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For a number of you, contingency earnings are a vital part of your
agency's profitability. I guess the best way to look at contingency
profits is to consider it the broker fee for agents. Since agents can
not charge fees, their supplemental earnings come by the way of
performance guarantees. And now, those earnings are being challenged.
Recently, Eliot Spitzer informed AIG,
Zurich
, ACE and St. Paul/Travelers that more than 65% of the market do NOT pay
contingencies and that per their signed agreement with the States
Attorney, they too must discontinue this practice. I for one, am
affected by that decision and my hope is that this does not set a
precedent for other carriers to discontinue compensating agents for
their profitable business. I suspect it will not. Why? Days after this
announcement was made and rippled across the country, St. Paul/Travelers
had a conference call to their agents to dispell any rumors that they
would discontinue rewarding their best agents for their profitable
performance. This comes as a great relief but it looks like the above
mentioned carriers will have to re-invent the profitability wheel in
order to remain in compliance. After listening to the conference call, I
do feel that everything will be fine and it may even lead to even better
profit sharing formulas. I just cant see some of the largest insurers in
the world throwing in the towel and allowing their best agents suffer
due to the wrong doings of a handful of large brokerages. We will find
out during the first quarter of 2007 exactly how this plan will be
reworked to satisfy both the agents and the insurer's legal departments.
For those of you who are not agents for any of your carriers, life is
pretty good right now. Of course, the phone is not ringing as much as it
should but I am hoping that the media will continue to pick up on the
registration suspension notices that are being sent on in the tens of
thousands. This SB 1500 Bill might just become the tipping point for
many consumers to reconsider driving without insurance. The more
important issue is whether or not the court system will impose the fines
and uphold the enforcement requirements or will they slap the offenders
on the wrist and utilize minimum fines.
California
is very late to the party when it comes to mandatory financial
responsibility enforcement. Many other states have had a system in place
with the DMV for year; however, they dont have to deal with a population
such as
California
nor the administrative nightmare that this can lead to. In any case, I
am hopeful that this bill will prove to be what it was intended to be.
As far as broker fees, there has been pressure to minimize the amount
charged to client due to market pressures. Better to get $50 and a new
client then nothing at all. In this kind of a system, I like the idea of
placing customers in the system at a low cost and then working with
those customers to secure other insurance policies. I know it sounds
"old-school" but we have returned to the days of "one
stop" shopping in order to satisfy the convenience needs of our
customers. Matt Pickett is an insurance broker in
San Jose
and a member of IBN and has often shared his techniques in rounding out
his customer base "old-school" style. He has no advertising
budget and uses only 2-4 companies. Matt sends a newsletter to his
customers and educates them about the need to have additional coverages
and policies to protect their needs. He uses a soft sell approach and
always signs off by saying "WE LOVE REFERRALS". This is just a
small sampling of what he does but it works. I have also spoken to some
agency owners who find themselves in a situation where they have
minimized their staff and in some cases are the only licensed producer.
They hire a couple of part time employees to process certificates,
endorsements, new business and any other task that an unlicensed
employee can do for them and this allows the principal to concentrate on
new business. I employ this strategy and I like it. If you can get with
a company who offers in-house customer support, it is even better. The
cost to join this service is usually 1.5 to 2.0 points of commission but
it is much cheaper than hiring somebody and the customer service unit is
never sick, knows the product line very well and never asks for Mondays
and Fridays off! LOL. Cost cutting is key but cutting into the bone is
not. Many companies such as Explorer, Viking, CenCal, SCJ, Anchor
General, Infinity, AIG and many others will allow your customer to call
them directly to process payments and you can go online to process
endorsements. My suggestion would be to look closely at your favorite
carriers and see which ones you feel comfortable with referring your
customer service needs to. This will free up more time for you to send
out cross-selling and rounding-out letters to your customers. If you are
sitting at your desk and wondering whey the phone isnt ringing, its
because brokers such as Matt Pickett are taking your clients because
they are working smarter. I really feel that payment processing is a
waste of agency time. I believe that you should educate your customer to
use the insurance company/general agency website to process payments
whenever possible and to de-emphasize walk-in business unless it leads
to writing new business. The real money is made by adding app. count not
earning a puny $5 fee by taking a payment. Just my opinion and you may
disagree but my experience has been that it costs the agency money
everytime somebody walks in the door and unless you are earning above
and beyond that cost, you are losing money. Keep those aisles clear and
open dialogue with your customers. If you are not contacting your
customer at least 4-6 times/year(other than sending a bill), you are out
of their minds for the most part and this has all been proven by the
research teams of some of the world's largest insurance companies such
as The Hartford and Safeco. And by the way, DONT send your cross-selling
letters along with the customers bill. Take the time to send a separate
mailing on your letterhead with a positive tone. Insurance premium
billings are not and never will be mail that your customer wants to
spend much time with. I have tried it and learned from it and thought I
would share it. In any case, please try some of these suggestions in
2007 and see if it changes your agency's production numbers and general
operating procedures.....you might just be surprised.
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