ACG - Agency Consulting Group

The PIPELINE

A national monthly newsletter for agency principals dedicated to agency management topic

2001-2002 Composite Group Analysis

Those of us with enough experience to remember Hard Markets of the past know that there are several indicators of the hard market headed by higher prices and carrier attitude changes. Those carrier changes, prevalent in every hard market, is causing sever difficulties for many agencies.

Agents say that the companies have changed. They are no longer interested in market share and are not as flexible on new business and

renewals. The company’s underwriters have been given more authority and the regional managers must make hard choices about how much business should be allocated to which agents and with which agents does the company want to do business at all? Now is the time that company/agency relationships that have been built over time either pay off big – or prove that they have no value at all.

Are you making it easy for a carrier to do business with you? Do you seem to ask for exceptions on every account that you submit? Do you incessantly pressure the underwriters for quick quotes on meager or incomplete submissions? Do you take “NO” for an answer? ----- Would your company representatives answer these questions about you the same way that you have?

Everyone has to start out in life as something! I started out in business life as an underwriter. Whether the market was hard or soft, I always had agents with whom I had a great relationship. They were very

cooperative with me, making my life easier on the whole. As a result, I preferred to handle their submissions. They added to my premium growth and to my loss ratio results, so they helped me personally. They didn’t use me (and my time) to simply block the market. We weren’t just a “quote machine” for them – they wrote a high percentage of the

accounts that they submitted to us. There submissions were generally complete (also making our lives easier when our files were audited from above). When the market hardened and we had to limit our writings, each underwriter ‘leaned’ toward the agents who were most supportive of them in the easier times.

But there were also the ‘other’ agents. These agents were always in conflict with underwriters. They put pressure on us. They

expected extraordinary service on every submission and most

submissions were not complete. Every submission was an

exception and they always had ‘reasons’ why we should overlook our underwriting guidelines because of special circumstances. They did not seem to understand (or care) that we had to respond to underwriting management and auditors who had control over our professional futures. Their ‘hit rate’ on submissions to us were terrible, making us look bad to our underwriting management

during soft markets when we were under the gun to write a high volume of new business.

So have you made your underwriters a part of your staff and your marketers a part of theirs – or is every submission a challenge with a winner and a loser? Believe me the attitudes of agents to

underwriters in good times reflects on their attitude toward agents in the hard times. No, they cannot make exceptions to rules laid out by their management or home office, regardless of who the agent is. But the underwriters can and do lean toward agents with whom they have established a strong working relationship. So it is always worthwhile to cultivate relationships by working WITH rather than in opposition to underwriters, including accepting underwriting decisions when an account does not fit their appetite.

But there is another side to the story ...

Are the carriers making it easy to do business with them? Some companies systematically ‘turn off’ the spigot to new business and make the renewal process more difficult on purpose as a way of lowering their quotes and new business writings during periods of lower capacity. Instead of explaining their situations to the agents, they just make it harder to do business with them. They are as problematic to professional agencies as those “other” agents were to professional underwriters.

If you find strong underwriting relationships deteriorating during hard markets to the point that you are treated with the same broad brush as the quoters and market-blockers you must redefine your long-term relationship with those carriers.

One of our greatest problems we have as agents is the establishment and relationship with stable insurance companies. They seem to turn on a dime and change attitudes on a quarterly basis. We no longer make associations that last for decades. Underwriters get promoted, leave for other companies and are transferred. So we deal with whomever we must and if we are lucky, we get a good underwriter for a few years. We do not build the relationships with managers high enough on the totem poles to be our friends for long periods. As a result, we have become so pragmatic that we will do business with carriers who have hurt us in the past in order to write that next piece of business.

If one of your employees treated you as shabbily as some of our carriers treat our agencies, we would fire that employee post haste. But we don’t “fire” our carriers for fear that we won’t have enough to satisfy our market needs – or for fear that our competitors will use those very carriers against us some day. Whether or not those fears are warranted or justified, we have found that the most successful agencies carefully select their carrier/partners, cultivate a relationship with them at more than one level (marketer to underwriter, manager to underwriting manager, owner to regional manager) and treat them with a respect and consideration that is reserved for only our best clients. In return, those companies are expected to treat the agency with similar levels of respect and consideration – in good times and in bad times. Relationships do not change because the market hardens. But if it must, company management is considerate enough to explain the situation to the agency owner and promises to provide relief as quickly as possible. Those companies and agencies select each other to do business with even if most other agencies must be limited or cut off from submission activity.

Evaluate your relationship with each carrier that you represent. If it is not representative of the partner relationship that you must have to earn maximum credibility and consideration, begin cultivating those relationships now. It is never too late to start fresh.