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Big “I” National News

P&C Trends

The Easy Button
Study finds ease of doing business crucial for agents choosing a carrier.

Travelers or Liberty Mutual? MetLife or Safeco? When it comes to carriers, independent agents have many options of companies to work with, but what sets one apart from another and ultimately leads to a collaboration that’s beneficial to both parties? What it really boils down to is how easy it is to do business with a carrier, according to the Ease of Doing Business National Survey.

The survey polled 6,000 agents and brokers and found that 84% of respondents believe a carrier’s ease of doing business performance is crucial when choosing a carrier.

“Ease of doing business is absolutely critical for agents’ productivity and profitability…how easy a supplier is to do business with makes a huge difference,” says to Nort Salz, president and CEO of Deep Customer Connections, the company responsible for the survey. “If an agent can quote and issue a policy in half as much time and with half as much work with one company in comparison to another, it’s not hard to imagine where they’ll go.”

Jack Puckett, agency principal at Capstone Insurance Services LLC, in Greenville, S.C., works with 12 all-lines carriers and a wide array of online workers’ compensation carriers and agrees with the strong emphasis survey respondents placed on the ease of doing business.

“The ease of doing business is really important to the people inside the agency, the customer service representatives and producers,” he says. “When it comes down to transacting, the ease of doing business wins a lot. The customer service reps and producer have a lot to do with it because they are going to go to the path of lease resistance. It doesn’t do you any good to get five quotes when you can’t get them done in time.”

The survey asked agents and brokers questions regarding: the importance of ease of doing business when deciding which p-c carrier earns their business; the importance of each of the 10 factors that make up ease of doing business; how p-c carriers perform against these 10 factors; and what the two most important things carriers can do to be easier to do business with.

The survey identified 10 factors that contribute to the ease of doing business and used these factors to create a model to rate carriers’ performance. The factors include:

1. Understanding of the needs of agency personnel;
2. Responsiveness in underwriting;
3. Flexibility in underwriting;
4. Accurate, timely policy services;
5. Effective, user-friendly technology;
6. Handling claims properly;
7. Handing claims fairly;
8. Providing marketing support;
9. Providing insurance expertise an support (i.e. loss preventions programs); and
10. Ease for the insureds to do business with the carrier.

Of the 10 factors, agents said the most important is underwriting responsiveness, followed closely by handling claims promptly and handling claims fairly.

“The most important EDB factors have to do with carrier performance during the underwriting and claims processes,” the study says. “Agents in particular want it all: the personal, organizational and technical responsiveness that enables them to convert a prospect into a policyholder quickly and to keep that policyholder over the long-term with effective claims handing.”

An unexpected survey finding was that ease of doing business concerns much more than technology. Out of the 10 factors, technology was ranked sixth in importance and fourth in terms of opportunity.

“A lot of people think technology when it comes to ease of doing business, but there are other things like whether claims are handled fairly and properly and does the carrier provide timely, accurate policy services…the ease of doing business is the whole experience an agent has when dealing with a carrier,” Salz says.

However, technology, especially single-entry ratings products, is still extremely important when it comes to ease of doing business and choosing a carrier, according to Puckett.

“Remember when you were in high school or college and a teacher handed you an hour of homework? To them that seemed reasonable, but they lose sight of the fact that you have homework from five other classes. Well the carriers are the same way. They think what they are delivering to an agency is wonderful, but they lose track of the fact that we have 15 other carriers. So it’s sort of like the teacher who loses perspective that you have other classes,” he says.

The survey determined a wide variance in performance among the 200 carriers ranked by respondents, and even within carriers’ performance on individual ease of doing business, factors varied significantly. The survey’s measure of performance and opportunity, the EDB Index^SM , ranged from the 60s for some carriers to the mid-90s for the strongest performers. (An index of 100 means performance matches expectations perfectly, lower numbers show more need for improvement.)

One thing that hasn’t varied though is the value agents and brokers place on the various factors contributing to ease of doing business. There has been consistency in where respondents’ since the survey was first conducted, according to Salz.

 “I think…what it means is that, to a fair extent, a lot of carriers are doing well and working hard at it,” he says. “When you’re already doing a good job, it’s hard to make incremental improvements.”

For more information or to order the study, click here.

Michelle Payne (michelle.payne@iiaba.net) is Big “I” writer/editor.

On the Hill

House Approves Terrorism Backstop Extension
Big “I” urges speedy Senate action.

