2001 Best Practices Study

Analysis of Agencies with Revenues Between $500,000 and $1,250,000

C ARRIER R ELATIONSHIPS

“We identified our ’sweet spot’, i.e. the type of business that we excel at writing, and concentrated on it so that we could deliver it to the companies very efficiently and profitably. On a proactive basis we align ourselves with those carriers that want the business in the manner in which we can deliver it. Technology is a big piece of our decision to align with a company.” “Never over-promise but always try to over-deliver.” “Our front line staff understands the importance of saying no to certain accounts or certain prospects. We won’t write everything that comes in the door. We don’t want to jeopardize good loss ratios by making a careless decision on the front line.” “Our buy-sell agreement spells out how, if any one of the three people dies, their ownership interest would be acquired by one of the remaining two. It’s funded by life insurance. I own a policy on my parents and they own one on me. The intention is for me to acquire their interest in the agency over time and that is being done through a schedule of gifting each year, as well as an ultimate buyout of some kind, at our discretion. It would be facilitated if one or both of them passed away.”

The practices used by this group of agencies to build and maintain productive relationships with their carriers include the obvious: ƒ align the agency with carriers that have compatible business directions, philosophies, and technology support; ƒ work with the carrier to set realistic production goals; ƒ write good, profitable business that the company wants; ƒ be extremely responsive to the carriers requests; and ƒ build personal relationships at multiple levels within the company. Many of the agencies interviewed indicated they met with their lead carriers on a periodic basis to make sure that the agency was meeting its commitment to the carrier, and to address any issues that might be impacting that commitment. They also try to visit the carrier’s location and encourage company personnel to visit the agency regularly as a way of developing a closer working relationship. While competitive rates, good products, and the contingency agreement remain key considerations for these agencies, the carrier’s technology support is becoming critical to the relationship.

P ERPETUATION /L EADERSHIP D EVELOPMENT

Perpetuation is a major challenge and weakness for these agencies. Those that have a formal perpetuation plan in place feel they have addressed the major issues. They know: (1) to whom they want to transition the ownership, (2) when they want to begin the transition, and (3) how they will do it – including the preparation of the legal and funding vehicles and training of the new leadership.

40