Benefits Producer Training Program Reprise
September 20-October 1, 2010
AUSTIN, TX, June 18, 2010 -- In April 2010, the International Foundation of Employee Benefit Plans and The National Alliance for Insurance Education & Research jointly conducted the first Employee Benefits Producer Training Program. In response to many requests, they are announcing a second program to be held in September.
This unique 12-day program is scheduled for September 20-October 1, 2010 at the International Foundation Training Center in Brookfield, Wisconsin. It brings together two industry leaders in insurance education and professional development to give program participants a one-of-a-kind experience that blends sales training content with employee benefits content. The unique curriculum provides a roadmap for brokerage and consulting professionals to succeed in the employee benefits producing market by giving them confidence in their insurance sales training, as well as a solid education in employee benefits offerings.
"This program truly provides a one-of-a-kind education with a distinguished national faculty. Attendees will graduate with the expanded sales skills and the increased confidence to increase their productivity and become successful producers," said Dr. William T. Hold, CIC, CPCU, CLU, President of The National Alliance.
The sales training portion of the program teaches attendees how to develop the traits of a "super producer" and how to effectively handle client issues or concerns. Role-playing scenarios provide immediate feedback on the new skills. The employee benefits training covers both health care plans and retirement plans, and provides a foundation for a better background understanding of these benefits.
"I think this school is essential to developing our careers; it's a life changing thing for me -- career changing -- it's going to really help me push forward," explained Bryan Buchanan of Solutions First LLC and an inaugural Employee Benefits Producer Training Program participant. "I've done a lot of training in other places and nothing compares to this, had they had this when I first started in the business it would have helped me a lot."
For further information, contact The National Alliance, P.O. Box 27027, Austin, Texas 78755-2027; 800-633-2165; website: www.TheNationalAlliance.com.
About the National Alliance for Insurance Education & Research (www.TheNationalAlliance.com)
The National Alliance for Insurance Education & Research provides the highest quality, practical insurance and risk management education in the industry, for professionals working at all levels, in all capacities. The purpose of The National Alliance is to enrich careers through excellent education, meet participants' goals of personal growth and professional development, thereby laying the foundation for a lifetime of learning. With 40 years of history and experience, The National Alliance conducts over 2,500 programs annually throughout the United States, Puerto Rico, and Mexico in both classroom and online formats.
About the International Foundation of Employee Benefit Plans
The International Foundation of Employee Benefit Plans is a nonprofit organization, dedicated to being a leading objective and independent global source of employee benefits, compensation education and information.
The Academy Publishes Ninth Edition of
Growth and Performance Standards Study
AUSTIN, TX, June 29, 2010 -- The National Alliance Research Academy has published its newly revised 9th edition of Growth and Performance Standards (GPS). The 2010-2011 edition is written specifically for those who want to compare their agency to other agencies of a similar size and location, with respect to income and expense averages, productivity measures, and balance sheet ratios. This allows them to discover how the best performing agencies are doing, and gauge the results of agencies in different sized metro areas. Through the use of the companion CD, they may compare their own numbers, compute variances, and improve results.
The study is an impressive book at 189 pages, and just a few of the findings indicate the breadth and depth of the inquiry:
- The annual revenue growth rate for participating agencies was 7%.
- The account retention rate was 89% for commercial lines and 90% for personal lines.
- Pre-tax profit was 9% of total agency revenues.
- Revenues per person were $118,000.
- Spread, the difference between revenues per person and compensation per person, was $39,000.
- Commission per CSR was $272,000 for commercial lines and $173,000 for personal lines.
According to William J. Hold, CISR, Director of The Academy, "The GPS study represents current, national agency trends. Much of its value is in faithfully representing agency response to times of uncertainty and readjustment. Agencies around the country use the study to establish benchmarks for their own responses and progress,"
Readers will find the CD a useful companion for comparing their own numbers to trends in the industry. Growth and Performance Standards (GPS) combines 189 pages of precise current data with practical tools for its use. Price: $75.
