, most agencies are well aware of the great income potential of the other lines of insurance. More importantly, the small, insignificant and corollary lines of business and the business of their friends and families are sometimes as important to the VIP client as their own specialized insurance. Subsequently, many of the specialized agencies staff to write all forms of commercial, personal and financial security insurance for the clients who need their specialty line.
So the specialty agency has their best insurance professionals dealing with the specialty lines of business around which they have formed their agencies. The other lines of business are placed through a standard commercial lines department, a personal lines department, and a financial services or life & health department. Unfortunately, those departments run just like their counterparts in standard insurance agencies. Each department is a ‘kingdom unto itself’ and operates on its own priorities to most efficiently operate that department. Also unfortunately, this is sometimes in conflict with the priorities of the agency with respect to the treatment of the VIP clients who are so important to the future of the agency.
For many years, agencies have struggled organizationally to serve the corollary insurance needs of their specialty clients, giving them the right grade of service to avoid losing a VIP client for the lack of service on a minor line or insurance or to the client’s mother or close personal friend.
We have seen all sorts of machinations to alert one department that a client is important to another department and then hoping that the corollary line department treats the customer as (s)he deserves. Agencies used to set up special colored file folders to alert departments of the high status of important customers. Now we link clients to each other digitally to try to impress the same importance to all corollary lines of business that might be influenced by a single VIP client.
The AGENCY PODSS© Concept
However, an organizational method has evolved that will treat a VIP’s friend’s boat policy a thousand miles from the VIP client with as much importance as deserved by the VIP, himself. It is the AGENCY PODSS©(Point of Delivery Service System) service organization for specialty agencies.
The AGENCY PODSS© Concept occurs in Customer-Centric agencies (those for whom the customer’s well-being is the primary motivator) in which all forms of insurance for the agency’s most important clients are managed by a single team with dedicated specialists for different classes of insurance business.
In a typical specialty agency an AGENCY PODSS is staffed by Account Managers in the specialty discipline, perhaps a standard CL AM, a PL AM and, if necessary a Financial Services AM. In addition to the AMs, one or two Service Assistants and, potentially, Claims Manager/NB Manager are also in the mix. The key to the success of the AGENCY PODSS© is that all of the professionals within the team are acquainted with all of the clients of the AGENCY PODSS©.
AGENCY PODSS© can only be created with enough revenue is generated by the customers served by the AGENCY PODSS© to afford the compensation of the members of the AGENCY PODSS© considering the agency’s acquisition costs and its other administrative expenses.
Identifying when AGENCY PODSS© is affordable
Every agency has a percentage of revenue that is appropriate for paying service staff. And every agency’s percentage is different based on a) acquisition costs, b) management costs, c) administrative costs, and d) non-compensation operating costs. A very general average for compensating service staff could be in the 20% range (for example’s sake).
If AGENCY PODSS© requires three Account Managers and two Service Assistants and their total payroll is $275,000, it would require $1,375,000 of AGENCY PODSS revenue to support the staff, normal acquisition, operating and admin costs ($275,000 / .2) if the agency’s compensation factor is 20%.
This example would imply an AM serving the primary specialty and other commercial lines, an AM for personal lines and an AM ‘plugging the gaps’ and handling NB and claims (the most important reason for most clients to come to an insurance agency from their perspective).
Elimination of Departments in Favor of Client-Centric AGENCY PODSSs
General agencies service and process insurance transactions based on the laws of large numbers and require specialized departments to do so. Specialty Agencies earn their living by concentrating on the VIP clients of their specialty program and write all other forms of insurance for those clients and their family and friends because of the specialty program clients. While a general agency will split personal from commercial accounts to allow efficient processing of transactions, the desire of a specialty agency is to satisfy all of the insurance needs of the specialty clients in order to accommodate and retain the primary clients.
The AGENCY PODSS© concept eliminates traditional departments in order to have all of the expertise within each of the AGENCY PODSS© to properly care for the agencies’ lead customers and all of their related business.
The AGENCY PODSS© concept would NOT work in general agencies trying to handle thousands of customers through traditional price-driven sales concepts. It is perfect for specialty agencies whose clients are handled by risk managers, business managers or the client’s accountant or attorney. All of the business of each of the agency’s key clients is handled within a single unit with all staff members fully acquainted with all customers. Multiple disciplines are managed by different professionals but there is no excuse for lack of proper care and service for even the most minor policy of significant clients of the agency.
If you would like to discuss the AGENCY PODSS© concept for your agency, please call Al Diamond at Agency Consulting Group, Inc. 856 779 2430 (firstname.lastname@example.org)