A recipe for independent agency-carrier relationship success

July 23, 2007

Agency-company relationships are a softer issue in business today, and not something independent agencies think about all the time, according to Frank Kortarba, president and CEO of Golden Eagle Insurance in San Diego. Nevertheless, because insurance is a people business, relationships are an important core competency of any organization, he told the audience at the recent Insurance Brokers and Agents of the West Blue Ribbon Conference.

Insuring successful long-term relationships is not “rocket science.” “Successful relationships should not have a high degree of complexity,” Kortarba said. They key ingredients are for the relationships to have mutual trust and respect, be relationship based, mutual need and long-term potential, he indicated.

Mutual trust and respect at times can be difficult to secure, because companies put forth a lot of capital in a relationship with an agency, he said. Agencies are responsible for developing calls and setting up and securing future business. Consequently, mutual respect and trust cannot be set up in “one lump,” he said.

“If you have an organization where you deal with one person in the office that you have a relationship with, what happens when that one person leaves?” Kortarba asked. Companies need to form “relationship ladders.”

“You want three relationships on both sides so that if somebody leaves or is promoted, you still have a very, very strong relationship,” he said.

An agency might have a couple of accounts with a carrier and the interaction between the companies is more of a contract. But to form a relationship, a carrier and agency must have underwriting, organizational capabilities and communication, Kortarba said. “There are expectations on both sides of a relationship; expectations that the company has of the agency or brokerage, and expectations that the brokerage has from the company.”

With underwriting, a beneficial relationship is one where the company has:

  • a consistent philosophy;
  • clear, consistent appetite;
  • competitive products and pricing;
  • empowered staff that can make local decisions;
  • ability to say yes quickly versus no or a slow maybe; and
  • willingness to back an underwriter’s decision.

Agents do not want to work with an underwriter that has to jump through many hoops to get a decision. “Empowering staff to make local decisions is an expectation that [agents] have,” Kortarba said. The underwriter should be well-trained to make decisions, and illustrate that the company has a consistent underwriting philosophy. “You want a clear, consistent appetite so that you know what resource at what time you need to put into a particular company,” he explained.

It’s important for companies to back up their underwriters, even if he or she makes a decision that is not exactly what a company would expect. “Train them, give them counseling, whatever is necessary, but back up the underwriter’s decision,” Kortarba added.

Similarly, the agent/broker needs to:

  • Understand the carrier’s underwriting appetite;
  • Underwrite the risk;
  • Have complete and accurate submissions;
  • Sell coverage and value;
  • Use online tools; and
  • Communicate with the underwriter.

It is important for agents to understand the company’s appetites. Companies don’t want to form relationships with agents that throw things at them and waste their time, he explained.

“It goes without saying,” Kortarba added, that agencies need to invest in training their staff as well as bringing in experienced people to help perpetuate the organization.

Agencies also need to invest in online technology. Kortarba believes it is both the agency’s and carrier’s responsibility to have the right Web tools. “Many agencies think that it is solely the company’s responsibility … It’s important that the agent understand what is necessary to build business,” he said.

As they do business, agents also should look to place the right business with companies that have strong financials, a balance between growth and profit, a stable management team, and competitive products, automation and compensation.

Agents need to have a growth and profit focus, a plan for perpetuation, provide appropriate company representation, value company appointments and be automated.

These elements create predictability, and allow for effective planning and ease in doing business, Kortarba said. Agencies will look for their strongest partners to perpetuate a long-term partnership, Kortarba advised.

The last component of a successful carrier/agency relationship is communication, Kortarba said. From a company perspective, agents want a carrier that provides the same message at all levels. “A timely and accurate, responsive staff is very important — it influences perception,” he said.

Likewise, agencies need to be responsive to company issues. “Is there something going on in the agency that you can confide in with the company so that they can prepare for whatever that change is?” Kortarba asked. “If you don’t, we can’t deal with it.”

Overall, it’s incumbent upon both agency and carrier leaders to make sure that their people understand the concepts of trusted relationships to ensure ultimately profitability for the partnership,” Kortarba summarized.

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