The Academy is a non-profit organization funded entirely through publication sales and affiliation dues, and serves as the research and development arm of The National Alliance for Insurance Education & Research. Research grants are made possible through the annual dues of National Alliance members and The Academy's Research Associates.
For further information, contact The National Alliance, P.O. Box 27027, Austin, Texas 78755-2027; 800-633-2165; website: www.TheNationalAlliance.com.
The Best Way to Ruin an Agency
I can already hear the responses to this title: "What a horrible start to an article! This author should be thinking optimistically!"
While optimism is in vogue right now, my experience suggests that in this tough economy, excessively optimistic agencies are suffering the most. They too easily buy into happy ending stories. They too quickly buy into happy talk about how to grow quickly without measuring the cost of growth.
I have a unique perspective because I often get hired to help fix these agencies after reality sets in. This includes some agencies of the month and best practices honored agencies. Reality always wins in the long run while some unfortunates are focusing on short-term optimism.
This blind optimism is best epitomized in the movie "Field of Dreams." "Build it and they will come" is truly the epitome of blind optimism. The reality is that no, customers won't always come, especially now in this economy. And no, customers won't just arrive because you build a good website, not in the flood of data, information, and advertising in which they are inundated daily. Customers have to have a really good reason for parting with their money today.
The business world is filled with dozens of examples of companies operating on blind optimism. Even a few insurance companies today are operating on the blind optimism that they have solved high loss ratios forever. These companies believe their short-term success is entirely their own doing and they believe their success is permanent.
The irrational optimism I see in agencies usually involves sales and marketing. A lot of agency owners are easy marks for firms selling sales and marketing. They buy from every door knocker that calls on them. No matter how often the product fails, the agency is always willing to buy from the next medicine man. If oil wells were as deep as their optimism, the world would never run out of petroleum.
The truth is those marketing spiels often leave out certain facts, especially facts showing certain advantages the person in the story had going into the situation. For example, I was reading a story about a successful entrepreneur. It was a great story, but they left out the part about the free loans he received to get started. Just a minor missing detail. Positive thinking is great, but access to free loans is even better.
I do believe that sometimes a person just has to take a chance, believe with all their heart, and commit to their chosen course of action. Committing is the key word. No systems work without commitment--not even those magic weight loss pills.
So when listening to some sales/marketing consultant's spiel regarding how great and easily their system will promote your success without mentioning commitment, accountability, or adequate funding, a wise person will lose optimism and begin wondering about the true viability of such a system. For example, the firms selling web-based marketing often use the premise that when completed, the website will do all the work of marketing the agency and making sales. All the agency has to do is take orders. The ultimate solution! Just take sales orders and never have to ask for sales. Become the Amazon of the insurance world. Of course, the reality is there is much more work involved than paying the invoice and turning on the switch. And, just because you build it does not mean customers will come!
Another example is the sales system that does not detail the cost of the system. In fact, one popular system increases sales and revenue per person, but the cost of the people, tools, and system far outweigh the benefits it generates unless it is done on a scale far exceeding most agencies' capabilities. The result for most agencies is significantly greater expenses than revenues.
The blind optimism upon which each of these examples is based is ruinous. I'm not suggesting pessimism is the answer either, it has its own faults, but there are not many agency owners that are pessimists. Instead, I'm suggesting a dose of reality will serve agency owners better than blind optimism. Ask the hard questions when someone is promoting the next best sales program. Ask the hard questions when you find yourself falling in love with a prospective producer. Ask the hard questions when you find yourself enthralled with another agency's success. Combine reality and optimism to identify realistic opportunities. Add commitment, hard work, and accountability. Not a lot of people do this. For those that do, opportunities abound.
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How Effective are Your Producers?
A lot of staff people are facing lay-offs in today's market because they don't have enough to do. In many of these situations, the issue is not too many CSRs but too few productive producers. If the real problem is poor producer productivity then laying off staff is probably not the best solution.
