Is Selling No Longer Required?
The massive advertising campaigns being run with warlike budgets are designed to eliminate producers and selling. Advertising on this level is pure marketing. No selling is involved. These companies' business models do not require selling and in fact, the models are ruined if someone is selling. Revenues are made 100% through enticing people to call a 1-800 number or visit a web site.
If you had multi-millions to spend on advertising, you probably wouldn't worry about selling either. But I doubt any reader has that kind of money. So why aren't more agents selling? I am seeing more and more agencies focus on marketing. They are marketing over the internet, using stealth marketing, advertising on cable television, network marketing, and even using the old stables of radio, newspapers, and yellow pages. There is nothing wrong with marketing per se, but unless you have millions to spend, selling is still required. Marketing in and of itself is not enough and yet, I see producer after producer and agency after agency making no plans beyond a marketing plan.
Too many agencies and producers have wrongly concluded that pro-actively selling is not essential to their success. I have met many producers and agency owners who are certain customers should come to them. They believe they should not have to sell clients, that it is even beneath them to sell, as if selling insurance was dirty. They believe insurance should not be sold, only bought. Of course, everyone wants to be paid as if they sold insurance. But if sales are coming through the door because of marketing rather than selling, a producer is not worth nearly as much.
This anti-selling perspective is pervasive. I see evidence of it nearly everywhere I turn. For example, rather than getting out and selling, many agencies buy other agencies. The attitude that buying other businesses is a sign of royalty while actually selling is indicative of a low caste has infiltrated many agencies. But the truth is, anyone can buy a business if they have enough cash or enough lenders willing to lend them enough money. Serial buyers often cloak the true reasons for their purchases and the quality of the deals in obscure, multi-syllable words conveying euphoria has been reached. When in reality, nothing more has occurred than an exchange of money for a set of assets. An analogy that fits the situation well is how men of position in Victorian England would not work or run businesses because it was beneath them. These men had their "holdings" to support them.
Selling is hard work. It takes talent, bruised egos, and resilience. Yet selling is now considered to be the lower calling. Marketing and buying agencies does not require getting your hands dirty and who wants to get their hands dirty?
Many producer don't. I've lost count of how many producers have asked me, "How can I make sales if I don't accept call-in and walk-in business?" The job of a producer is to produce, it is not to sit and wait for someone to walk through the door. Even worse is the number of agency owners that also wonder how their producers would make a living if they actually had to walk out the door and sell. These owners believe their producers should be paid to sit and wait for the phone to ring.
I fail to understand why so many people in this industry now believe it is beneath them to make a sale. Even if the marketing plan is sufficient to drive people to your agency, someone has to close the deal. I've talked to a number of agents who don't believe they should even have to close the sale if someone calls the agency. They refuse to ask the client to sign on the dotted line, because that is manipulative, unethical, or just dirty to them. Never mind the insured needs insurance. Never mind the customer will buy it from someone else. Never mind the price and coverage are both competitive. Never mind, hopefully, that the agency will provide superior service. They still won't close the deal unless the insured asks to sign on the dotted line.
The cry for lead lists is another example of the unwillingness to get out and sell. The best producers I've met have never relied on lead lists to build their books. Those were tools for them, not crutches. Most of the time, the lack of a lead list and the supposed need for a lead list is a strong indication the producer is not getting out and meeting people. At some point, a producer has to start making the calls. At first it is messy with a low success rate. But when it is done right, one thing will lead to another. A reputation will be built. A lead list will be also built by the producer. It will be a quality list, complete with the current brokers, carriers, and risk characteristics. But this is not a list that can be purchased. It is only a list that can be built by a producer that is willing to get out and sell.
The aversion to selling is so significant that even in these tough times, many agents are not getting out to sell because it is beneath them. Commercial premiums have been reduced so much, an agency today needs to sell at least 3% more accounts than they lose just to stay even. Yet, a pro-active sale is still below their status. Insurance is a product that must be sold in an insurance agency. It will not sell itself. This selling-averse environment is dangerous because when too many people believe they should not have to get out and work for a living, the business and then the industry will collapse.
