ARTICLE SPAWNS
AND ARTICLE
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In a recent article I had written, I eluded to the fact that, in my opinion, there have been general agencies in California that have offered a product, personal and commercial lines, in which its underwriting profitability seemed to be a secondary motivation. The premiums were inexpensive and the fees were high. Be it perceived or actual, the fact remains that some general agencies have gone through many, many companies in a relatively short period of time and in some cases the average “internship”(which never reaches journeymanship – is that a word?) is less than a couple of years/company. Why do some General Agencies go through so many carriers?One general agency emailed me a note and stated that the comment was irresponsible and went on to state that their philosophy is to write a profitable book of business for their carriers. BRAVO! That's the way it should be; however, the there were some General Agencies who have not embraced the obligation to perform well from an underwriting perspective, especially when the market becomes soft. And in one instance,some of the changes that I have noticed included ; 1)disregard for minimum annual mileage factors, 2)accepting business that would otherwise be unacceptable, heavy commercial vehicles, vehicles registered to a corporation, etc., and 3)allowances for drivers to insure vehicles that they are not the owners nor have any vested interest in (how do permissive use rules get interpreted when a non-owner allows the vehicle to be driven by others (and how does this line of business make any sense to underwriters and actuaries when you can’t track who the drivers are?) These general agency product manager decisions have got to be brought into question, unless the overall philosophy was to ease the guidelines in lieu of more business (this being the most probable scenario). When production wanes, fee income is obviously affected, fixed income becomes a bigger problem and that means laying off marketing representatives, lower-tiered underwriters and overpaid top-brass positions. (I recently heard from a representative in Now that I have said this, I am thinking of a carrier that I thought would been in the market today but quickly departed after an investor meeting suggested they pull out(from what I was told by one of their marketing reps a few years ago) and they were highly rated at the time and that was American Sterling. Remember Millers Mutual Ins. Co.? How about National Auto and Casualty? All of these companies were strong coming into the auto arena but have fallen from grace as Am. Sterling is B+ IV(good rating but a small company) and the other two can’t be found on the A.M Best website. Also, consider this. I have seen a few general agencies that have offered the same carrier for a very long time and have adhered to the underwriting profitability even when it meant that they would attract less business and knowing that the weaker carriers would eliminate themselves over time. I really like that business plan the best because no matter what cycle we are going through, soft or hard, I know I can count on that general agency or company. One of the longest running companies was Clarendon National and managed by Pat Kilkenny’s group at Arrowhead. I wrote almost $100K of property business with them over the last few years and now Arrowhead General is expecting to write close to $800,000,000 of premiums this year. This is coming from a G.A. that started off with one nonstandard auto program back in the mid-80’s and has proven itself over and over again. I have often wondered why Arrowhead General never started their own company like Anchor General. I guess when you are using your own money, underwriting profitability becomes more than priority. It becomes paramount. Kudos to both of these companies. Once again, I wonder why a company like Clarendon remains with one General Agency for over a decade, writing numerous lines of business and yet we continually see other carriers come and go in short fashion? Remember Cadillac Insurance Company? Underwriting profitability was not there stronghold. Cadillac had the same premium for customers that had 1-3 minor violations. And what happened to Superior Insurance Company (Symmons Group), and Galway Insurance Company. Some of these companies were very strong coming into the auto market but the first two are not even in business anymore. It really is hard to determine which companies to write large amount of business with and I suppose you have to look at their tenure in this line of business. When I see a company file rate changes on a consistent bases, whether it be for the changing of forms or premiums, it indicates that they are continually watching their results and reacting accordingly.
Here’s another thought. Before you sign the addendum to your broker agreement, contact the marketing department and ask some questions about their new carrier and see what they have to say. Find out if they have written auto insurance before and in what states? What is their loss ratio history in these other states? What other lines of insurance do they write? What is their A.M Best Rating. I am sure they don’t mind you asking this and probably impressed that you care enough to be interested. Of course start up agencies don’t have much of an option when choosing the carriers they want to represent but over time they should be just as curious and inquisitive. I think that track records speak for themselves and the people behind the program are just as important. I also use Cabrillo General Insurance quite a bit for their homeowners products and though they came into this line of business recently, I knew that their product manager, Rhonda Loshinkoll (I just butchered her name….sorry) and owner, Mr. Jester, were responsible for the development of the 5 tier product that Arrowhead General Insurance offers and the coverage offered is similar to Allstate and Statefarm! There is nothing worse than trying to sell a preferred client a product that is missing so many coverages. Those type of programs I will not sell because I fear an E & O claim is just around the corner. I guess it comes down to narrowing your focus to those companies that offer a carrier that has a known track record of success and who give you the tools to manage their product (once again, I emphasize the need for every company to have an interactive website for their agents and brokers). In most cases, their are very few Technoduds left out there who don’t offer modern technologies to their producer base. My point with this and the previous article is this: Write business for those direct companies AND general agencies that have demonstrated to you that they can be relied upon through soft and hard markets and have weathered a few cycles with the same carrier(s). This is a sign that they are responsible to the guidelines and are not solely dependent upon fee income. Ah….now there’s an idea for another article….Fees and More Fees. Ever looked at the FSC rater and seen this scenario: 1)Company A offers $45 premium + $40 SR Fee + $40 policy fee and a $10 billing fee/month and 2)Company B offers $57 premium with no fees and a $7 billing fee? Who would you use? Amendment: General Agencies are vital to our continued success (refer to article 8 in the archves) but not all of them are created and managed equally. As a producer you should expect to have the proper tools afforded to you by the general agencies and companies you represent as your client sees you as the carrier itself. You do have choices and though price is important, stability and ease of use are crucial. Cheers to the Technostuds and the companies that have weathered numerous cycles of business - we need you, not necessarily more of you...LOL. |