So before cutting expenses in the agency's foundation, look real hard at whether the agency's producers are pulling their weight. Are the agency's good CSRs hampered by poor producers? Also consider whether the agency has good producers hampered by poor producer management. Many times, poor producer productivity is caused by poor producer management, rather than poor producers. How effective are your producers?
Are your producers' books growing?
According to the latest Best Practices survey, producers in agencies with revenues between $500,000 and $2.5 million have an average book between $190,000 and $344,000. Using the midpoint of $275,000 and making the assumption the average producer has 15 years experience which I believe is a very safe assumption, this is an average growth of $18,000 in commissions per year. I see many agency owners expecting producers to generate $50,000 to $100,000 of new business annually, but is this a realistic expectation given these facts? By the same token, is $18,000 annual net new growth over 15 years adequate? Right now, that is probably fine. For a new producer or in a normal market, I would suggest $18,000 is entirely inadequate.
Can you account for your producers' time?
How much of their renewals do the producers really work? In the agencies I've surveyed, most producers do not work more than 60% of their renewals. Using the average books size mentioned above, 60% of $275,000 is $165,000. Suppose the average account size is a very optimistic $2,000 in commission. ($2,000 is optimistic given an entire book of only $275,000.) Based on the over 200 new sales and renewal sales time studies I've completed, the average time required by producers to renew $2,000 commission accounts is approximately 8 hours including drive time, meetings, and so forth. $165,000 / $2,000 equals 83 accounts. 83 accounts x 8 hours equals 660 hours annually. Each year has approximately 1,950 working hours. What are these producers doing with their other 1,290 hours?
Let's give them the benefit of the doubt and assume they are knocking on doors the entire time. My time studies suggests new accounts of $2,000 commission require an average of 12 hours each. 1,290 / 12 equals 108 new accounts quoted and proposals prepared annually. Are your producers actually quoting anything near that many accounts?
Let's assume they are working really hard and just striking out. According to my time studies, at least 10 hours of staff time are required on all new business quotes/proposals. This equals 1,080 hours of staff time per producer that is absolutely wasted. At an average cost of say $25 per hour including benefits, this equals a waste of $27,000 annually, per producer.
If the producers really are not quoting that much business so the resources really are not being wasted, then what are they doing with their time? Are they servicing the accounts rather than the CSRs servicing the accounts? Are they taking too long on renewals? Are they taking too long on the quoting process? Agencies that run efficiently actively manage these issues.
What's the cost?
The cost of this average book, using an optimistic 30% to the producer and industry averages and ballpark figures for the other expenses, is:
Book Size = $275,000
30% to the producer = $82,500
15% to the CSR = $41,250
17% of wages for benefits = $21,000
3% of the book for selling expenses = $8,250
18% of the book for overhead = $49,500
Total = $202,500
This excludes the producer's share of the bookkeeper, receptionist, claims, executive compensation, and so forth. This result is not too bad because the producer's compensation is only 30% and it does not include the $30,000 annually wasted on business quoted and not written. When these factors are considered, what is left? What if the producers are making 40% of their commissions? Do the calculation and see for yourself.
Poor producers consume resources so every aspect of the agency is less efficient and less profitable. If cuts are necessary, I encourage agencies to look at their producers and producer management first. If the producers are only working 55% of their renewals, the customers' relationships are most likely with the agency and CSR rather than the producer, so the risk may actually be higher if the CSRs are let go rather than the producers.
I encourage agencies to create a strong producer accountability plan. A strong producer accountability plan does not include some of the programs out there that mostly make agency owners feel good about their management even if the results are inadequate. Responsibility and accountability begins and ends with management. Agencies that have accepted this accountability and responsibility are achieving material organic growth even in this market. Most are not really doing anything special like searching for new marketing techniques and better websites. They are simply creating accountability from top to bottom and the results are outstanding.
For your Cost of Sales Study and Profit Enhancement Plan, contact Chris at 719.485.3892 or chris@burand-associates.com.
