2010 Best Practices Study

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

Mgmt. Perspectives

are actively monitoring the landscape to ensure that client’s questions and concerns can be addressed.

unemployment rates, continues to generate modest single digit results for most agencies. These economic headwinds are further exacerbated by the continued soft P&C marketplace, now in its seventh year. With many agencies suffering through 10-15% reductions in year-over-year P&C renewal rates, the independent insurance world is facing the toughest operating environment it has encountered in a generation. Challenging even in the best of times, recruiting and developing support and sales talent is more important than ever in the current environment. Client expectations and tough competition have raised the bar significantly when it comes to customer service and many best practices agencies are struggling to find enough talent to meet this challenge. A Best Practices agency’s distinguishing characteristic is generally its sales culture, which must be fed with a steady stream of new business from existing producers and the continued addition of high caliber producer candidates. Finding these producer candidates and developing them to their full potential remains a high priority and challenge. Healthcare reform, passed mid-year in 2010, provides yet another significant challenge to the industry. Although now law, it will be several years before the legislation is implemented and its accompanying regulations finalized. For many agents trying to respond strategically to the changing health insurance landscape, planning is next to impossible to do. There simply is not enough clarity about how the “game will be played” in the future.

Profile

Revenues

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

Expenses

Profitability

Although all group health insurance is likely to be impacted by healthcare reform, the most vulnerable book of business appears to be smaller group health accounts (frequently cited at 50 lives and fewer). These smaller clients, who will qualify for the state insurance exchanges scheduled to come on-line by 2014, are seen by many Best Practices agencies as the most commoditized segment of their books of business and most at risk. As such, many Best Practices agencies are setting their sights higher, attempting to write larger accounts that will be less likely to be lost to the insurance exchanges. Given the uncertainty associated with health insurance in the future, many Best Practices agencies are focusing on other products and services less likely to be impacted, such as voluntary products and services, disability insurance, long-term care and wellness. A great deal of energy is also being spent on attempting to convert from commission to fee arrangements when appropriate. Facing Challenges For many agents, the challenges facing their businesses today at times feel far more numerous that the opportunities. Although people issues have generally topped the list in this category in past Best Practices Studies, this year the economy and the soft P&C were cited frequently as the most significant challenges faced. The economy, mired in recession for the past several years, continues to grow at a snail’s pace. Client bankruptcies, dismal new construction activity, fewer business startups, and shrinking exposure bases make positive organic revenue growth a near herculean feat. Employee benefits growth, which is tied closely to 1. No action at all 2. Writing larger accounts less likely to move into insurance exchanges 3. Increased focus on individual products 4. Staying informed 5. Transitioning from a commission–to-fee business

Employee Overview

Producer Info

Staff Service Info

Technology

Insurance Carriers

Appendix

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

1. Recruiting/developing sales & support staff 2. The economy 3. Soft P&C market 4. New business activity 5. Healthcare reform

2010 Best Practices Study

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

94