Erie and do companies buy the business

[JSJAG]

Ouch! I was quoting an AO/HO/Umbrella against Erie. I took the pictures, I did the cost estimator and came up with a dwelling replacement value that is $50,000 higher than Erie. I increased a few more coverages and came in $54 higher than Erie. Ok, that's not bad because the dwelling is now at a good replacement cost and the insured can see that value.

So I call. The insured tells me that she just got Erie's renewal for the HO and it dropped from $526 a year to $410, over a $100 premium drop. Her current agent said Erie is lowering their rates.

Lowering their rates or buying market share....hm? Now I know why I stay far away from personal lines. I probably spent more time and gas (taking pics) than I would make for the next two years. Yep, in 2 years ya break even. That's one hell-of-a good business model.

Now compare the above to this scene:

I am good at doing 98% of the work on our cars, from breaks to you name it. I can do it. But it is very rainy weather and my wife's Caddie needs front breaks, I can't do them in the rain. I call a car place and they said it would be $200 for front breaks.

Ok, what the??? I can replace the pads on both sides in 40 minutes and the OEM top end pads are $47. So they are getting $150 in labor for a forty-five minute job. Actually the garage has a lift and can do it quicker than me.

Yes, I know overhead but we all have overhead. If I sold a $400 HO policy, my brokered commission is $40 and I've spent more than 30 minutes on the darn thing.

She has been a client off and on, she's also a business person and understands when a company buys the business. She may move to me on a goodwill basis. The Erie has her dwelling coverage to low and therefore haven't done their job. Doing the homework and goodwill do count....don't they?

[Porter]

You can't make any money doing business the way you do. I never leave my office. Either they come to my office or I do it over the phone, email and/or fax. Instead of driving all over town meeting with clients consider staying in your office. When a prospect calls me requesting a quote I get their info right then. Call them back and close it, get credit card, and email application for signature. Your done and on to the next prospect.

[JSJAG]

I think I'll go back to commercial stuff. Thought I'd do some personal lines stuff but far to many requirements from the people that do the quotes. before they'll quote they want pictures and they want a completed replacement cost estimator form. Of course then you have the apps themselves. It's like my friend that works at another agency says, nobody can make money in personal lines. Nineteen years ago we worked at the same agency and personal lines is still a loss leader.

[independent guy]

Unfortunately personal lines is kind of hard to just "get into". My dad (and now his two sons myself one of them) have been very successful in personal lines. We have several big yellow page ads, sponsor a lot of university student organizations locally, have a nice website with local referrals from other sites, and most importantly, a very loyal core client-base, some of which goes all the way back to 1941 under the prior agency owner. We spend thousands on advertising that is impossible for a start-up or someone new to personal lines to finance. But, more than half of our clients come from referrals. I've never done cold calling, and I never will. I side with Scott on this one 100%. Porter has the right idea, as it sounds like he operates a very efficient operation. That's what you have to do to make money in personal lines. Hustle like a chinchilla on speed and you'll be buying a Mercedes in no time, if that's what you want.

On Erie - we've had them since they came into our state and they're a good company. From the sounds of things I know exactly what has happened. Erie changed their cost estimator 3 years ago and it was suggested that agents re-run the cost estimates as they were of course higher under the new MSB RCT method. Its hard to do that for your whole book of business, so maybe the agent hasn't gotten to them all yet? Erie is also a relative newcomer to insurance scoring, and as such they are just starting to reach an equilibrium with pricing in relation to scores. I don't feel like they're buying business here where I'm at. They are pretty conservative about making rate changes, for the most part. Their rates are appropriate compared to their competitors which have slightly more relaxed underwriting standards.

[JSJAG]

As my buddy that has a Nationwide agency said yesterday, he considers personal lines to be a loss leader and so do I. Nobody makes money on a $400 premium. Personal lines are a commodity market, viewed not as what you as an agent know but can you save me $10.

The largest agency in our town has stopped taking people calling in cold for AO/HO quotes. Good choice to because it was wasting a lot of their time on look-ee loos. Those people shopping to save a dollar.

At least in commercial my clients appreciate that I have meetings to discuss WC loss control programs, annual BPP property evaluations, telling why they need WC COI's so they don't get charged for a sub not carrying WC, and on and on it goes. I've produced risk managment power point presentations that I have burned on discs and give to commercial clients.

Personal lines....well how much service can you give on a $40 commission? Plus do the people care? What do they say when you tell them that little juniors pizza delivery job, using his own vehicle presents a problem? Do they care? Do they care when you tell them the truck Mr. client uses, the one with the General Contractor sign on it, the one he is using to haul / deliver his lumber, his ladders, tow his equipment presents a problem? Do they care or do they just try to hide it to save $10?

I tip my hat to you persoanl lines people because IMHO it is a Mother Teresa business model.

Unfortunately personal lines is kind of hard to just "get into". My dad (and now his two sons myself one of them) have been very successful in personal lines. We have several big yellow page ads, sponsor a lot of university student organizations locally, have a nice website with local referrals from other sites, and most importantly, a very loyal core client-base, some of which goes all the way back to 1941 under the prior agency owner. We spend thousands on advertising that is impossible for a start-up or someone new to personal lines to finance. But, more than half of our clients come from referrals. I've never done cold calling, and I never will. I side with Scott on this one 100%. Porter has the right idea, as it sounds like he operates a very efficient operation. That's what you have to do to make money in personal lines. Hustle like a chinchilla on speed and you'll be buying a Mercedes in no time, if that's what you want.

