Insurance Industry Staffing

Let's talk about what's keeping you up at night. 

"NU Online News Service, Feb 9: Industry Adds Jobs in Dec."

Total insurance-industry employment grew by 5,000 in the last month of 2011. During the same period agents and brokers shed 200 jobs. 200 jobs out of a remaining 646,000 doesn't seem like very many. And the previous month, jobs were added in the agent/broker sector, so there shouldn't be much sleep lost over the employment situation. Unless, of course, it's your agency being affected by the additions and reductions in staffing.

How about your agency? Did you lose staff last year? Was it intentional? If not, did you lose the "right" people? Staff reductions can have a positive effect on the bottom line. But only if you lose a poor performer or someone in a non-critical job. Losing a strong performer or someone in a key position puts you in a dilemma. Do you hire a replacement and forgo an expense reduction or do you ask the remaining employees to take up the slack, knowing you will likely experience a deficit in sales or service ability? Whether the economy is good or bad, you want to make sure that improvements in productivity don't result in the loss of effectiveness.

The difference between productivity and effectiveness is that one is about the numbers and the other is about the people. Improvements in productivity with no loss in effectiveness requires accountability. As the boss, that makes you accountable to ensure that competent, skilled, accountable, individuals want to be a part of your business and you're accountable to ensure that those who don't measure up are the ones to go.

Competent, accountable, employees want to know what "good performance" looks like. They also want to be clear about how performance is measured. They want regular feedback. Employees who meet or exceed expectations want to be recognized. They want a positive consequence. When they fall short, there should be a negative consequence.   No measurement, no consequence, no accountability.

What about employees who are incompetent or unaccountable? The only way to ensure that your organization is accountable is to ensure that there are no positive consequences for poor performance. Rewarding everyone the same hurts two ways. First, you won't see any improvement. Worse, you'll lose the respect, and likely the good performance, of good employees.

Remember that recognition and rewards come in all flavors, some with intrinsic value and some not. There are some few people who take sufficient reward from a job well done. Most of us, however, want something a little more tangible, even if it's just acknowledgement. Since people do things for their own reasons, it's likely that different people will respond to different types of recognition. It just needs to be fair and consistent.  So...

As the boss, you're accountable to make sure there is a formal process for evaluating performance.One that is consistently and meaningfully followed.

Or is that what's keeping you up at night?

Contingent Income Rising

Let's talk about what's keeping you up at night.

"Agency Compensation Expected to Rise in 2012: Ward Group"

Well, that's good news. No sleeplessness on account of that. Right? Right!

Unless, of course, you're counting on your contingent income to cover operating costs. It's been a couple of tough years and many agencies are reporting low or no growth. Without those profit sharing checks, profits would be down significantly instead of just a little. And there is a reason it's called "contingent" income. It depends on several factors -- some of which you control and some you don't. Catastrophic losses are not predictable. Premium volume and growth you can predict. And while you can't know exactly how your growth and volume will convert to contingent income, you can predict operating revenue and expense. Making sure the former covers the latter is critical when there are so many negative factors driving the economic forecast. It's enough to keep you restless if not outright sleepless.

In the study referenced above, reported in the Insurance Journal on line, there are also some potential trade-offs to go along with what are expected to be increases in agency compensation. Requirements for premium volume and growth are likely to increase for some of the companies in the study, as are loss caps. So, both the controllable and the uncontrollable may be more challenging to manage.  All the more reason to make sure your contingent income is only used for contingent outgo.

Forecasting and budgeting for the independent agent has become for challenging than ever. If you're not already doing contingent projections, you may want to start. It's a good way to look at your finances, regardless of the economy. Start with a baseline budget and project no change in income or expense. That probably means cutting back on some things just to stay even. Then create a second budget for growth, projecting realistic revenue increases based on realistic but aggressive sales projections. And, last, create a third budget projecting worst-case revenue projections and a worst-case expense budget. You can then look at what you will have to do to make each budget a reality and set your plans accordingly.

While we're on the subject of projections and budgets,  if you're having trouble making ends meet, be sure you distinguish between revenue problems and expense problems. Whether your income projections are positive or negative, if you haven't already addressed your expense problems, the time to do it is now.

How many ways are there to measure profitability? At least four. Check out our Models of Profitability.  And if you would like some objective third party help with projections and budgets, call or email and let's have a conversation.

And if the expected rise in agency compensation predicted for 2012 is great news for you, is there something else keeping you up at night?

Soft Market or Soft Economy

Let's talk about what's keeping you up at night.

"MarketScout: P&C Rates Rise for Second Straight Month in December"

"Marsh: The Two Speed Insurance Market"

"Moody's: Measured Rate Increases to Continue, but No Hard Market"

"Berkley: Market is Hardening; Good Companies Can Seize Opportunities"

"Best: 2012 Insurer Market a Mixed Bag"

Is the soft market finally turning? 

If you've been watching the industry press for the last couple of months, you may be optimistically confused.  Most sources seem to see signs of price increases, but the extent of the shift and the timing are uncertain, at best. Selected classes and lines of business look better than others. So when you ask, "Is the soft market finally going to give way to a hard market?" the answer is going to be, "It depends."

