Why Small Commercial Lines May Not Be So Bright for Agency Carriers

March 3, 2016

  • March 3, 2016 at 1:22 pm
    Jack Kanauph says:
    Well-loved. Like or Dislike:
    Thumb up 32
    Thumb down 0

    “That’s What”
    -Google

    • March 3, 2016 at 3:05 pm
      Agent says:
      Well-loved. Like or Dislike:
      Thumb up 31
      Thumb down 0

      Jack, have you noticed how many articles that IJ has put out recently predicting the demise of the Independent Agent due to online shopping? Commercial Lines is 10 times more complicated than a Personal Auto quote. I have 4 markets that love small and mid market Commercial, have online submission systems for quotes and yes, we are licensed to advise the clients on proper coverage and they trust us with their business. The client is not the agent and most don’t know what they need unless they are advised properly. I can’t see how a contractor could do business online and get positive results. He needs a Certificate of Insurance and when sent, his client says he is deficient in several categories and by the way, they need an Additional Insured and Waiver of Subrogation, higher limits, Umbrella. He might be in a spot of bother and realize he shouldn’t have moved for a low price.

      • March 3, 2016 at 3:46 pm
        Paul says:
        Well-loved. Like or Dislike:
        Thumb up 26
        Thumb down 0

        Yeah, one of them was hyping Google Compare. Talk about a false start! We ate their lunch by just doing what we always do each and every day.

        • March 7, 2016 at 10:06 am
          Agent says:
          Like or Dislike:
          Thumb up 5
          Thumb down 0

          Paul, there have been a lot of banks that bought insurance agencies and wish they hadn’t after a while. Insurance has always been cyclical and it doesn’t fit the model of what banks expect in revenue stream.

      • March 13, 2016 at 4:54 pm
        Spyhunter says:
        Like or Dislike:
        Thumb up 1
        Thumb down 0

        Yes most contractors would have a hard time buying insurance online, and would have no idea where to start. Waivers of subrogation, hold harmless agreements, ( how many contractors have clients such as developers and landlords that love taking no responsibility right ? ) etc. they need to be educated and hopefully if done by the right agent, will help create loyalty, and cross selling opportunities.

  • March 3, 2016 at 1:25 pm
    Mickey Dee says:
    Well-loved. Like or Dislike:
    Thumb up 35
    Thumb down 23

    They’ll be more than enough business to go around once Trump becomes President and brings back jobs to the US from China and Mexico!

  • March 3, 2016 at 1:29 pm
    Irregular Guy says:
    Well-loved. Like or Dislike:
    Thumb up 24
    Thumb down 1

    I can see the future now, because it has already happened. Consumers left to their own devices will ALWAYS pick the cheapest available plan. Of course, that is best for the carriers too. Watch your local superior court docket for the sheer number of UM/UIM claims mounting against GEICO because consumers are only offered the required coverages, and the optional coverages are then selected. Of course, every consumer understands Comp and Collision, mainly because their lender requires it. But UM/UIM? What is that? If it ain’t required by the state or my lender, then screw it, I don’t need it.

    Now, move to the commercial markets. Okay, I KNOW I have to have my General Liability, my GL. But what is Products/Completed Operations? Aren’t I covered under my GENERAL liability? Then no, don’t charge me for that, I don’t need it. I can’t believe my old agent hit me with that charge. And what was that Business Interruption coverage? Who needs that? Just give me what the state requires. Geez, my old agent really tore me a new one!

    The next TV lawyer commercial?

    “Did you buy your insurance direct from the insurance carrier? Were you ill advised? Was your claim denied? You may be entitled to compensation! Call us now at Dewey Cheatum and Howe!”

    There’s a reason a license is required.

    • March 3, 2016 at 2:09 pm
      agent2 says:
      Well-loved. Like or Dislike:
      Thumb up 31
      Thumb down 0

      Better call Saul!

    • March 3, 2016 at 3:16 pm
      CL PM says:
      Well-loved. Like or Dislike:
      Thumb up 15
      Thumb down 3

      Irregular – I am a surprised to hear your view on consumers ALWAYS picking the cheapest available plan. That has not been my experience as both a consumer and a business person. As a consumer I am smart enough to spend my money at the best intersection of price, service, features and convenience. This is true for many products I consume, including insurance. I agree there are some segments of the population whose income forces them to put price first, but that is only one segment of the American consumer landscape. I have known many, many agents over the years who do not allow price to dictate their ability to make a sale.

