STRATEGY
Takeaway : It ’ s easy to double down and maintain a high velocity of new business with one good carrier , but working with multiple partner carriers allows you to spread your risks while providing options for your clients . Best practices recommend the 80 / 20 rule that approximately 80 % of your business should be placed within the top 20 % of your markets .
For smaller agencies this is often only a couple , so if one carrier underwrites a large portion of your clients you may need to review your production strategy to spread your risk . If one carrier underwrites considerably more than your agency ’ s profitability goal , that should be an indication should a carrier change its underwriting appetite your profitability could be at risk .
Aligning with the right carriers also helps to optimize profit sharing . No one should ever advocate for steering clients with the purpose of better profit sharing because it is illegal in most states . However , concentrating your efforts and placements with a few carriers that align with your client ’ s needs provides you with economies of scale to optimize the potential for profit sharing within your normal placement process with your partner carriers .
IT ’ S NOT THAT YOU NEED MORE CARRIERS , IT ’ S THAT YOU NEED THE RIGHT CARRIERS
While having access to numerous markets can be beneficial , it ’ s essential to focus on quality rather than quantity . It ’ s not about having more markets ; it ’ s about having the right markets for your agency ’ s target market and specialization . Understanding your clients ’ coverage needs and preferences will help you identify carriers that align with your agency ’ s goals and provide the right coverage options .
When evaluating potential partner carriers , assess their appetite and track record for the core lines of business you want to offer to your clients . In addition , be sure to understand the carrier ’ s growth goals and their financial security . Partnering with carriers that have a strong track record in your niche markets will not only enhance your agency ’ s credibility but also mitigate risks associated with mismatched client needs and carrier offerings .
Takeaway : A couple of insights from my prior experience managing carrier relationships for a national agency – smaller agencies or growth-minded producers often fall into the idea of “ needing more markets .” Many larger agencies have a real problem trying to manage too many relationships , which can add indirect costs to your agency through too many meetings or unproductive submission or quoting activity . As an owner , you should focus on finding the right markets for your clients so that they have the coverage they need at a reasonable price .
Winning one or even a few policies by AOR with a market you don ’ t currently have may seem like a good idea , but unless you have other clients or a pipeline that aligns with their appetite you are incurring admin costs for contracts , commission processing , and other indirect costs that may erode your profitability for that one account .
MAINTAINING GOOD AMS DATA WILL SET YOU UP TO BE PROACTIVE AND PROTECT YOUR REVENUE
Agency Management System ( AMS ) data is a goldmine of valuable information that can help you proactively manage risks and protect your revenue . By maintaining accurate and up-to-date data , you gain insights into your book of business , identify potential risks , and make informed decisions .
Especially in a hard market , it ’ s critical to have an accurate book of business in your AMS to identify clients and risks in the event you need to act quickly to market news .
Having the proper policy type , effective and expiration dates , Billing Company , and Issuing Company coded
NOVEMBER / DECEMBER 2023
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