This question has arisen in almost every business that employs salespeople including the agency industry. The business assumes that customers that purchase goods and/or services from the Company belong to the Company and that the company, not any specific individual employee or salesperson, is responsible for the service and administration of the customer’s post-sales needs with respect to the product or service provided. The salesperson believes that, without their contribution, the sale would not have been made and the client is connected to the agency through the producer. And, while not as ego-driven as producers, the knowledgeable and experienced customer service representative, who actually interacts with the clients much more frequently and intimately after the sale than the producer, knows that they are a key link between the client and producer and are primarily responsible for the client’s satisfaction with and continued retention by the agency.
If I buy an appliance and mention that I will need another appliance in the near future I am not surprised when the company from whom I have bought the original appliance contacts me about my other appliance needs. Of course, I am not surprised when the same salesperson who served me previously is the point of contact for the next sales call. However, I would think it extraordinary if the salesperson left the appliance store and took it upon himself to contact me personally to tell me he left and now works for another store. As a customer, I may be flattered that the salesperson kept my name and remembered that I needed another appliance. But I would more expect that action from the original store if they were paying attention to their customers.
Of course, the same rationale that applies to appliances, and any number of consumer goods and services also applies to the insurance business.
As an agency consultant we spend much time in agencies teaching the agency owners and staff how to use tickler and diary systems to cross sell existing customers the other products and services that are available through the agency that the customer needs. These cross-sell systems are personalized to the specific customer’s needs but also automated to maximize the utility of the agency to each customer (and maximize the agency’s revenue potential of the customer for products and services that they need anyway). The role of the salesperson in an automated cross sell system is to build and maintain strong client relationships on behalf of the agency.
Under these circumstances, the producer is the face of the agency to prospects and is expected to impress the prospect with his knowledge and helpfulness. His goal is to build a trust relationship between the prospect and the agency to the end result that the client has enough confidence to purchase his asset protection devices from the agency. The agency “owns” the client because 1) it has the products and represents the carriers to provide the needed insurance coverage, 2) the agency has attracted the prospects to consider the agency for its insurance needs, 3) and the agency manages the contact system to keep the producer and client in touch with each other to achieve additional sales of insurance products as the clients need them. The producer, like the customer service representatives who primarily service and administer the accounts after the sale and the claims staff who assure proper handling of any insured losses, is an important cog in the wheel of agency operations but certainly not the only or critical controller of the clients.
Finally, most carrier contracts state that from the standpoint of the carrier, the agency “owns” the client. If another agent wishes to assume the client’s account using the same carrier, they must obtain a Broker/Agent of Record document, signed by the client, naming the new agency as their choice of agent for the carrier’s insurance policy for that client. And, even with a A/BOR, a carrier is not obligated to permitting the policy to move from one agency to another. From the carrier’s standpoint the agency that initially writes the coverage with the carrier on behalf of the client is the controlling agency for renewals.
However, no “rule” is absolute. Certainly, clients that purchase insurance from an agency as a commodity (personal lines and some small commercial lines), with or without a producer involved, is strongly indicative of an agency owned relationship. The client may use a producer to generate a quote but there is certainly no relationship that would tie that producer to the client subsequent to the sale.
If an agency does NOT market its products to bring prospects to the table; if an agency relies on its producers to prospect for and bring new clients to the agency; if the producer is also the customer service representative, the claim representative and the only contact between the agency and the client the relationship may be between the client and the producer instead of between the client and the agency. Specialty lines of business for which the producer is the primary knowledge base within the agency is an example of producer-centric business that could readily leave the agency if the producer, the only knowledgeable agency employee were to leave the agency. We have seen many cases in which a personal relationship between clients and producer overrides any loyalty to the agency and the agency is best served by selling the book of business to the departing producer instead of risk losing those accounts to the same producer at a new agency after the expiration of any non-solicitation period.
Like anything else in a contentious relationship, the “ownership” of accounts can’t be broad-brushed and treated like an absolute rule. Much depends on whether the client base in contention is considered as Personal Goodwill or Enterprise Goodwill (see Enterprise Goodwill and Professional Goodwill). Enterprise or Professional Goodwill is much more likely to be considered “owned” by and agency than by an individual.
Finally, every producer (and most agency employees) should sign an Employment Agreement at hire that specifies whether or not the business written is considered owned by the agency. This form of signed agreement goes a long way if it is drafted as a condition of employment instead of years after the fact. The form of employment W-2 or 1099 is also an indicator that lends itself to whether the producer is an employee (W-2) of the agency or an independent contractor (1099) for the purposes of ownership of accounts.
Please call Al Diamond 856-779-2430 (al@agencyconsulting.com) for more information and consulting services regarding producer management and goals, compensation and account ownership issues.