An Independent Problem?
Independent agents have a reputation for building strong personal relationships with their clients. Does that make the battle between client retention and new business production a uniquely independent agent problem?
Nick Kormos, vice president of sales management at MarshBerry, says many direct and captive models have the right infrastructure in place to strike a balance between the two initiatives.
“Accountability, the reduction in income and the service models are very robust,” he says. “It’s clearly communicated from day 1 and via how producers are paid in direct and captive models.”
Often, that’s because many captive producers are paid a much higher percentage on new business than they are on renewals, Kormos explains. “So then that compensation model alone combined with a robust service plan just sends that message that we are a sales organization, we need to drive new business,” he says. “We have the service piece in place—that’s less of your concern.”
It’s the law of large numbers. “They can keep their price down when they have a lot more customers,” says Mark Fine, president and owner of MBF Training and Consulting with nearly 30 years in the industry. “In dealing with that, the only way you can sell homeowners or auto as an independent agent is to find more markets that might get you a little bit lower price, but you also have to sell the added value of placing business through you—and that you’ll be there for them in case they have a claim.”
Part of the independent agent value proposition is providing better service, says Thomas Doran, principal at Reagan Consulting. “The direct writers are making good inroads into that because they are clearly going after commodity business in a way they haven’t before,” he says. “But I would still say the average independent agent enjoys an advantage.”
Fine agrees that only so many people will go after the cheapest opton—most are willing to pay a little bit more if they know they’re getting something for that extra cost. “The agent has to focus on the local, trust, well-trained and knowledgeable staff and value—not just the value when you sell it to them, but the value after the sale,” he advises.
After working with a major captive carrier for many years, Doran looks back on his experience as “an accommodation business, where I needed insurance and they sold it and we got together and came up with a number that made sense,” he says. “Now that I’m with an independent agent and experiencing active cross-selling, my experience is that independent agents are much more vibrant sales organizations than direct writers and captives.”
That’s why direct writers and captive carriers are throwing advertising dollars at advertising icons like the Gecko, Doran says—they’re trying to make up for a lack in caliber when it comes to their sales teams. And because agents can’t compete with big bucks and national campaigns, “they have to focus on the things that they can control, and build that type of branding locally,” Fine says.
“One of the great advantages we enjoy on the independent side of the equation is we’re better at selling and we’re better at servicing,” Doran agrees. “The reality is that the direct writers of the world, they’re writing commoditized business that doesn’t generally have a strong personal relationship associated with it. It just doesn’t. With independent agents, you know who your CSR is. You don’t call a 1-800 number and have some bureaucrat help you out—you call your person. That’s a significant advantage.”
Want tips on how your agency can compete with direct and captive models? Keep an eye on the June issue of Independent Agent magazine for details.
Jacquelyn Connelly is IA senior editor.