      • March 4, 2016 at 11:47 am
        Irregular Guy says:
        Like or Dislike:
        Thumb up 9
        Thumb down 0

        CL, you may be in the 1% of the 1%. Are you an agent? I have been an agent since June 1990. Over 25 years. I have lost my share of accounts to price, at the client’s peril. If it is indeed only one segment of the American consumer landscape, then that segment is vast. As in continental. Why do you think that virtually every auto/home insurance carrier promotes the “fact” that people who switch to them save an “average” of 40%? Or a specific dollar amount like $407? Remember, this article is about “small” commercial accounts. Typically, small accounts (and new or startup accounts in particular) live on the edge of solvency year to year, and price is the dominant determining factor of choosing coverage and agent. I’m not speculating, I’m relating factual experience. I have a reminder at the bottom of every email I send. It says “Cheaper is not better…..better is better.” I get comments about it all the time, and I’m certain it has cost me a client or two. But I have testified in court over 35 times in agent professional liability trials, and in virtually every case, the defendant agent recommended or in fact altered coverage DOWN because he/she thought that the client couldn’t afford or wouldn’t buy the correct, adequate coverage.

        If you as a consumer are smart enough to purchase the way you describe, you are the dream client.

        • March 24, 2016 at 5:37 pm
          Agent says:
          Like or Dislike:
          Thumb up 1
          Thumb down 0

          I believe the article is about Commercial Lines and many of you mix in Personal Lines for comments. There really aren’t many arguments for direct selling to Commercial clients by the online system. Typical clients do not understand much and the provisions need to be explained by a competent agent.

  • March 3, 2016 at 1:31 pm
    Irregular Guy says:
    Well-loved. Like or Dislike:
    Thumb up 17
    Thumb down 0

    Wait for the lawsuits. There is a reason a license is needed.

  • March 3, 2016 at 2:25 pm
    Crain says:
    Like or Dislike:
    Thumb up 5
    Thumb down 1

    What if the virtual agent was only virtual in the sense that you contact them by computer? So, if someone like you (who I believe is a competent if not excellent agent)was the contact (even virtually), could the insurance be written correctly? There are those folks who simply do not like confrontation and that is how they view the typical agent relationship. What if they were looking at a pleasant (I am not saying you are not pleasant) image on the computer while they are actually interacting with you? You could make sales without the expense of travel to the account. Once sold, you have a golden opportunity to convert them from virtual to reality (the article states that). What do you guys think?

    • March 3, 2016 at 3:52 pm
      Paul says:
      Well-loved. Like or Dislike:
      Thumb up 24
      Thumb down 1

      Yeah, it didn’t work so well for Google Compare. Direct-writers are there, they always have been. Those people who want to buy their insurance hiding behind a screen usually have something else they’re hiding, and since they are only interested in price, that makes them a less desirable insured. Let GEICO get adversely selected with those people – it might remind why way back when they dumped their book of misrepresented homeowners policies on the old Aetna, and were eventually ran-off after Travelers bought Aetna. The words: Concealment, Misrepresentation, Fraud. They can have that junk and their people.

  • March 3, 2016 at 2:26 pm
    Crain says:
    Like or Dislike:
    Thumb up 5
    Thumb down 0

    Hey irregular, won’t they still have to be licensed even if they sell online? There are not exceptions for that, are there?

    • March 4, 2016 at 11:56 am
      Irregular Guy says:
      Like or Dislike:
      Thumb up 8
      Thumb down 0

      Crain, I was retained to do forensic work and offer an opinion on a UM/UIM E&O claim against GEICO. Their defense was effective in the past as they pointed to the fact that there was no “agent” to sue, due to the online nature of the sale. I investigated and found 22 agents licensed to sell in AZ, and ALL of them were located in North Carolina. We got the name of the agent that actually handled the transaction and proceeded, but it was a major effort. Of course their defense was that everything they did was in the “best interests of the client, who wanted to save money”. However, we proved that the client didn’t know that they were saving money because the Gekko didn’t offer UM/UIM as it is “optional” in AZ, and the agent didn’t think the client “needed it”. It is the illustration of the client thinking they were smarter than their previous agents, did better on their own, and took the CHEAPEST route.

      Incidentally, not to put a political spin on this, but the DOL under Thomas Perez is now strong arming the American public small retirement investors to go the GEICO route and place their future in the hands of “ROBO” advisors. Coming soon to a TV station near you, your grandma eating cat food in a law firm commercial because the robo advisor lost her money for her, and it was her fault. I’m dead serious.

