Agency ownership of its expirations is core to agency culture, core to the agency’s value, and core to the owners’ livelihoods. Yet today, the ownership and even more important, the value of the expirations, is being threatened, and most agency owners do not see it happening. The analogy to the old story of the frog enjoying the warm water until the instance before death is possibly apropos.
Consider the following examples.
The first example is the most obvious. Producers – and often far more important, CSRs – taking clients. Most agency owners recognize this threat, but their producer contracts are entirely inadequate and their contracts with CSRs are even worse. What is possibly even more damaging is how so many agency owners underestimate the control some CSRs have over clients. Their client relationships are often far stronger than the relationships producers have.
The second example is also mostly obvious and that is an agency’s carrier taking the expiration list. I am not too terribly concerned about a company brazenly taking ownership of expirations. Usually when this happens, it happens because the agency has failed to pay its premiums on time or has lost a license.
The third example involves companies and is bold but not as obvious. Owning an expiration list in the old days was good protection, but in today’s information age, owning data is far more important. The agency may own the list but does the agency own all the pertinent data? I have seen companies effectively cause agencies to lose material business by using client information, in my opinion, nefariously but permissible per the contract. Check your contracts.
The fourth example involves companies who simply give client information to agents and brokers they like better than you, once you move a policy to a competitor. I do not understand some insurance companies’ fixation that clients only move because agents facilitate their moving. This is why companies give policy information to other agents. It is why companies secretly buy agencies and then prevent the staff from moving accounts. It is why companies like service centers. Some companies seriously believe customers will not shop if an agency does not remind them to shop.
Protect yourself in these situations, including the use of service centers. Always read your contracts, not only for what they say, but what they do not say, too.
Data, Programs and More
The fifth example is relatively new. Now that many companies are writing directly, what happens to the data they have regarding your clients? Just asking.
The sixth example is actually old, and that involves programs. A famous case involving a program for softball leagues where a company stole the program from the agency was resolved in favor of the agency. If you have a program or even the thought of a program, make sure your company, or companies, sign non-disclosure agreements and even non-compete agreements before you share the details. I know your companies are special and they are your friends, and they would never take a program from you, so it should be no problem for them to sign these reasonable agreements.
The seventh example is maybe the scariest, as I look from the outside in. In the past five years, the largest brokers have purchased many wholesale brokerages. These brokers’ wholesale businesses now contribute 10 percent to 30 percent of the brokers’ commission revenues. These are large sums.
I continually find most agencies have not adjusted to this new reality. Their broker relationships are lax. Sometimes they do not even have a contract with their brokers. If you do not have a contract, what is to prevent a broker from sharing your expirations, your data, with their retail branch? Maybe I have become too jaded over time or maybe I have just seen too many instances of Chinese walls that were imaginary at most, but I would err on the presumption that data gets shared.
A related issue is how I have seen many programs develop on a handshake basis, and these programs have run well for years, sometimes decades. All parties have complete confidence in each other and maybe rightly so.
However, all agencies and brokers are eventually sold. The appetite for purchasing wholesalers and certain program business does not seem to be slowing. Given the inevitable sale and the potential purchasers, doesn’t it make sense to build protection while you still have a friendly face on the other side of the deal?
The eighth example involves clusters and aggregators. The question here varies considerably depending on how the cluster contract is written. In general, when an agency joins a cluster, it may not retain 100 percent ownership. I recently saw a situation in which a company claimed ownership of a cluster member’s expirations – and it was correct! I have seen other situations where an aggressive cluster operator took advantage of more trusting “partners” and took control of the expirations. An interesting example is some agency owners join a cluster designed as a service center. The cluster services the business alleviating much woe for small agency owners. This is fine on paper and fine if the agency owner stays in touch with clients. Some agency owners are lazy though, and they quit selling much and they let the cluster’s service center build relationships. Then, if the cluster contract is not designed well, the owner can be kicked out. Sure the owner can claim ownership, but exactly where are they going to go?
Ownership of expirations has been so inculcated into agency culture that many agency owners take it for granted. They have not stayed in-tune with the times. They do not understand that other entities controlling data and relationships can severely damage the value, possibly eliminate the value, traditionally associated with owning the expirations. The solutions are fairly simple, but work is involved. Is protecting your agency’s value, your wealth, worth the work and investment?