Nothing is better than an insurance sale done right. The insured gets a good price, they receive great protection, and their lives and businesses are safer. The price of insurance is very cheap right now, so consumers are getting great bargains. A producer has much to be proud of with each and every sale that is done right.
Agents who accept the challenge of making a sale, who believe sales are essential, and who do not rely on crutches will find a fantastic opportunity in the many accounts that are ripe for picking. These accounts may require some tugging but if the incumbent agent feels sales are beneath him or her, once the client's initial resistance to change is overcome, the account can likely be picked with little resistance. It's harvest time for the best!
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Technology Ideas for the Luddite Agency Manager
I rarely write about technology for agency managers, leaving this subject to the consultants that have far superior knowledge than me. And according to 100% of the IT experts and programmers I have met, I am years behind in my knowledge and use of IT. Now, I have not always been behind the times. I once worked at a large technology company and programmed financial software. In my first insurance job, I hacked into the main frame and obtained clearance to considerable data. Home office wasn't happy--but their security was awful.
Today, though, I find too much technology exists. Too much in quantity and type, and much of the technology I see is good for its own sake, but it really does not provide that much benefit to agency management. Much is hype and much may eventually become useful, but it is not useful yet. So this article is strictly from a purely practical perspective guaranteed to upset the elite tech Geeks and possibly provide too much for those still searching for the power button.
1. Which system is best?
I get that question weekly even though I do not offer any technology consulting. I do not know which is best. I suspect it depends on the agency's situation and what they currently have to some extent, although data portability has improved significantly through the years. Both systems seems to provide plenty of headaches (while some select readers may consider this statement libel, I have yet to meet an agency owner using either system, out of the hundreds of agency owners I have met, who did not describe their system as causing headaches). So for those searching for agency IT nirvana, it does not exist yet.
One conclusion I have made is that many users of both systems rarely feel they are adequately trained or supported. I know they try and the service they provide is good, just inadequate. Again, I believe these are well-known secrets since I have never heard any agency say differently. I'm just repeating what I've heard hundreds of times. Fortunately, there exists a few excellent independent consulting companies that know and support each system. The training is excellent. The training is ongoing. The trainers know the systems inside and out. They have found ways of doing things and errors within the systems that most agents would never find on their own. Maybe most important, the training is bite size (not gigabyte size). A major mistake so many IT companies make is to provide initial training where they throw everything at the staff all at once and then disappear forever. These consulting firms can engage in continual training so that when the staff have firmly learned one aspect of the system, they can then go onto something else. The staff doesn't have to try to learn everything all at once. The difference is night and day in productivity, morale, and even staff turnover.
2. Should producers have access to the system?
Absolutely they should be able to look up clients on the system. In fact, they should be required to do so. That way, when they're talking to a client, they can look up the policy and answer the question then and there, rather than saying, "I'll check into it" (meaning he or she has to ask a CSR to do it for them). This saves considerable time.
Producers should not be able to change any premium or commission data under any circumstances. Whether they should be able to enter any information other than notes, is debatable. In most agencies, this is not a good idea. However, all producers should have to enter notes regarding conversations with clients. This is essential file documentation and it is so easy to do today, no good reason exists for not mandating they document these client interactions.
3. File Retention
Electronic files absolutely must mirror paper files unless paper files are considered copies, meaning no original documents are kept in the paper files. I know of no laws which provide any exceptions. So when you destroy paper files, the electronic files meeting the same parameters must be destroyed.
4. Electronic Social Network Marketing
Beats me whether it works. I've seen some articles touting it as the next Google. I have not personally seen any real success yet. Sure, there's been a sale made here or there, but a sale here or there does not make a successful marketing campaign.
