ACG - Agency Consulting Group

The PIPELINE

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

To Service Center - Or Not To Service Center

It has been no secret that Agency Consulting Group, Inc. has not been a proponent of using carrier Service Centers to manage customer relationships in Personal and small Commercial Lines. Here is why –

When Service Centers first began a high ranking carrier executive told us their plan. Paraphrasing that conversation, he told me that five years after clients began using the Service Center, they would ‘know’ the carrier much better than they know the agent. He went on to tell me that, in the long term, the clients allegiance would be transferred to the company and the agent would participate as one of the carrier’s ‘Points of Sale’ for those clients desiring persona service to purchase insurance products. He finally concluded by admitting that agents commission schedules may remain high as clients are introduced to the Service Center but that, eventually, we should see high first year and ‘moderating’ renewal commissions as the company takes over more and more of the after-the-sale roles.

A few things happened subsequent to that conversation that changed the carriers Service Center plans – and, potentially, our opinion of Service Center operations.

First the carriers’ initial results in their Service Centers were less than stellar. They confused the customers, couldn’t get the Center roles and agents’ roles straight and gave generally poor service. The agents and companies who pioneered Service Centers bled customers – even to direct writers who had some of the same issues (but at least integrated the agents with service).

Then the carriers realized that the agents weren’t stupid – they ‘got’ the same message delivered to us. Many agents refused or resisted the Service Center concept.

Finally, some carriers tried to force agents to use Service Center – before resolving their problems – tempting them with higher commissions, leaving commission structures intact for Service Center agents and actually lowering commissions for agents choosing to service their own clients and coercing agents by negatively affecting contingency agreements if the Service Center were not used.

Then something miraculous happened – SOME OF THE INSURANCE COMPANIES ‘GOT IT’! Someone had the novel idea that if the Service Center a) serviced at least as well as the agents, b) kept the agents ‘in the loop’ on any communications and changes occurring for their clients, and c) partnered with the agents by servicing clients IN THE NAME OF THE AGENT, that they could retain clients better for both the carrier and the agent without supplanting the agent as the ‘owner’ and principal contact for the clients. So here’ what some (not all) carrier Service Centers have begun.

1. Answering client calls as the agents. Answering the phone as ‘Smith Insurance Agency’ instead of as ‘ABC Insurance Company’ went a long way in making agents comfortable with Service Centers.

2. Transferring calls back to the agency when a client asked for the agent or an agency staff member confirmed the partnership between the company and the agency on behalf of the client. Giving the client the right to speak to a local individual was important to both the client and the agent.

3. Downloading information about all contacts made by an agency client to the Service Center. Agents always knew that the nuances of a customer contact were often important in identifying potential opportunities – or potential problems brewing. Loss of that control affected agent-client relationships. Downloading contact details gives the agent the ability to know when a client has called and for what reason. There is nothing more embarrassing than running into an important client who brings up an issue he has with his insurance about which you are completely unaware.

4. Service Centers started managing and measuring service standards and publishing them both to their own management AND to the agents for whom the Service Centers were performing.

The concept of Service Centers has never been bad. I still prefer agency-based (or independently owned) Service Centers because they can give clients more choices of products, features and prices. But, if any agency commits to a partnership with a carrier there are circumstances that make use of Service Centers palatable IF they fulfill the four points above and as long as the carrier agrees (by contract) that the client base belongs to the writing agent and that agent has the right to move clients (singly or en masse) should the goals of the agency and that of the carrier diverge.

The rationale and use of Service Center must not be unilateral. In order for Service Center to make sense they must save more money than they cost for BOTH agent and carrier.

For the agents, the volume allocated to the Service Center must be sufficient to a) either eliminate staff or permit substantial productivity (revenue/employee) growth to provide greater profits from those departments (short-term (1-2 year) growth of at least 25% in revenue/employee) IF commission rates remain the same. Revenue per employee growth must be even higher if immediate or eventual commission reductions are imminent.

For the carrier, customer retention (through more direct control by the company) must rise sufficiently to offset the cost of the Service Center.

Entering a Service Center without tangible rationales doesn’t make sense. Evaluate your decisions carefully and openly with your carriers. Agency Consulting Group, Inc. is happy to provide consulting help to determine if Service Center participation is justified for your agency. Call 800-779-2430 to discuss.