I have a question for Al Diamond – I have read his article through the Big I Virtual University regarding personal lines service centers. We are currently evaluating service center usage for our small business accounts – do you feel that the same principles apply and knowing what you do would you recommend the use of them? We currently use them partially for two carriers in our small business department and do not use them at all for personal lines. Thanks for any ideas you may have.
The main problem that Service Centers have not and cannot face is that the clients still tend to call their agents for service, and the agents end up being the intermediary for their clients with the SC – just another step created. This is especially true when you have several products with several insurance companies for a client. The client doesn’t know when to call you for service and when to call the company direct. If they don’t get the response they want they will either call the agent again or they go shopping. So the agents take a commission cut that is supposedly commensurate with their savings in not having to deal with small personal or commercial clients, and then end up dealing with them anyway for less commission.
Another direct result of long-term relationships between the SC and the client is that the agent loses touch with the client. After a few years during which renewals are automatic, billing is done directly from the carrier, and all contact with client questions and issues is made between the client and the carrier. As a result, the client feels that he is a customer of the CARRIER, not of the agency. While this is certainly something to which the carrier aspires, the agent may want or need to remarket the product or strengthen their relationship with their client for cross-selling purposes or to stress the differentiation between the agent’s role and that of the carrier, but will not have any form of regular contact remaining
Realistically, many agents don’t feel they can afford to build relationships between their smaller personal or commercial clients and themselves. The premiums and commissions only warrant flow-through work effort. Instead of increasing the efficiencies of their processing and service departments through effective use of automation from both the agency and carrier, the agents try to offload the actual customer contact to the carriers. Historically those agents have not properly used their client base as a ready source of marketing and referrals. A client comes to them with a single personal or commercial policy. Most agents don’t follow through to cross-sell other personal or commercial lines and only a very few agents actually create Client Marketing Programs (CMP’s) to get existing relationships to refer new relationships to the agent, thereby multiplying the value of every client by the value of all of their referrals.
I believe that the actual service problems related to dealing with folks a thousand miles away instead of just down the street (i.e. the SC staff doesn’t know or understand the geographic issues and specifics of your clients’ needs) have diminished. Most service calls for either Personal Lines or small Commercial Lines tend to be billing questions that are best handled by the SC since they have easier access to the carrier billing and collection systems than the agent.
However, I ask a few simple questions to agents –
WHY DO THE CLIENTS NEED YOU TO BE THEIR AGENT?
WHY NOT JUST RESPOND TO DIRECT INQUIRIES OVER THE INTERNET OR THROUGH CARRIER MARKETING AND GET INSURANCE DIRECTLY FROM THE CARRIER?
WHY SHOULDN’T THE CARRIER PAY THEIR AGENTS A STRONG FRONT-END COMMISSION FOR SELLING THE PRODUCT AND LOW (OR NO) BACK-END COMMISSIONS IF THEY (THE CARRIERS) ARE SOLELY RESPONSIBLE FOR THE AFTER-THE-SALE SERVICE OF THEIR ACCOUNTS?
The clients need an agent to help them decide the best form of insurance, to give them advice on protecting all of their assets and not just the one they are requesting at the moment, to dovetail the coverage they are requesting with other coverage they may have and to be THEIR local representative to the carriers. Otherwise dealing direct with a carrier is the right way for the clients to buy insurance. Commissions are paid for value received, either by the carrier or by the client. If the value received for an agent’s work is the acquisition of new accounts only, then commissions akin to life insurance commissions are the most appropriate. If the value received is that of an insurance advisor to the client as well as an agent for the carrier, then consistent advice and customer service by the agent to the client should supplement good risk selection criteria by the agent for their carriers to warrant consistent commissions paid by the client for the services of the agent.