5. Big Brother in the Workplace
I severely dislike the idea of someone always watching over me. But in the workplace, the employer is buying someone's time so they have the right to expect the employees to be working. The Los Angeles commuter train accident that cost so many lives was likely caused by the conductor texting rather than driving the train according to several published articles. Recently the rail line announced it was going to install cameras to help police conductors doing things they should not be doing while driving a train. The union promptly announced this was an invasion of privacy.
This kind of response is what gives unions bad names. When employees are at work, I have come around to believing they have no right to privacy outside of the bathrooms. This includes using desktop software to check their web surfing activity and attendance.
6. IT Security
First, it's never as good as you think it is. Second, never discount how innocent you and your employees are relative to the evil of the hackers. Third, hire a really good IT Security consultant to test your system. Fourth, sooner or later the government will begin checking agencies' compliance with HIPAA and the new Red Flag Rules.
7. Learn to Type
Using a computer is much easier if the user knows how to type. I understand we have many men in this industry whose generation did not consider typing a manly activity in high school. Typing is an essential skill. It's good for morale, productivity, and E&O exposure minimization if producers will type notes into the system.
8. Learn Basic Software
Agencies are losing significant opportunities to improve their professional appearance and increase their productivity because too few people in the agency have adequate knowledge of Word or Excel. In some agencies, no one knows either adequately well. Every staff person should receive training on both if the agency wants to increase productivity and improve its professionalism.
These are some really basic IT issues every single agency faces. The solutions are basic and doable. If agency owners do no more than conquer these really simple aspects, I assure you, your agency will run much more smoothly and profitably!
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Accounting Audits
Many agency owners and managers assume that if they pass an accounting audit, their entire agency is in good shape. This is a massive mistake. Far too many business owners, regulators, and accountants place too much blind faith in accounting audits.
I first learned this many years ago when I was working for a Fortune 100 company. During the company's annual audit, I quickly discovered the auditors didn't know what questions to ask. I also got the impression they really did not want to ask too many tough questions. They clearly practiced the adage, "Let sleeping dogs lie." I'm not suggesting all accountants fall into this category, because some do ask tough questions. But not all do and even if they do ask tough questions, far too often they still don't know what questions to ask.
For example, each of the audited SEC reports for the publicly traded insurance brokers mentions the firm holds certain funds in trust, in a fiduciary capacity. The reports, however, don't explicitly state if such holdings are adequate. In other words, the reports do not indicate if the brokers are actually in trust. I am not implying they are not in trust. I am stating that a truly valuable audit aimed at not just following audit rules but actually providing real insight, would categorically state whether or not the broker/agency is in trust. The trust ratio is the most important balance sheet or financial ratio for agencies and brokers. Yet, in 18 years of analyzing agency and broker financial statements, I have never seen one accounting firm make a trust ratio calculation. When the most important financial ratio is ignored, how does anyone outside the company know whether the agency/broker is in good financial condition? Stockholders don't know, carriers don't know, customers don't know, and regulators don't know, but the publicly traded brokers can still pass their audits.
In some situations, the auditors really do not know insurance agency accounting. Not only do they often fail to address the trust ratio, but when an agency is out of trust, they fail to recognize the off balance sheet liability this creates. For example, if an agency is out of trust by $250,000, the net tangible worth is not just $250,000 less. Someone has to make up the $250,000 in cash. Only cash will cure this deficit.
Another problem arises when agency owners do not understand what they are reading but since the auditors passed them, they conclude all must be rosy. For example, I've known several agency owners who thought for years their agencies were worth way more than they were because the auditors did not explicitly state their agencies were worth millions less due to off-balance sheet liabilities (such as vested producers and producers who owned their books). These owners faced unpleasant surprises when each tried to sell.