  • March 3, 2016 at 3:43 pm
    Paul says:
    Well-loved. Like or Dislike:
    Thumb up 35
    Thumb down 0

    McKinsey & Company has been trying to effect the demise of the IA channel of distribution since I started in this business March 7th, 1986 – almost exactly 30 years ago. The guys that started that rumor are themselves long-dead. McKinsey is just another company that makes its living bashing the IA. We are used to it. We are alive and doing well. Long live the American Agency System!

    • March 3, 2016 at 4:24 pm
      Agent says:
      Well-loved. Like or Dislike:
      Thumb up 22
      Thumb down 0

      Amen to your post Paul. You are a stand up guy and very correct. I am waiting for the article from IJ that trumpets the success and advantages of using the Independent Agency System. We may not see that anytime soon.

  • March 4, 2016 at 3:28 am
    Agency says:
    Like or Dislike:
    Thumb up 4
    Thumb down 0

    Irreverent article, all signs indicate there is no trend of this happening as many have already pointed out.

  • March 4, 2016 at 11:22 am
    Frank Jones says:
    Like or Dislike:
    Thumb up 3
    Thumb down 4

    Anybody paying attention knows the validity of this article. The IA channel isn’t going anywhere quick, but IA’s must adjust their focus to larger accounts as an average in the agency. The carriers ARE positioning themselves, and some already have, for direct to consumer small commercial business. It will be a disappearing segment of our business over the long haul.

    • March 4, 2016 at 11:32 am
      Mickey Dee says:
      Like or Dislike:
      Thumb up 7
      Thumb down 6

      Aren’t you watching the GOP debates? Trump is going to bring back small business to our great country. The small business segment is going to grow!!!

      • March 4, 2016 at 12:38 pm
        Agent says:
        Like or Dislike:
        Thumb up 7
        Thumb down 5

        Yes Mickey, I rather like the idea of bringing back that $3-4 Trillion parked offshore to invest in America and create some good jobs. Small businesses will benefit by doing business with larger businesses and that is a good thing. Of course, we still have to get rid of the job killing Obamacare so businesses can thrive again.

        • March 7, 2016 at 12:04 pm
          Ron says:
          Like or Dislike:
          Thumb up 5
          Thumb down 4

          Mickey Dee and Agent,

          Per the article, “Overall, the small commercial insurance market is a bright spot, one of the few P/C markets in the U.S. that has been growing in recent years.”

          I did not realize that Donald Trump has been the president for the past several years.

          Agent said, “I rather like the idea of bringing back that $3-4 Trillion parked offshore to invest in America and create some good jobs.” President Obama also likes that idea. Too bad the Republicans are against it.

    • March 4, 2016 at 11:44 am
      Agent says:
      Like or Dislike:
      Thumb up 6
      Thumb down 1

      Frank, are you an agent? The small to mid sized accounts are the real money makers and when an agent writes a large account and has the competition every year from everywhere, they are much harder to retain and when an agent loses one, the commission hit is much tougher. We can retain the smaller to mid size accounts much easier and almost never lose one unless they sell out to someone else.

      • March 4, 2016 at 3:25 pm
        Andrew says:
        Like or Dislike:
        Thumb up 1
        Thumb down 2

        As an agent who has handled both large ($100k+ revenue) and small ($10k revenue) commercial risks my opinion is aligned with Frank’s above. With middle-market & large commercial accounts brokers & agents have the ability to provide their clients far more from a services standpoint which further cements them as a trusted advisor not just an agent who sells them insurance. The small business owner is more often looking to “pinch pennies” on their premiums than the larger risk who has allocated funds for the insurance spend, thus they tend to shop the account far more often IMO.

        • March 7, 2016 at 10:00 am
          Agent says:
          Like or Dislike:
          Thumb up 2
          Thumb down 2

          Andrew, please explain to the class what you mean about revenue. Is that premium volume or commission? A million dollar premium size will generate $100K commissions. A $100K premium will generate about $10K commission. Smaller accounts of about $10K premium volume. The small and mid market accounts generally range from $5,000 up to $100,000 and that is sweet spot for most agents.

        • March 7, 2016 at 10:58 am
          Sole Proprietor says:
          Like or Dislike:
          Thumb up 5
          Thumb down 2

          If you do not know what revenue is, you are unfit to run your own business. Frank said the businesses he writes has revenue at $100K (large) and even down to $10K (small). He didn’t say it was his commission or premium, he said those businesses have revenues at those levels. Are you seriously asking what revenue is or did you simply not understand what he said?