Yesterday the House of Representatives passed H.R. 2761, the Terrorism Risk Insurance Revision and Extension Act of 2007 (TRIREA), legislation to extend the federal terrorism insurance backstop, which is set to expire at the end of this year. The bill, sponsored by Rep. Michael Capuano (D-Mass.) and House Financial Services Committee Chairman Barney Frank (D-Mass.), is critical to maintaining affordable and available terrorism coverage.

“The Big ‘I’ strongly supports the continuation of a terrorism insurance backstop,” says Big “I” CEO Bob Rusbuldt. “This legislation is crucial for the business customers of independent agents and brokers and for our nation’s economic security. We thank Chairmen Frank and Kanjorski, as well as Ranking Member Bachus, for working to get this done in the House in order to bring certainty to policyholders, insurers and the insurance market as a whole.”

The bill would extend the federal backstop on a long-term basis with reasonable trigger levels. In addition, it would help to ensure coverage from catastrophic terrorist attacks by including nuclear, biological, chemical and radiological (NBCR) events. The Big “I” supports a reasonable mechanism to include NBCR coverage and applauds the House for including provisions that recognize both customers’ need for such insurance and insurers’ difficulty in underwriting these exposures. The Big “I” also strongly supports the bill’s creation of a blue-ribbon commission to propose long-term solutions to covering terrorism risks and is pleased that the views of independent insurance agents and brokers will be represented on the commission.

“This is a very significant step toward extending the terrorism backstop on a long-term basis---a priority for our members,” says Charles Symington Jr., Big “I” senior vice president for government affairs and federal relations. “We applaud the House for taking action and urge the Senate to take action on extension legislation as soon as possible.”

“Our members are pleased that the House has moved forward on this important issue and we will work with the Senate to help get extension legislation introduced and passed before the end of the year,” says Jason Spence, Big “I” assistant vice president for federal government affairs.

Patrick Royal (patrick.royal@iiaba.net) is Big “I” director of public affairs.

L&H Trends

Less Enjoyable Than a Root Canal
Don’t let insureds’ distaste for life insurance prevent them from getting coverage.

Discussing life insurance needs does not top most peoples’ lists of desired leisure activities. In fact, a new survey from the Life and Health Insurance Foundation for Education (LIFE) finds that people would rather do almost anything instead of discussing their life insurance needs.

To many insurance agents, the findings are not surprising. After all, life insurance sales have been mostly flat the past several years even though consumers can buy insurance from a variety of sources, including through the Internet. What is surprising is the survey indicates 20% would prefer to get a root canal and almost half would rather go to the Department of Motor Vehicles to renew their license.

Why are so many people averse to discussing their life insurance needs? The answer is analogous to food labeling. Recall the “good old days” when you bought a candy bar, unwrapped it and ate it in three or four bites with little doubt that you were consuming some sugar, fat and about 250 calories. However, in today’s world, with the accompanying transparency in food labeling, if someone takes a moment and reads the side of the candy bar they see out how many grams of fat, the amount of carbohydrates and several ingredients that they can’t pronounce are in it.

What is the connection to life insurance planning? The life insurance planning process (family needs analysis or capital needs analysis) is not painful---there is no shot of Novacaine, drilling or rinsing required. Instead there is a sobering discussion of the financial realities if someone dies (or becomes disabled) and the fact that Social Security survivor benefits (if eligible) for dependents and their company’s group term life insurance are probably not going to replace the deceased wage earner’s income contribution to the household and will require a life insurance policy. And even as life insurance premiums are more affordable than ever, it still means the household may not be able to buy the flat screen plasma TV and/or get the Direct TV NFL package. That is the outcome that people fear---the accompanying guilt if they choose a luxury item over the necessary financial protection for the family.

Insurance agents know this. Fortunately, they have the communication skills, empathy and knowledge to help customers overcome the dreaded human foible observed by the empiricist John Locke, that it’s human nature to discount the present for the future. Of course, agents can also quote another famous Englishmen to their customers, John Maynard Keynes, who also opined that in the long run we are all dead. Don’t let customers let procrastination keep them from taking care of the most precious thing in their lives: their families.

Dave Evans (dave.evans@iiaba.net) is a certified financial planner and an IA l-h contributing editor.




Tech Update

Weaving a Web (Site) of Success
Tips for agents looking to create award-winning Web sites.

