94 / 191
2010 Best
Practices Study
Agencies
with Revenues
Between
$5,000,000 and
$10,000,000
94
Analysis of Agencies with Revenues Between $5,000,000 and $10,000,000
Mgmt. Perspectives
Profile
Revenues
Expenses
Profitability
Employee Overview
Producer Info
Staff Service Info
Technology
Insurance Carriers
Appendix
are actively monitoring the landscape to ensure that
client’s questions and concerns can be addressed.
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
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.
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
Top Adjustments
(Top 5 Listed in Order of Frequency Mentioned)
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