Most important of all though is the simple fact that passing an audit does NOT mean the agency's operations are in order. In at least half the agencies I visit, significant operational data does not tie together and/or does not tie to the financials so passing an accounting audit by no means indicates the agency is in good operational health. Below are a few examples:
- An agency had a 70% retention rate and a 5% growth rate. Retention is operational, so this aberration went undetected by the agency's auditors. Operationally, a 70% retention rate does not tie to a 5% growth rate. To grow 5% when retention is 70% means the agency must replace 35% of its book each year. Just how is this possible? It turns out fraud was occurring. Most auditors explicitly state they may not identify fraud.
- I often find situations where producers are paid more than their contracts state. An audit will rarely look for this, much less discover it because it is not required to balance the books. Discrepancies such as this will not show up in an accounting audit given the way most agencies keep their books.
- Another common problem is when the sum of all the producers' books is greater than the agency's total commissions or the producers' total books plus the house book is greater than the agency's total commissions. Depending on how reports are run, this is unfortunately possible, but should not be dismissed as a reporting incongruence. The agency should check to make sure producers are not being credited with more business than they really have, especially if producers are sharing accounts. And again, this is an issue that will rarely be found in an accounting audit.
- A similar issue is when the producers' collective books are growing at a significantly faster or slower pace than the agency. This may occur if the agency has a large house book that is growing opposite of the producers' books growth. Otherwise, rarely does it make sense.
- During operational audits, I frequently find line items on agencies' income statements which vary significantly from benchmarks. Sometimes there are good reasons for this discrepancy. Often the reason is because someone at the agency has decided to account for expenses in an odd way that skews the results. For example, building all benefits and employment taxes into wages distorts how much it appears the agency is paying its staff. This leads to mistakes when management looks at their income statement showing staff wages at 35% when it really is only 25% and they conclude to lay people off or not give bonuses or raises.
My experience and I believe my clients' experiences have been that an operational audit provides significantly more insight into what is right and wrong than a financial audit. This is especially true for acquisitions.
The significant discrepancy between the information financial audits actually provide versus the information many agency owners and executives believe they provide causes many wrong assumptions. Part of the blame is that audit standards are strict and auditors are extremely concerned with following those standards, even if the standards themselves cause readers to draw the wrong conclusion. The risk of a professional liability suit is too high for auditors to take such risks. Similarly, part of the blame is the vast majority of audit readers do not understand this limitation, so we have a situation of critical mis-communication. Beware of this gap the next time you receive or read a financial audit!
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2010 HR That Works Implementer School
Provided by Don Phin
HR That Works is a powerful program for attracting, growing and retaining a profitable workforce. It is cost effective and easy to use. It helps build companies and careers. Unfortunately, its tremendous value becomes marginalized if not used to its potential.
With more than 70 of agency partners nationwide and 2,700 company members, I have seen how many have used HR That Works successfully and how others have not. Unfortunately, there are partners and their clients being handed powerful tools they take little advantage of and it is costing them thousands of dollars every month. Bottom line this 2 day program is an incredible opportunity. Not only will you come away understanding the full potential of HR That Works, I will make sure you enjoy the time spent learning!
Program attendees will learn the following:
- An introduction to HR That Works SharePoint platform.
- A thorough understanding of HR That Works strategies and tools.
- How to use HRTW to create audits, quizzes, surveys and training programs.
- How to upload and manage documents.
- How to turn the HR function into a strategic profit center.
- How to position HRTW to your clients or executives with zero resistance.
- And, more. Much more.
In the pre-workshop session for agency partners only you will learn:
- How to use the marketing tools in HRTW.
- How to build a coaching and consulting program around HR That Works.
- How to monitor and increase client usage of the program.
To learn more about the program, or to sign up today, please go to http://www.hrthatworks.com/HRTWImplementerSchool.aspx.
Should you have any questions, please do not hesitate to call me directly at 800.234.3304 or email me at don@hrthatworks.com. I look forward to helping you take HR That Works to the next level.
Don Phin is an attorney and president of the Employer Advisors Network, Inc.
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