2010 Best Practices Study

Analysis of Agencies with Revenues Under $1,250,000

Mgmt. Perspectives

especially difficult to find and attract qualified employees, and to fund ongoing development and rewards for current employees. In discussing a wage freeze on all employees, one agency manager confided, “our clerical staff has helped us have good profits this year and I want to reward them as soon as possible. They currently share commissions on business they produce but I want them to enjoy wage increases.” Cash flow constraints have been brought on by the continuing soft market and weak economy. As agency profit margins have shrunk, expense control has become increasingly important. Many of the agencies in this group wrestle with the need to hold or cut spending levels at the same time they need to invest in new sales and improved retention. New sales are needed to meet their volume commitments to their carriers, to maintain their agencies’ values and to fund the internal perpetuation, a route that most want to take but are often unable to achieve. Retention is critical for positive net growth but difficult as the agencies’ commercial clients are closing their doors and their personal lines clients seek lower pricing. One agent explained, “Due to the current economy, clients are calling us and asking for their account to be priced with other carriers…..it feels that we are working harder than ever to retain long-time clients.” This same agent, however, exemplified the advantage of being an Independent Agent and why this group continues to thrive by adding, “We are glad to be an independent agency that is able to retain our business although we may have to move it among carriers with the agency.”

this group of agencies has been “more active than ever to attract new business.” They used multiple channels, not to mention the tried and true…”ask existing customers for more business!” Adjusting to Health Care Reform Typically, life & health insurance accounts for less than 10% of this group’s revenue, so the most common action taken in light of health care reform is no action at all. However, for those that have life & health books of business, legislative change is viewed as either an opportunity to expand the business into new areas or as an impending threat to the revenue source and their ability to provide an affordable benefits program to their own employees. 1. Taking no action 2. Staying informed and keeping clients inform 3. Investigating/preparing for opportunities that will surface 4. Continuing to sell L&H products but not as aggressively 5. Considering the impact on agency’s own benefits package For those seeing opportunity, they feel more people will have or want to purchase health insurance and are positioning themselves to be trusted source of information and products to those consumers. One agent indicated,“Our practice is adjusting by becoming very well informed of the implications of the reform at the various stages and passing our knowledge onto our clients and prospective clients. We’re using the situation to expand our client base.” Others are developing plans to aggressively market products to individuals, hiring or aligning with an outside health and benefits broker, revamping their websites for additional focus on healthcare insurance products, and attending classes for further training. For those with a more negative view of the reform impact, they too are staying informed but have reduced their marketing and prospecting for group health clients. Facing Challenges A perennial challenge for agencies in this revenue category is finding, developing and retaining quality employees. However, recent cash flow constraints endured by many of these agencies have made it Top Adjustments (Top 5 Listed in Order of Frequency Mentioned)

Profile

Revenues

Expenses

Profitability

Employee Overview

Producer Info

Staff Service Info

Technology

Insurance Carriers

Appendix

Top Challenges (Top 5 Listed in Order of Frequency Mentioned )

1. Recruiting, retaining, and rewarding quality employees 2. Controlling Expenses 3. Maintaining positive growth 4. Meeting carrier volume commitments 5. Staying up with technology

2010 Best Practices Study

Agencies with Revenues Under $1,250,000

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