Improving Communication with Carriers

Picture this scenario. A couple meets and they go through the courting period. Both parties try to look their best and pay extraordinary attention to each other. At some point they get engaged and formalize their relationship. They talk with each other often about their goals and plans for the future. For a few years the couple gets along really well, and the long-term future looks promising.

But after a few years they slowly start to drift. The attention they pay each other diminishes, and some promises are not kept. The two now seem to be going down separate paths. Communication now has trickled down to just the formal business that keeps the couple together. After a while the two realize they no longer share the same goals, and they have little in common.

This is a common situation. Marriages often fail because the couple does not maintain the same energy that brought them together. A truly successful long-term relationship requires continuous effort by both sides. This applies to personal relationships as well as business relationships. The scenario outlined above is what happens quite often to agencies and their carriers.

Take Responsibility

The key to any good relationship is communication. It is imperative that the agency has a well-organized plan to communicate with each carrier. Some insurance companies communicate better than others, so the independent agent needs to take full responsibility to ensure a dialog occurs.

Agencies need to take a proactive approach to managing company relations. Good relations cannot be allowed to stagnate, and weak relations must be built up. Agency owners need to evaluate which companies they should do business with to meet their needs for competitive, responsive markets.

Both parties need to grow, and relationships of the past may no longer meet the needs of today, especially if either party has targeted certain classes of business that aren’t of interest to the other. Resources should not be wasted on maintaining relationships with carriers that offer little benefit to the agency.

Companies continue to limit the number of agencies they do business with, often to better utilize their resources and to reduce costs. Some companies differentiate between the services they provide, their preferred agents, and their regular agents. It is usually worth the effort to achieve the “preferred” agency status with as many companies as possible.

The “preferred” agent may receive better underwriters, quality target/niche marketing programs, or exclusive programs. The “preferred” contracts usually contain enhanced profit-sharing agreements, value-added services, interface capabilities, training programs, and financing of various items, such as producers, acquisitions, and perpetuation.

Establishing an Action Plan

So, how does an agency keep the communication open with its markets and perhaps become a “preferred” agent? Create a process that makes it easy for management to focus on company relationships. The first step is to assign an individual or two from the firm to each carrier as that carrier’s “relationship manager.”

Responsibilities for the management of the firm’s top carriers should be divided up among the owners and/or a key non-owner producer or account manager, depending on who has the best relationship with each carrier. Overall carrier relationship management should always be a major focus for all owners; however, dividing up duties with others in the firm will ensure that the steps are implemented.

A specific action plan should include job assignments, planned visits, information and data to communicate, and a budget to implement the plan. Keep in mind, it takes time and money to nurture a successful company relationship. It’s important to keep track of the plan and make sure it is followed. Even a strong relationship will eventually die if it is neglected.

The collection and presentation of information and data is a significant step since it will set the tone of the communication. Agencies that are prepared and well informed will create immediate interest from the company representatives, since unfortunately, most agencies fail to do their homework.

Review Markets

Learn about the agency’s relationship with its markets. A list should be made of all companies and include three years’ worth of the following information: written premium, earned premium, commissions paid, contingents received, number of policies, average commission per policy, number of submissions, number of quotes, hit ratio, and loss ratio.

The targeted classes of business that the carriers seem to be interested in should be written down and which classes they are competitive in. A report card for the company should be created and completed by the staff.

Ask the companies to fill out a report card on the agency, as well, in order to identify the carriers’ perceptions of the firm. Discuss what the firm can do to improve the existing relationship and to write more business. Determine how the agency can take advantage of the value-

added services offered by the carriers, such as financing, training, etc.

The next step is to create a profile of the agency. Agencies, like people, have their own unique personality. Agencies that know the firm’s “personality” and their strengths and weaknesses will be in a good position to communicate their needs to the carriers. How can agencies expect the markets to meet their needs when they don’t know or understand their own needs?

‘Building improved relationships needs to be a two-way street.’

Company Visits

Take the agency profile package and the insurance company evaluation directly to the market representatives. Set an annual meeting to discuss agency goals and future opportunities. In this annual meeting, the agency principal in charge of markets and the relationship manager for that carrier should meet face to face with the regional vice president or branch manager of each contract company and the main underwriter assigned to the agency.

There are three objectives for this meeting:

Inform the company’s management about the current status of the agency and future plans.

Find out where the company stands now and its plans for the future.

Discuss how the agency and the company can do more business together in the future.

There should be follow-up meetings to discuss progress on the agency-company game plan on at least a quarterly basis.

Both parties need to be open and frank. The agency profile and the company evaluation should be reviewed and discussed at the meeting. Reasonable goals and commitments for future business need to be established. Relay the highlights of the meeting back to the agency staff.

Plan ongoing carrier networking activities to enhance relationships. It is easier to develop a relationship if parties meet often, and social visits are especially effective. The whole agency needs to be involved with fostering good relations with the markets.

Summary

Now more than ever before, with markets often cancelling the ability to write new business and gain new appointments, it is extremely important for insurance companies and owners of agencies/brokerages to build partnerships that are responsive to the business plans established each year by each party. Building improved relationships needs to be a two-way street.

It is easy to get this relationship-building program underway, and it really works. Responsibilities for this program must be shared, and communication needs to be flowing within the firm, within the carrier, and between each other. Improved communication and a focus on improving relationships will save time and will guarantee both parties more money.

Oak is the founder of consulting firm Oak & Associates, based in California and Oregon. The firm specializes in financial and management consulting for independent insurance agencies, including valuations, mergers, acquisitions, sales planning as well as perpetuation planning. Phone: 707-936-6565. Email: catoak@gmail.com.