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Your Health is in Your Hands
By Dave Goodwin
Like it or not, the historic legislation just passed (March 2010) in Washington will make immense changes in how your healthcare will be delivered and paid for. And, like it or not, much of your own fate will now be in your own hands.
Although many of the changes won't kick in until 2014, you should not -- cannot! -- simply wait to see what may come next, because some changes will be effective earlier but more importantly, when the impact of the changes hit you it will be too late to start preparing for them.
Without belaboring it here, I must go on record as saying that change in our healthcare system was/is desperately needed and was long overdue and President Obama deserves commendation for addressing it. However, as finally enacted, the bill will likely create more problems than it solves. Still, this is not a political column and we need to work with what there is while trying to improve its impact on us.
Here are a few -- just a few -- of the major events to come and some of the things you can do
now to deal with them, as seen in my crystal ball:
1. You will fend for yourself more
One of Obama's attacks on the insurance industry was a provision that at least 85% of premiums collected will need to be paid out in claims. Clarification is needed, but one result will be that insurance agents will be squeezed on commissions if only 15% of premium is left for insurer overhead, profit and buildup of reserves. When commissions dip or disappear, agents cannot afford to spend much time and talent on the sale or servicing of a family's health policy, so you'll need to get health insurance service from (a) one of the agents surviving in the business after many others leave it, (b) a group or employer- based plan of coverage, (c) a fee-based professional, (d) a government or quasi-government source, or (e) the library or the internet. Of these, only (a), (b) or (c) are likely to be useful to you, and you'll need help in dealing with them. That will be your first step in becoming your own risk manager; you'll need to identify your alternatives in dealing with a challenge, and in selecting the best of them. Not incidentally, you'll also be increasingly on your own in planning your retirement benefits and many other facets of your financial life; help is needed on many fronts. One of the best ways to get that professional help will be to...
2. Use leverage
Leverage here is the placement of your attractive insurance premiums where it will gain you the
results you want on unattractive insurance situations. Simply put, if your agent is getting profitable business from you -- life, disability income, annuities, home, auto, for example -- then he/she is more likely to willingly help solve your health insurance needs even when it becomes a low- or no-profit product. That has always been true; it will now become critical. You can start now by gathering up all your present insurance products and reviewing them with an agent or agency which professionally handles all forms of insurance. (This column has always preached leverage and an annual review.) You'll need that important connection when the crunch comes.
If you're an employer, or an employee getting coverage through your employer's group plan, you're both in the same boat. Professional help will be very important and leverage is one of the best ways to get it. Voluntary benefits (insurance purchased through payroll deduction but without employer contribution to the premiums) also gives employees the benefit of volume rates on coverages they can elect or reject.
There's a vast array of insurance needs and products on the street, and both employers and individuals need help in identifying, evaluating and obtaining them, as well as handling problems at claim time. It all comes down to customized professional guidance.
3. Anticipate higher taxes
There is no way that tens of millions of uninsured people, many already carrying expensive medical conditions, can be provided medical care and insurance without severe strains on the funding. If premiums are to be forced to an artificially low level -- and that is the plan -- then one of the sources of funding will need to be new taxes, even when government presses are printing money as fast as Washington can spend it. One of the sources for new tax revenue is the cash value of life insurance policies. President Reagan tried to enact a tax on it and he was far friendlier to insurers than Obama; his chief of staff, Donald Regan, was formerly head of a financial conglomerate which included at least one life insurance company. And the GOP itself was business-friendly.
(Herein lies a story too timely to ignore. I attended the White House press conference at which Reagan, Regan and the GOP tried to sell the idea of taxing policyholders on the cash values of their life policies, and I may have been the only journalist there with insurance experience, because the gross ignorance of life insurance -- despite Regan's credentials -- was appalling, and the general press was silent. I wasn't. For starters, the cash value isn't even owned by policyholders -- it's owned by the insurance companies as a reserve (required by law) to be sure that they can meet their future promises. The government -- our government -- apparently didn't even know that, or ignored it, in devising its proposal to levy a tax on consumers based on the value of something owned by others. (The ridiculous proposal was eventually killed.) Unfortunately, Obama himself has also displayed ignorance of insurance on at least as dense a level in his own words and in his insurance proposals. Those are two of the reasons that I greatly fear government's administration of insurance. There are many more reasons as well, better suited to a longer article, and all of them illustrated by historical example.)
