Soft market, economic downturn, consumer advocacy translate into more work for agencies
Insurance Journal‘s Editor-in-Chief Andrea Wells was at the Big “I” Legislative Conference in Washington, D.C., where she caught up with Robert Fulwider, an independent agent from Iowa who is chairman of the Independent Insurance Agents and Brokers of America (the Big “I”). He discusses agencies’ workload, markets, the economy, recruiting, compensation and other issues on the minds of agents he has met in his travels across the country. The complete video interview with Fulwider may be viewed at www.Insurance Journal.tv. The following are excerpts from the interview.
What are you hearing from agents around the country? What are some of the challenges they’re dealing with?
Fulwider: I’m finding that a lot of them are very concerned about the workload that they’re encountering in their agency operations They’re very concerned about the company relationships that perhaps are dwindling to some respects, and of course, concerned about the economy — the soft market and how it’s affecting their own consumers in their own backyards.
How is the soft market affecting agents?
Fulwider: Well, we’ve gotten used to it over the years. It’s cyclical, as we know. We enjoy the hard market a little better, usually. But the soft market has its challenges, and we’ve learned to live with it. The biggest problem that the soft market presents to independent agents, of course, is the fact that No. 1, you’re spending an awful lot of time re-quoting all of your book to try to stay competitive.
But more importantly, what you’re also involved with is budgeting your own dollars in your own agency operation with a relatively unknown as to how much money is going to be available to you based upon what happens with the soft market and commissions generated.
You mentioned carrier relationships as a concern. Does that coincide with the soft market?
Fulwider: I don’t think that’s as much a coincidence with the soft market as it just is a sign of the times. Agents today have a much larger workload than they’ve had in previous years because of all the things that need to be done for the consumer. If we’re going to continue to advocate on behalf of the consumer in America and be the number one Trusted Choice agency for those operations, we have to be a jack of all trades in many cases and doing a lot of things for the consumer that are directly related to the companies and taking over much of their workload in order to make this happen. But that causes problems between the company and the agent many times, because what we find happening is that the companies are saying, “We want you to take on this particular endeavor on our behalf.” That’s fine, but one of the problems we run into is that many times there is not adequate compensation for that.
Where there is a downturn in the economy, what effect, if any, is that having on agents?
Fulwider: I think there is a general concern in the agency marketplace as to what’s going to happen. I’m not sure that we’ve seen that much direct impact yet other than in the subprime housing area. I know in my communities in Iowa, we have agents that are having difficulties now with consumers that want to buy a new home and maybe don’t qualify or the lending is not as prevalent as it once was for them. So you have people, for instance, that are trying to sell a home and they’re sitting there with the home for a longer period of time.
That impacts the insurance industry. It impacts us as agents because as the consumer knows, he can only keep a house insured as a homeowner, as an example, as long as it’s occupied by the owner. If the owner moves on, the house sits there … it creates additional insurance exposures and problems for the agent.
What about commercial clients — are they having troubles in this economic downturn?
Fulwider: Yes. You’re seeing it especially in the financial community and banks and that type of thing, where they’re talking about it, concerned about what might happen. I think there’s a lot of unknowns yet as to what’s really happening. Hopefully, Congress will be able to come up with a fix that will work and we’ll be back up and rolling again.
Your agency is based in Iowa. Do you think that certain regions of the country are experiencing problems more so with either the soft market or the recession?
Fulwider: Yes. I think that as far as the recession is concerned, it’s definitely impacting certain areas of the country. Iowa, because of its large agricultural base, has not experienced it as much as some states because ironically, the land prices in Iowa continue to rise as far as the farm economy is concerned. We’re at record land prices right now. So, that helps that segment of the economy, which kind of offsets downturns in others.
Insurance Journal recently surveyed young agents and found that 83 percent of young agents are either optimistic or very optimistic about their career choice, and another 81 percent love their career and plan to stay with it for the remainder of their working life. But we constantly hear that independent agencies, and the entire industry, have trouble recruiting new talent. Do you find that once you do have a young agent, they generally stay?
Fulwider: Well, there’s a number of problems that are associated with the whole “brain drain,” if we could use that term as far as young agents are concerned. First of all, independent agents have a problem understanding for the most part the X’ers and the Y’ers, all of us do at our age.
As I’ve gone across the country, one of the major things that I’ve told all of our agents is get out of the way when the young agents are ready to move in. They’re the brightest, the sharpest, the most highly educated group of people that we’ve ever encountered in this industry and they do bring us a lot of talent and a lot of good ideas. What we need to be doing is assisting them in becoming better salespeople and working with the consumer.
Now, having said that, there are also some concerns on the part of agents that I think are relevant concerns. No. 1, the X’ers and Y’ers are a different sort today than was my generation as a Baby Boomer. They work differently, their work ethics are different. And so, we have to modulate all that and work together, if we can, to come up with the best type of arrangement.
As far as agency perpetuation, we’re going to run out of people in this industry and that affects us as agents, because many times, the companies are hiring that talent away and we can’t compete salary-wise in the early stages of their employment … paying as much as a company can. If the contract is set up correctly and the agent is really good at what he does as a young agent, he can far outperform what’s happening in the company ranks. But you’ve got to have the right choices of a person, and that’s the problem.
Former New York Attorney General Eliot Spitzer recently resigned as governor amid a scandal. That brought his insurance investigations back into the news. What about all of the controversy over contingent commissions and transparency? Did it accomplish anything in the industry?
Fulwider: It brought a new awareness to the fact that there were some problems in some segments of the industry. I’m happy to report, however, that with the majority of independent agents and brokers, we weren’t the ones that were being targeted in that case. Some of our companies were because of special arrangements they had set up with some of the larger brokers in society, many of them not members of our association.
On the other hand, I think, it was an effort to surgically address some certain business relationships that might not have been the best for any of us and I’m glad it’s over. I think it’s beyond us. But it was a very necessary concern when it took place.
Is there still a concern among agents about preserving contingent commissions and profit sharing?
Fulwider: Sure, and there will always be. An agent needs to be rewarded for doing a good job. The companies and agents together have to have a mechanism where they can sit down and say, “If this is your performance level both in sales and in bringing us good business, we plan to reward you.” That happens in any type of sales occupation.