2010 Best Practices Study

Analysis of Agencies with Revenues Between $5,000,000 and $10,000,000

Mgmt. Perspectives

Recruiting & Developing Talent Many agents have grown weary of attempting to recruit production talent from competitors. Producer non-compete agreements are now the rule, rather than the exception, making it increasingly difficult to recruit producers with existing books of business. In response to the old adage,“it’s easier to teach a good salesperson insurance than it is to teach a good insurance person to sell,” many Best Practices agencies are increasingly recruiting successful sales talent from other industries. Keys to Recruiting/Developing Talent (Top 5 Listed in Order of Frequency Mentioned) 1. Recruiting experienced sales talent from outside the industry 2. Screening / testing producer candidate much more carefully This emphasis on recruiting sales talent without specific insurance experience is significantly increasing the need to develop a well defined training and development program. Although most agencies still rely heavily on insurance company schools, many are developing inside “universities” and curricula to supplement these outside resources for both producer and support personnel hires. Given the enormity of the investment necessary to facilitate this employee development, agents are placing more or more emphasis on the careful screening and testing of candidates to increase the likelihood of success. Although outside recruiters and Internet employment sites are frequently used to identify new employee candidates, many agencies find that their existing employees are the best source of producer and support personnel candidates. Many agencies provide significant referral bonuses to employees for identifying candidates that are ultimately hired. Achieving Organic Growth Current economic conditions and the soft P&C marketplace are making significant organic growth 3. More emphasis on in-house training 4. Hiring referrals from existing employees 5. Increased use of recruiters & Internet employment sites

increasingly difficult to achieve. The average agency in this $5 - $10 M group grew organically by only 0.3% last year. Cross-selling initiatives were a frequently cited practice leading to positive growth and most find it far easier to sell an existing customer than to find a new one. Agencies are increasingly making use of cross-sell commission arrangements to spur this activity among producers. Best Practices agencies also report better success with a more specialized approach and a greater emphasis on niche business. A specialized practice focus (contractors, professional liability, biomedical, etc.) generally results in far better new business results and much higher profitability than a general lines approach. Accordingly, marketing and advertising efforts for these specialty practices are much more focused and effective. Recruiting producers and support personnel from these target niches make it more likely that the agency “speaks the industry’s specific language” and understands the specific needs of the customer base being targeted. Finally, a more methodical and “businesslike” new business pipeline approach is frequently cited as a key to successful new business efforts. Pipeline software is increasingly used to ensure that producers are accountable for prospecting the right business in sufficient volumes and that target business is not “falling through the cracks” or being mismanaged. Adjusting to Health Care Reform When asked about their strategic responses to healthcare reform, many Best practices agencies indicated that they are taking a “wait and see” approach. The uncertainly of how the healthcare reform legislation will ultimately be implemented makes it difficult to take definitive action. Many in this year’s study are optimistic that they will be able to adapt and that their group heath books of business will not be negatively impacted once the dust settles. Most 1. Cross-selling initiatives 2. Niche / specialty focus 3. Increasing new business producer incentives 4. Target marketing & advertising 5. Managing producer pipelines more carefully Keys to Organic Growth (Top 5 Listed in Order of Frequency Mentioned)

Profile

Revenues

Expenses

Profitability

Employee Overview

Producer Info

Staff Service Info

Technology

Insurance Carriers

Appendix

2010 Best Practices Study

Agencies with Revenues Between $5,000,000 and $10,000,000

93