          • March 7, 2016 at 11:53 am
            Agent says:
            Like or Dislike:
            Thumb up 3
            Thumb down 2

            Sole, perhaps there is a language problem here. Revenue to me is the commission income I receive from commissions of earned premium. If I have a $25,000 premium account, it is not hard to figure out how much revenue that account produces based on the percent of commission that account produces. Got It, or do you need a 10 key to figure it out?

          • March 7, 2016 at 12:15 pm
            Sole Proprietor says:
            Like or Dislike:
            Thumb up 3
            Thumb down 3

            Calling your commission revenue is fine, but that is not what Frank wrote. Frank is not talking about what he takes in. He is talking about what the businesses he writes takes in.

            Let me put it this way – hypothetically, you are now the agent for Company1. Company1 had a revenue of $5 million dollars in 2015. The premium you charge them is $1 million and so you make a $100,000 commission.

            How much revenue did Company1 make? $5 million, right?

            That is what Frank was saying. Not what HE took in on the sale, just if the businesses he writes are considered large or small based on their company’s revenue.

            Do you get what he was saying now?

          • March 7, 2016 at 12:17 pm
            Sole Proprietor says:
            Like or Dislike:
            Thumb up 1
            Thumb down 1

            Just to clarify

            How much revenue did Company1 make? is what Frank was saying.

            How much revenue did Company1 make THE AGENT WHO SOLD THEM THE POLICY? is what you were saying.

            These are two different questions and two different answers.

            We good now?

          • March 7, 2016 at 1:33 pm
            CL PM says:
            Like or Dislike:
            Thumb up 4
            Thumb down 0

            I thought Agent’s question was good. Andrew’s post is not clear as to what he meant by revenue. Maybe we should let him answer Agent’s question. I can read it to be Andrew’s revenue on the account or the revenue of the business.

          • March 7, 2016 at 1:41 pm
            Sole Proprietor says:
            Like or Dislike:
            Thumb up 2
            Thumb down 1

            “Maybe we should let him answer Agent’s question” That is totally fair. I will wait and see if Frank posts a clarification on what he meant by revenue in his earlier post.

  • March 4, 2016 at 3:13 pm
    PETE says:
    Well-loved. Like or Dislike:
    Thumb up 11
    Thumb down 0

    Internet shopping……bottom dollar buyers…..price comparison shopping…. A race to the bottom (full of hefty loss ratios).
    To the geniuses that lead our industry…. Create the monster AND IT WILL EAT YOU!!!

    • March 4, 2016 at 3:39 pm
      Agent says:
      Like or Dislike:
      Thumb up 6
      Thumb down 2

      PETE, I am afraid there are a lot of CEO’s out there along with Boards of Directors that have bought into this nonsense from dufus Actuaries and Predictive Modelers. No wonder so many companies are in trouble with mounting losses, poor results. State Farm is getting killed right now on Personal Auto and the only way they make money is their investments in big Pharma.

    • March 7, 2016 at 2:45 pm
      Agent says:
      Like or Dislike:
      Thumb up 2
      Thumb down 2

      CL, I thought my question was good as well. I have a number of accounts that run several million in revenue. Good for them. I am glad for their success. They also generate a premium based on sales revenue and that is how their GL premium is calculated. We get the commission “revenue” from writing their coverage. This is not hard to figure out and I figured it out about 30 years ago.

    • March 8, 2016 at 4:19 pm
      Agent says:
      Like or Dislike:
      Thumb up 2
      Thumb down 0

      Actually Sole, I was looking for an answer from Andrew, not Frank since he was the one talking about revenue. I couldn’t find one word in Frank’s post about revenue. I think Andrew had a quick cup of coffee on his post and then was out of there. By the way, I answer surveys all the time and two questions stick out for an agent. 1. What is the premium volume for your agency and they give a range of volume. 2. What is your revenue from commissions and other income? It isn’t that hard to answer for someone who has been around for years.

  • March 24, 2016 at 2:34 pm
    Charlotte says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    Love this post!! I wonder if agencies new found love for small business is because they know they can write them, then dump them into a service. Thanks.

    • March 24, 2016 at 5:38 pm
      Agent says:
      Like or Dislike:
      Thumb up 2
      Thumb down 0

      Charlotte, we think too much of our clients to dump them into a service for handling. Lose contact and lose the client in a heartbeat.

  • October 7, 2016 at 9:40 am
    Dixie says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    You should check out my site, I tried performing some SEO
    but it didn’t work though
    Will definitely be returning, ’tis a great blog



Add a Comment

Your email address will not be published. Required fields are marked *

*