So, despite Obama's glowing projections, new taxes will need to be levied and I feel that cash values are too juicy-appearing a target to be by-passed, facts of life be-damned. Therefore I suggest reviewing with your insurance advisor all the policies you now carry or are considering, to see if they can be structured or restructured to avoid cash values while delivering the benefits needed. (Previous columns have discussed cash values.) Such a review will likely result in serious improvement for you, even without a threat of taxation.
4. Reduce the risk
One of the basics of risk management, even before searching for funding the risk, is to eliminate or reduce the risk. In health, that means -- to be blunt -- getting rid of the lifestyle that sends you to the hospital. If, as experts say, some 80% of our health care costs are preventable, then it's obvious that we ought to learn what we can do. Wellness programs, health education, diet, exercise, lifestyle (drugs, alcohol, obesity) are the keys. Obama's plan short-changes wellness, but individuals and employers can become motivated for all of us to live better and longer.
Set up and follow a regular schedule with your doctor(s) if you're not already doing it. Why? For your health, in the first place. But also to build your relationship there. Why? Because when tens of millions of new patients -- many of them in need of extensive medical care -- are put into the system, the medical professionals will be swamped. We are already in short supply of doctors, nurses, therapists and other medical staff in many parts of the country, and many doctors are already closing their doors to some categories of new patients. It will become much worse. You need to build your welcome at the office of your choice.
5 . Overview
This is just the beginning. We certainly need a shakeup in healthcare because the present system is untenable, and I'm hopeful (albeit presently skeptical) that a truly good system will evolve. It's within this nation's ability, but in this round the politics became too mean and selfish and we got too many compromises and gridlocks. In some 14 months of squabbling over healthcare, Congress ignored many other vital needs: flood insurance and estate tax deadlines, for example, not to mention many of the nation's other issues. (Again, you're on your own if you don't have help.)
In criticizing Obama's approach, please know that I'm not arguing for the status quo. We can learn from past errors -- we must! -- but we need to stop finger-pointing and concentrate more on looking ahead. Obama started on the right track in wanting to improve the system, but early on he pulled the wrong switches and now I feel we're heading for a train wreck. Constructive criticism is needed but it shouldn't be mean-spirited. We need an efficient, effective healthcare system with realistic funding. That system must be built by knowledgeable craftsmen of good will.
I have hope.
Future columns will discuss future events.
Copyright 2010 Dave Goodwin
Dave Goodwin is a cross-marketing consultant to P/C agencies and carriers in building Life/Health/Benefits production. Former principal in three P/C agencies and award-winning life producer, his seminars, articles and agency visits have served clients from coast to coast and in Canada.
Email: davegoodwi@aol.com
Phone: 305.865.0158
Mail: PO Box 54-6661, Dept. 42, Surfside, FL 33154-0661
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NOTE: The information provided in this newsletter is intended for educational and
informational purposes only and it represents only the views of the authors. It is
not a recommendation that a particular course of action be followed. Burand &
Associates, LLC and Chris Burand assume, and will have, no responsibility for liability or
damage which may result from the use of any of this information.
Burand & Associates, LLC is an advocate of agencies which
constructively manage and improve their contingency contracts by learning how to negotiate
and use their contingency contracts more effectively.
We maintain that agents can achieve considerably better results without ever taking actions that are detrimental or
disadvantageous to the insureds. We have never
and would not ever recommend an agent or agency implement a policy or otherwise advocate
increasing its contingency income ahead of the insureds' interests.
A complete understanding of the subjects covered in this newsletter
may require broader and additional knowledge beyond the information presented. None of the materials in this newsletter should be
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