But, so what? What will that mean for your customer? What will it mean for your business?

Regardless of how the market shifts – hard or soft – your success depends on the effectiveness of your sales organization, your skill, your expertise, your value-add, your competitive advantage. And if your competitive advantage isn’t clear, a market shift won’t help you attract more customers and retain the ones you have.

Competition is the new normal. If you’ve successfully grown your business over the last few years then you’ve had to sell through the soft market, around the soft market, in spite of the soft market.

Regardless of how high prices go, for your customer, it's still about finding the best protection for the best price. Since the consumer has learned so well to shop for the lowest price, you’ll work hard to try to keep the cost down in order to retain the business.  And if the cost of insurance goes up faster than the state of the economy, the trade-off for the insurance buyer may be coverage.

When the insurance company describes their pricing structure and willingness to underwrite in terms of "fear and greed," as in the Berkley article, it's easy to see why the typical insurance buyer doesn't understand why his price soars or drops regardless of whether there have been claims or not.

You have to understand where the market is. You have to be able to offer cost-effective insurance coverage to protect your customers from financial loss. And you have to be able to bring appropriate customers for the carriers you represent. You can’t control the insurance market any more than you can control the economy.

So what if the market is getting harder? Will you be sleeping better because of it, or in spite of it?

Customer Satisfaction in the Insurance Industry

According to NU Online News Service, December 15^th, the most recent American Customer Satisfaction Index shows property and casualty companies get higher satisfaction scores than life and health insurers.  The survey lists scores for the five large direct writers, i.e., State, Farm, GEICO, Progressive, Allstate and Farmers. The factors cited for causing better results in the P&C companies: lower premiums and, get this, fewer customer interactions. 

So, in order to keep their customers satisfied, large direct-writing insurance companies should strive to keep customer contact to a minimum. Fewer contacts mean fewer conflicts. Less frustration.

Well, I guess that makes sense. Have you tried to do business with a large company (of any kind) lately? Automated voice trees that delay and confuse. Sales and customer service representatives reading from scripts. No one with the knowledge or authority to make a decision.

Seems to me that the survey just emphasizes the value added by the independent insurance agent. And the huge competitive advantage this gives you if your sales and service models have an emphasis on personalized, professional relationship building.  

Retention & New Sales

Let's talk about what's keeping you up at night.

We need more new sales. Retention has been better than expected, so we stayed almost flat, revenue-wise, but new sales are harder than ever to make. No one wants to change and there are no new accounts. How do we get back on a positive growth path?

Start by asking yourself a few questions. The answers can tell you what you're doing right and what you could do better.

• Why did your toughest account renew their account?
• Why did you lose that great account?
• Why did your newest account move their insurance to your agency?

If you can answer these questions, thoroughly and analytically, then you know what your competitive advantage is. And that's the key to sales success - leveraging those things that you do better than the competition. If you can't answer those questions, then your sales team - in fact your entire business - is at a disadvantage. 

Business and personal insurance buyers have a lot of choices. And there is always someone who is willing to provide a lower price. When you can demonstrate that the lower price comes with a cost and you can provide added value in terms of something important to the customer, you have something to sell.

For growth and profitability, it's all about competitive advantage. Make sure every member of your team is able to talk convincingly about why customers buy from you and stay with you.

If you don't know what sets you apart from your competition - if you can't answer those critical questions - let's have a conversation. 

Planning for A Tough Year Ahead?

Let's talk about what's keeping you up at night.

2011 has not been a good year. Business is slow. Customers and carriers are not optimistic about the future. And it looks like more of the same on the horizon. How do I get ready for the third tough year in a row?

Don’t!  Get ready for a better year in 2012! It can be, but it’s up to you. Your carriers won’t make it so. And the stock market won’t make it so. Certainly the government won’t make it so. It will be up to you. The big question you’ll need to ask yourself – and your team: “What can we do differently in 2012?

As November 1st approaches, start by asking:  “What can we do in the next 60 days to make a positive difference?”  60 days doesn’t seem like a long time – and it isn’t. If you could do one or two things during the next two months, in amongst all the usual madness of holidays and year-end, what would it be? One change – big or small – that will make you or your business more productive. Maybe the thing you decide to do is to stop doing something unproductive.

Use the remainder of this year to position your business for a productive next year. If you’ve already completed your planning cycle for next year, take another look at both where you’ve been and where you want to go. If you’ve given up on planning because it all seems so pointless, maybe that’s the one thing you really need to do.

For a powerful start to the new year, identify – and execute – on one or two things you can do to end the current year on a positive note.

More about finding and keeping great employees.

People do things for their own reason. I never run out of opportunities to remind myself and others that this is true. Frustrated business owners tell me, "My staff just doesn't care."  The unstated part of that is "...about my business the way I care about my business."  Well, of course not. But there are things they care about. Plugging into those things is how you keep people engaged. I'm not talking about personal things. Most employees don't expect the boss to try to solve their personal problems. I am talking about the kind of things that make work feel like accomplishment. From BNET, here's a neat little story that makes a BIG point about what motivates people.