Support for the Agency System is Key to Success
Note from Steve Ruchman: Readers of this column know its purpose is to voice the professional independent agents’ perspective on our industry. The following was written by PIA National President Andrew C. Harris. It’s absolutely salient and appropriate and I couldn’t have said it better myself, so I’m using this space to share his message this month.
Support for the Agency System is Key to Success
By Andrew C. Harris President, National Association of Professional Insurance Agents
When independent insurance agencies speak about the carriers they represent, they often refer to their “carrier partners.” This is particularly appropriate, for many reasons. First, the business relationship between the agency and the carrier is one designed to be of mutual benefit. Second, revenue generated from this relationship goes to both parties. Finally, this business arrangement allows both participants to accomplish together what they cannot without each other.
PIA agencies need financially sound, able and competitive insurers to meet the needs of their customers; carriers need quality, financially able independent insurance agencies to conduct the scope of business and provide the services required by insurance customers. In addition to marketing the carrier’s products, the agency processes insurance transactions, carries out the carriers’ instructions and assures that compliance obligations are met.
Independent insurance agencies are truly the backbone of carriers. The success of the company and the agencies that form a company’s sales force are inextricably linked. When agents succeed so do their carrier partners, because we’re in this together. For the past several years, the insurance business has not been immune from the financial pressures affecting our entire economy. Profit margins have been squeezed everywhere – not just by stresses in our industry, but also due to general economic conditions.
Agencies have been hit by a perfect storm of falling rates, sustained economic depression of exposures, and searing competition. Taken separately, we can do fine. Put all these together and run this for five years, and you can weaken even the best run agencies. And in tough economic times, anything that weakens the agent will also weaken the carrier.
It is at times like this that agents need support from their carriers, both directly and indirectly. Many carriers are offering increased compensation for lines of business where it makes sense for them to do so. Others have tried to promote growth. Some unfortunately are reducing compensation to “share the burden” of catastrophe losses.
Administering disincentives to agents is like cutting back on advertising in response to an increasingly competitive marketplace. It makes no sense. Maintaining or increasing incentives for a sales force is a good way to increase sales in a down market. This is especially important as agents incur additional costs in automating systems, integrating social media and enhancing web portals. PIA National always has an open door for individual carriers to discuss with us the added value that independent insurance agencies bring to the table prior to making changes that have the potential to negatively impact their agency sales forces. Such communication can foster more successful results.
I urge those carriers who are supporting their business partners to continue to do so, and implore those that are looking to share the burden to look closely at the financial health of their sole distribution system. A weak sales force will yield weak results, just when our distribution channel needs to grow most!
