When the loss ratios of an auto insurance program go bad it seems that the
usual suspects are the producers and what kind of business was sent to the
company. But before a company begins to place the blame, they should analyze
their rate structure and whom they gave the appointments to. Numerous programs
who are doing many things to recoup some of the premium THEY GAVE AWAY 6
MONTHS AGO with an ill-advised rate decrease. There was a mad rush to cut rates to
the core and expect the huge influx of volume to carry this rate. Did it work?
Very few companies have found this to be a successful strategy. So what happens 
in the face of the mounting losses and with a tight DOI rate approval committee? 
Insurance companies are being forced to take matters into their own hands by 
rating higher mileage factors to boost the rate, discontinuing direct bill options,
lowering commissions, among other things. The DOI has made it quite clear 
that rate increases will be carefully scrutinized and this has proven to be factual
for carriers who are looking for rate relief. Is it fair to always blame the producer 
for the bad results? To some degree, it is ultimately the insurance company's  
fault for appointing producers who do not deserve to write the program. Producers, 
in my opinion, should be categorized into 3 groups. The first group is Novice, the 
second is Advanced and the third is Professional.

 
NOVICE PRODUCER
The Novice is a new producer who probably spun off of another retailer and 
thinks that he/she can do it better with little or no experience in running a
business (selling is the easy part). He/she has no more than a few years of
experience writing any one carrier and is still learning how to use different
products effectively (the tendency is to sell the cheapest rate regardless of
whom the carrier is). In this market, with the overuse of "me-too" programs,
many products are closely priced and brokers can decide where to send the
business WITHOUT worrying about price difference. (Novice tip: Do not send a
high-risk policy to a carrier that you have little or no book of business
established with. One large BI/Pd claim and you will not have enough
premium to cover the loss without causing your loss ratio to go through the roof. 
Chances of getting another well priced product from this company are severely
diminished. Better to send it to one of your more well established books that
can take the hit as long as you are sending good volume to them. It is very
hard to recover from a huge loss ratio on a program that you can only send a
couple of deals per month to. The Novice has to think about the carrier as
much as the client in order to properly represent both effectively. 

ADVANCED PRODUCER
Once he/she masters this and resists selling price only, reputation will be
enhanced and results will prove themselves over time (though loss ratio is out
of our control, for the most part, good underwriting at the producer level
does prove itself over the years). And finally, the Advanced producer has had at
least 5 years of experience in writing a half-dozen carriers and knows
underwriting guidelines fairly well. He/she has rewritten a couple of books of 
problematic business and understands how difficult it is to keep these customers. 
Approximately, 1 out of 5 Novice producers will remain in the business. It is at this
level where the mid-market to preferred programs should be appointing
producers on a "per case" basis. The Novice can be offered nonstandard programs
initially and then reviewed every 6 months or so to see if another more challenging,
heavier underwritten program can be offered to the producer. Many companies
give in to greed and attempt mass appointments at the expense of their better
judgment. At this point, it is NOT the producer's fault as much as it is the
appointing general agency or carrier. 

PROFESSIONAL PRODUCER
The last type of producer is the one we all like to think that we are. A
handful of true Professional producers come to mind such as Don Soukup, Verne
Walton and a few others. These individuals have been through numerous hard and
soft markets concentrate on consistent good service and write business with
only a handful of reliable markets. They are open minded enough to consider
new appointments and expect some key Ingredients: an acceptable commission
structure, dependable service and consistent rate pricing models. The
Professional has very little difficulty in getting appointments.
Approximately, 2 out of 5 of the Advanced Producers get to this level. 
Just think about it. How many producers do you know who can say that they have
been writing new business policies for over 25 years …. NOT MANY. Much of this
discussion is based on various surveys and a general sense of what is in the
market place. Food for thought.

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