Twenty-eight percent of consumers are currently using the Internet to find auto insurance and people are increasingly turning to the Web to meet their insurance needs, according to a recent study by McKinsey & Company. So how can an independent agency compete with big names such as GEICO and Progressive that have revolutionized the world of online insurance shopping? Developing a Web site might be the smartest bet, but what makes one site better than another?

David-Michel Davies, executive director of the annual Webby Awards, has an idea or two. Every year the International Academy of Digital Arts and Sciences holds the Webby Awards to recognize excellence on the Internet via Web sites, interactive advertising, online film and video and mobile Web sites, and Davies has seen his share of what does and doesn’t work.

There are six criteria key to a successful Web site, according to Davies. These criteria include:

Content – The information contained on the site including text, video and audio.
Navigation – How easy it is for visitors to find information.
Functionality – Whether it serves its purpose.
Design – How the site actually looks.
Interactivity – How much of an experience does a person get from the site.
Overall look – Also know as the “X-factor,” it’s how all the components come together.

In addition to the criteria, one of the most important things to keep in mind when developing a Web site is simplicity, Davies says. Customers have a myriad of options to choose from when searching for a quote, so asking them to do any extraneous work is risky.

“It’s really, really easy for customers to get a quote on a plan,” he says. “So many insurers’ sites offering direct quotes for plans and if you are requiring a customer to call, then you are really going to lose a lot of customers. There’s nothing wrong with, once they get the quote, wanting to give them better service (by getting more information), but at least giving them that initial information up front is important.”

It’s also important to not ask potential customers to provide too much personal information, such as Social Security numbers, on a Web site because customers will be wary of divulging too much, according to Davies.

“I think the other thing to remember with insurance agencies is to really be careful of terminology used,” he says. “Someone who doesn’t know a lot about health or car insurance might not know what some of those terms mean. Keep the language simple.”

For those who already have a stellar Web site, submissions are now open for the 12th Annual Webby Awards, including the “Insurance Site of the Year” award. For more information or to see last year’s winners, click here.

Michelle Payne (michelle.payne@iiaba.net) is Big “I” writer/editor.




Agency Management

NASCAR and Your Agency
Auto racing, insurance agency management have striking parallels.

NASCAR has experienced incredible growth during the past five to 10 years. Considering the revenue most top-level NASCAR teams generate, the sport is quite successful.

Its rapid growth, though, has many teams struggling, especially at the management level. Andy Graves, team manager of Chip Ganassi Racing, told USA Today: “It’s my job to keep everyone’s environment right. I kind of think of it as a part-time babysitter, part-time bartender. I have to listen to everyone’s problems and make sure everyone gets along.” The crew chief used to do this plus run the engine shop, manage the crew and testing and handle all the other details.

Notice any similarities between this and insurance agency management? When agencies only have $500,000 in revenue, one person can sell, manage company relations, manage staff and take care of most operating details. When an agency has $5 million in revenue, one person cannot do all this. Ignoring the situation is an option many agency owners explore. However, ignoring the need for more management is not recommended.

Hiring or appointing specific people to manage or supervise the commercial lines and personal lines staffs is a fairly easy decision for most agency managers. Appointing others to oversee accounting and automation are also pretty easy. The most difficult aspect for many owners is not the reluctance to give up authority. Instead, owners find it difficult to accept that as the agency grows, key people need more management rather than less management.

In particular, producers need more management because their results are not as directly visible. You must make a concerted effort to know how they are doing. Furthermore, many producers know they are less visible and may take advantage of their obscurity by writing less-than-desirable risks, cutting corners on their submissions and pushing off their work on the staff. Most agency managers think producers should be totally self-motivated, but this is only wishful thinking. Producers need to be proactively managed if a growing agency is going to succeed.

Very few agency owners got into this business to manage people and yet as agencies grow, managing people really becomes the key to success. In particular, very few managers want to be the one providing a shoulder to cry on. It is not in most agency owner’s personality, especially when the line of people needing a shoulder to cry on seems unending. If the agency owner/manager is not going to perform this job in today’s larger agencies, someone else must.

Success always brings new challenges. NASCAR’s challenge and many agencies’ new challenge are very similar: Learning to manage people and their emotions while still succeeding on the track. Many NASCAR teams have separated operational from emotional management with different managers in charge of each. Does this make sense for your agency too?

To read the entire article, click here. For more on implementing a management structure in your agency, read “Who’s in Charge Here?” in the upcoming October issue of Independent Agent magazine.

Chris Burand (chris@burand-associates.com) is president of Burand & Associates, LLC.