Survey: Carrier Size Matters But So Do Price, Underwriting and Service

By | July 20, 2009

When it comes to selecting a carrier partner, size matters. But when it comes to ending a carrier relationship, price, underwriting flexibility and service matter the most.

That’s according to the survey — “How Independent Agents View Carriers: The Super-Regionals” — which polled nearly 1,100 agents in all 50 states, and asked questions about various aspects of their relationships with the carriers they represent. It’s the first survey of its kind that focuses on agents’ views of “super-regional” carriers, which form the middle ground between national and local insurance companies.

Small Enough to Care

Agents prefer super-regional carriers over larger and smaller carriers in nearly every measured attribute, including pricing, service to the customer, service to the agent, compensation and even marketing support. This appears to reflect a preference for companies that are big enough to meet their needs for coverage, while not being perceived as uncaring or bureaucratic as some national carriers.

“For the agents, it seems like there’s a tension between being in an
unbalanced power relationship,” said Kevin Jenne, project manager for
the survey and research director for co-sponsor Aartrijk. “When you are dealing with a national carrier you don’t have a lot of power in the relationship. When dealing with a very small company, sometimes they don’t have the reach or capacity to write the coverages you want, and sometimes they don’t have the financial strength to make you feel confident placing business with them.”

This preference is noted in placement: Agents on average place more of their business with super-regionals than with either nationals or small carriers. Agents believe large regional or “super-regional” carriers fared better than small and national carriers in almost every way, both for commercial and personal business.

Super-regional carriers have a lot of advantages in areas like pricing and service,” Jenne said. “There’s an impression that regional carriers care more about the agents and are taking better care of them.”

For commercial business, national carriers were perceived to have a slight advantage on offering “best coverage.” However, in every other way, super-regionals ranked better than nationals.

Customers were also more likely to ask for a regional carrier than for a super-regional, but more agents said that no type has an advantage in this area.

Breaking Up Is Hard to Do

More than a third (37 percent) of agents responding to the survey said they had ended a relationship with a large regional carrier in the past. And while some agents ended relationships with carriers to reduce the number of carrier relationships in the agency, others said they ended relationships because they were dissatisfied with underwriting requirements or pricing.

Many agents who had terminated carrier relationships felt that either the underwriting was too strict, or the pricing too poor, to enable them to meet the volume requirements placed on them by carriers.

One agent wrote cooperation with underwriters played a key factor in why the agency terminated their relationship with the carrier. The agent said, “Carrier was requiring a minimum premium volume that we could not obtain because of a total lack of cooperation at the underwriting level. No account was seeming very good to the underwriter and their pricing reflected that attitude.”

Service issues mattered as well. Some agents noted that service from their carrier lacked, either for their agency personnel or their insureds.

One agent said, “[The carrier] insisted that everything go to their service center and the commercial business was not well cared for. They ran off more business than they saved. Also, they insisted on having the service work done by service center employees who were not qualified to do the service.”

Agents also reported unfair treatment from their carriers as a reason why they terminated carrier relationships.

One agent said the carrier’s decision to jump in and out of markets left the agency to move a large book of business. “They would jump into tougher risks and we would build a volume, then they would pull out of that class and we would have to move the entire volume. They
were too hot and cold,” the agent wrote.

Jenne said when an agency is forced to move an entire volume, that move can be “very disturbing” for the agency and its customers.

Another agent said, “Our volume dropped from nearly $1 million to $250,000 over five to eight years. They priced themselves out of the Michigan market. Great company. We just couldn’t keep or place any business with them.”

Time and time again, agents said what’s most important is the customers’ need, Jenne said. “It keeps coming back to the customers’ requirements,” he said; the customers’ need for better pricing is what agents place first.

While fewer than a third of agents (30 percent) said that they had rolled a book of business to a new carrier, among those who did, they did so primarily because their carrier withdrew from their state. Other frequent responses for reasons why agents moved books to a new carrier involved expectations of better agency compensation, service or underwriting.

About the Survey

The survey was conducted by Channel Harvest — a partnership between Aartrijk and Campbell Communications — and sponsored by Insurance Journal. Insurance Journal will report more selected findings of the survey, such as agent and customers in the recession, in an upcoming article. A previous article on the survey findings, Claims Service Is Tops for Agents When Evaluating Carriers, discussed what performance factors are most important to agents.

The survey instrument covered more than 100 separate questions. A total of 1,098 agents responded to the survey and passed validation criteria. For most general questions in the survey, the number of responses yielded a margin of error of 3 percent at a 95 percent confidence level. Quantitative survey results are presented in a variety of formats, including rankings of frequently used carriers, ratings of individual carriers, and comparisons of carrier ratings.

“How Independent Agents View Insurance Carriers,” is the second in a projected series tracking agents’ views on issues in the insurance marketplace. For more information on obtaining the survey report, contact peter@aartrijk.com.

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