The Challenging Future Requires Your Attention

By | July 7, 2003

While the hard market continues to support current rate levels, there is increasing turmoil within our industry. Is there any doubt that major changes are on the horizon?

After all, who can predict the timing of the hard market/soft market cycle? Company consolidations are increasing. More companies are going direct to the consumer.

Meanwhile, the workers’ compensation system is deteriorating, both from the consumer and the brokers’ perspective, as well as the regulatory/benefit issues. Also, the health insurance crisis is escalating.

Insurance company R.O.E. is in the tank, causing underwriting backlash and diminished capacity.

The nature of competition is changing because of client expectations, needs and demands.

Finally, the legal system continues to re-interpret insurance coverages.

These issues and more serve notice that agencies need to manage their organizations better, improve productivity, increase utilization of automation, and develop more accountable professionalism that provides better communication and service to their clients.

Client focus
The truth is that most agents do not focus on client care! The insurance agency system has a single and critically important responsibility: provide professional and comprehensive analysis of their clients’ exposures in an efficient and cost effective manner, with clear and concise communication that is timely, efficient and honest. How do you rank in that process?

I’ve been in this profession for over 40 years as an agency owner, an executive in a national brokerage, and as a consultant to large and small firms. I understand the relevance of agency profitability and the related pressures and problems that accompany that. However, I suggest that independent agents need to adjust their priorities and focus on customer care as the driving force in managing the future.

Why do this? (1.) The customer deserves it; (2.) The customer is aware of this issue and is demanding better service; (3.) The sole reason for your existence and success is the customer; and (4.) It is the customer that ultimately pays for the ills of the industry propagated by the external factors that I have already enumerated. The hard market and the soft economy have elevated insurance to a major overhead item and, in some cases, a backbreaking business issue.

What does it mean to focus on the customer? While customer service is a universal concept, I believe that the key is to first analyze and clearly understand what the insurance client really wants and needs.

Unique to each agency
The challenge is to then respond by reorganizing the service component of your agency, directly servicing these needs. While the insurance business is generally homogeneous in nature, it is my experience that most agencies have unique customer profiles and culture. Therefore, customer service requirements, in its specifics, will be unique to each agency.

However, consider the following:
1. We don’t sell insurance—customers buy our product and our service.
2. There is a need to determine exactly what the concept of excellent client service means to your key clients and what good customer service means in your organization. Do not assume that you know the answers without making your clients part of the solution.
3. Quality (excellent) service to be truly effective and responsive to each client must represent the total dedication of every employee—totally non-optional in conception and execution.
4. When you are clear on exactly what your client wants, and what you are willing to provide, create a business plan centered on the client, implement it, and monitor the results. Remember, your staff needs to own the process in order for your business plan to succeed.
5. There will be times when a client will not have a vision of quality service. It is your responsibility to educate them.
6. Monitor the results and create change as your knowledge builds.

Analyze this
Change is never easy. There is great risk in making a commitment to your client, and then failing to follow through, setting up false expectations, not delivering, and ultimately alienating your client.

I strongly suggest that you carefully analyze your organization and develop a clear understanding of your strengths and weaknesses before you embark on this journey. There are many ways of accomplishing the analysis dependent on the nature and size of your organization. The purpose of the evaluation is to determine where you are so you can determine what you need to do to create the proper environment.

There are a number of issues that are relevant to your analysis, including:

Financial management
1. Do you have accurate and timely financial information?
2. Do you create and follow a business model that measures and tracks your profitability and productivity?
3. Are you in trust and do you spend less cash then you earn?
4. Do you manage your carriers to maximize commissions and overrides?
5. Are your producers compensated appropriately creating incentive, but balancing the agency’s risk-reward factor?
6. Are the principals paid commensurate to their contribution or are they subsidizing the agency?

Sales management:
1. Does the agency have a sales and marketing plan?
2. Do you analyze your book of business for profitability to the agency and the carriers?
3. Is there a non-optional cross selling process in place?
4. Is retention measured and analyzed?

Agency management
1. Are the employees empowered through management teams to take responsibility for agency operations?
2. Are employees evaluated fairly and timely with clear job descriptions and an understanding of their career path?
3. Is the work process audited for quality and E&O management?
4. Do the principals of the organization communicate agency goals, results and problems openly so the staff is part of the solution?

A never-ending process
We have reviewed the problems attendant to our industry.

Excellence is a never-ending process that evolves with circumstances and like knowledge is a product of experience and information. In other words, everybody can do it better if they are open to it.

Most agencies that I have worked with feel that they are doing a terrific job, or if they are honest (as they allow), will be open to “fixing us” so we can do better and make a greater profit. The “fix” requires a results driven plan whose vision is to improve customer service. It also includes the following five rules of excellence:

1. Assess the clients’ needs from your perspective and put it in writing.
2. Ask your clients for their perception of excellent client service and coordinate this into your business plan.
3. Determine how you can deliver the re-quired service effectively.
4. Integrate your staff into the process.
5. Monitor the results.

The bottom line
Insurance is a challenging and rewarding profession. It allows you to provide a service protecting your clients from catastrophic economic injury, and rewards you with excellent compensation and a sense of value. The trade-off is that it carries with it the responsibility to provide quality professional advice.

The client carries the burden of high premiums, high deductibles, difficult legal problems, and a static, at best, business environment. The agency carries the burden of providing the best possible protection.

Paul Bronow, president of In Focus Consulting, has more than 35 years of insurance agency and consulting experience. Bronow can be contacted at infocusconsulting@aol.com or by phone (818) 313-9810.

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Insurance Journal West July 7, 2003
July 7, 2003
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