On Erie - we've had them since they came into our state and they're a good company. From the sounds of things I know exactly what has happened. Erie changed their cost estimator 3 years ago and it was suggested that agents re-run the cost estimates as they were of course higher under the new MSB RCT method. Its hard to do that for your whole book of business, so maybe the agent hasn't gotten to them all yet? Erie is also a relative newcomer to insurance scoring, and as such they are just starting to reach an equilibrium with pricing in relation to scores. I don't feel like they're buying business here where I'm at. They are pretty conservative about making rate changes, for the most part. Their rates are appropriate compared to their competitors which have slightly more relaxed underwriting standards.

[independent guy]

I really don't mind the negative "can't win" attitude on personal lines, because obviously some agents and companies are winning, or they wouldn't be fighting so hard for pieces of the pie. The more people throw in the towel the more opportunities there will be for people like Porter and myself to add new business to the books.

I don't think personal lines is an unprofitable loss leader in all situations. There are rare ones where we write a motorcycle with Progressive for $75 a year and make like $7 on it that is probably eaten up by the time it took just to have my secretary get all the information and get the guy hooked. That happens occasionally. But guess what? That guy is so happy he just got insurance that cheap you're next quoting his autos and home as well. Then you find out he's got kids, so what does he need? Life insurance. Then you find out his mom retired a year early and needs a health insurance policy at about $5,000 per year, off of which I am still making $250 per month commission on a policy that took me maybe 2 hours to deal with. The guy wanted to pay monthly, so we charged our agency fee for that. Since he's a contractor, we put his work truck on a package with his GL and WC. Now he's referring everyone he knows to us. Had I said "no!" and opted not to write this unprofitable motorcycle policy, I would have really regretted it. But guess what? The majority of the income in this situation is still from his personal lines stuff.

[JSJAG]

Hm? You go on for several paragraphs describing a loss leader. Ok if even need to they think that "probably" that $7 was eaten by your secretary you better change that to ----- it probably cost you money.

I do the same with my commercial lines, cross selling. The only difference is that I never see a $75 policy first. That $75 motorcycle may come at a later date but usually after the commercial account.

I really don't mind the negative "can't win" attitude on personal lines, because obviously some agents and companies are winning, or they wouldn't be fighting so hard for pieces of the pie. The more people throw in the towel the more opportunities there will be for people like Porter and myself to add new business to the books.

I don't think personal lines is an unprofitable loss leader in all situations. There are rare ones where we write a motorcycle with Progressive for $75 a year and make like $7 on it that is probably eaten up by the time it took just to have my secretary get all the information and get the guy hooked. That happens occasionally. But guess what? That guy is so happy he just got insurance that cheap you're next quoting his autos and home as well. Then you find out he's got kids, so what does he need? Life insurance. Then you find out his mom retired a year early and needs a health insurance policy at about $5,000 per year, off of which I am still making $250 per month commission on a policy that took me maybe 2 hours to deal with. The guy wanted to pay monthly, so we charged our agency fee for that. Since he's a contractor, we put his work truck on a package with his GL and WC. Now he's referring everyone he knows to us. Had I said "no!" and opted not to write this unprofitable motorcycle policy, I would have really regretted it. But guess what? The majority of the income in this situation is still from his personal lines stuff.

[independent guy]

Hm? You go on for several paragraphs describing a loss leader. Ok if even need to they think that "probably" that $7 was eaten by your secretary you better change that to ----- it probably cost you money.

I do the same with my commercial lines, cross selling. The only difference is that I never see a $75 policy first. That $75 motorcycle may come at a later date but usually after the commercial account.

My point in my post was that we still make the bulk of our money off of the personal lines stuff in this case.

[Porter]

We make all are money in personal lines. I only do commercial policies to lock up the household. In my area the average personal lines policy is $1100 per year and 15% commission. You only need 600 policies to gross $100K. If I was in your area writing $400 policies at 10% commissions I would not be writing personal lines either unless your overhead was extremely low. You would need to write 2500 policies to gross $100k. Forget that!

[JSJAG]

At 15% I can assume that you aren't working for an agency. I don't work for an agency but neither can I meet the annual commitment of too many different ins companies. Therefore I broker business. If you broker business I would be interested in how you get 15% on brokered business?

We make all are money in personal lines. I only do commercial policies to lock up the household. In my area the average personal lines policy is $1100 per year and 15% commission. You only need 600 policies to gross $100K. If I was in your area writing $400 policies at 10% commissions I would not be writing personal lines either unless your overhead was extremely low. You would need to write 2500 policies to gross $100k. Forget that!

[Porter]

I'm an independent and I don't broker business.

[mhutch69]

I have made a good living over 30 years writing personal lines ONLY. I could compete for commercial, run around town quoting against everybody else, but I do not have an interest.

I just wrote a $9,900 homeowners yesterday without leaving my office and by making one phone call to Chubb. I have flyers and the homeowner talking to all neighbors. Should get several more upon renewal.

You guys who call personal lines a loss leader? Fine, send me your phone calls. I need my phone to ring more.

I keep living just above poverty..

[JSJAG]

<I just wrote a $9,900 homeowners yesterday without leaving my office and by making one phone call to Chubb.>

How was Chubbs UW on that property. I do have a property that will meet Chubbs appetite. The problem is they've been overseas since June and the renewal was in August. They don't get back until September.

I just noticed on some of my Chubb correspondence that at the bottom it say, Chubb & Son, Inc. Never before noticed the Son.