ACG - Agency Consulting Group

The PIPELINE

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

Triage - A Backlog Reduction Program

It has almost become humorous that the industry can easily identify Agency Consulting Group, Inc. clients by asking an agent, “How’s Business?” If the response is “Never Been Better!” you’re probably speaking to an Agency Consulting Group, Inc. client.

We teach this ‘mantra’ wherever we go because we have been faced with ‘Profits of Gloom and Doom’ in so many meetings during which agents ask each other this seemingly open-ended question. The response to the question is of often morose and sometimes downright depressing.

You have the right to be depressed if you find yourself making ever-DECREASING income and if you are out of trust and facing bankruptcy. If you are in this condition, call us – we can help you. But most agents are not in that circumstance. As a matter of fact, economic conditions in the last two years have acted to the benefit of most agents and they are finally experiencing substantial growth, both of agency and personal income.

Many agents confuse a difficult marketplace in which they must deal with customers who had become used to annual premium decreases and explain the circumstances that has (and will continue) to increase insurance costs for the next few years. Our commercial clients have been living on borrowed time with 15 years of depressed rates while claim costs have continued to increase. Without the buoyancy of a strong stock market combining with 9/11 and very poor underwriting results (notwithstanding 9/11), only the foolish agents still sold Price during the last few years. The clients should have been educated and told that as long as the companies remained ‘stupid’ about pricing in the face of their underwriting results, the clients would benefit from depressed premiums. Now that the time has come to ‘Pay the Piper’, agents (some of whom have never experienced a hard market) are finding if difficult to cope with explaining the pricing changes to upset clients. So the agents become upset and depressed to the point of leaving the business even though the difficult clients also spell strong revenues and earnings.

The other side of the hard market is less flexibility to the agent’s and client’s needs by the carriers. Some agents have had a harder time dealing with underwriters who they were used to ‘pushing’ to achieve the agent’s goals in the past. Further, the agents see some of their competitors being treated with distinct favoritism during this type of market. The reason for the difference in treatment is the difference between agents who have ‘used’ underwriters and carriers and those who have established strong relationships with them during the soft market. Relationships are as important to build with line underwriters as they are with prospects and clients. You would never consider pushing a prospect or client to accept the lines of business and rates that you determined they should have. That would be a good way of decreasing your client base. However, the same agents spend years using (and abusing) underwriters whose job it is to write high quality business for their employers. They must live under fairly rigid requirements (more so in the hard market) but they are subject to extreme pressures from agents to take risks and make rating and coverage adjustments to suit the agent’s needs. The agents who have considered the ‘give-and-take’ relationship with underwriters in the past are enjoying the fruits of their flexibility now. Underwriters do favors for people who have done favors for the underwriter in the past.

A second point of relationship that has not been pursued by agents when the time was right was developing a strong personal relationship between the agency owner and company management, both regional and Home Office. Carriers are less likely to take negative action against friends who have partnered with the company in the past. Including carriers in Strategic Planning for the agency, achieving the goals that you establish with a carrier, and being just plain friends with management goes a long way when a hard market arrives. Who will that company do business with in the future, the agent who has never shied from conflict with the carrier, or the one who has flexed to the carriers needs in the past?

Many agents have sought us out to help them find merger/acquisition candidates. What do you think that candidate seeks when he asks you in an Association meeting, “How’s Business?” He is probing to determine if you are in the same negative situation in which he perceives he is living. How likely is it that he will consider you a ‘savior’ who could help him if your response is also negative? Some of us feel that the ‘Never Been Better’ remark is either boasting or an outright lie. I disagree. If your agency is larger than it ever was and if you are taking home as much or more than you ever did, I propose that you, in fact, have never been better. If you are in the top 1% of earners in your marketing area, you, in fact, have never been better. Even if you have suffered problems in your business, but if you know how to solve them and are on the way to your desired position, I suggest that you have never been better (you have certainly been worse!).

Attitude is always the predecessor of fact. Dozens of motivational speakers have made millions of dollars preaching that philosophy. And it is correct. You can believe yourself into illness and the grave. You can believe yourself into business failure when it was not necessary. But rarely will someone fail with a genuine positive mental attitude that truly believes that the situation is good and getting better in his business and personal life.

I challenge you to read about the subject, make proactive moves to correct perceived weaknesses and adopt the positive mental attitude that permits you to say, NEVER BEEN BETTER whenever someone asks you how you and your business is doing.