I have my doubts. Hard markets are driven by surplus issues, not profitability. A review of historical industry data shows that hard markets happen when surplus is an issue, and insurance companies can have surplus issues while still making plenty of money. This hard market is a prime example. According to data from A.M. Best, the U.S. property and casualty (P&C) carriers have had an average annual pretax operating profit of $47 billion over the last twenty years through 2022

I know carriers are struggling with their expense ratios. Many carrier executives are especially concerned regarding the extra compensation being requested, maybe demanded, by networks, large brokers, aggregators, and so forth. Two types of carriers exist relative to this point. Commodity Carriers These carriers appoint every Tom, Dick, Harry, Sally, and Molly that possesses a license. When a carrier appoints every agent imaginable the carrier becomes a commodity. No value ex

Below is a representation of a model made famous by Boston Consulting Group (BCG) sometime in the late 1980's. This quadrant representation was well designed to tell a story. It was meant to differentiate between products. For example, a soap might have a high market share and a low growth rate (it gets harder to grow quickly the more market share you have), which results in a "Cash Cow". The soap generates a lot of free cash flow, and that cash flow can be used to build Star

In the past few years, I have received more phone calls than ever from the families and partners of agency owners who have died. The survivors have a buy-sell agreement and now realize the buy-sell agreement is not economically feasible and/or it is written so poorly that no one understands it. These are horrible situations. How can you avoid these issues for yourself, your loved ones, and your partners? First and foremost, never, ever use boilerplate buy/sell agreements. The

I have only been in the insurance industry for 35 years and have not seen everything by any means. I have, however, observed a large majority of sales consultants, including almost every prominent one. Sales consultants are kind of like whack-a-moles, they come and go and some go and come back again and again with new schtick each time. I have found that not many of their strategies work in a sustainable manner. Strike the tactics some might question as unethical such as cutt

This is a difficult article for me to write for two reasons. The first is that I really love how insurance, when done well, can make peoples' lives so much better. The second is that by writing this article I am taking the chance that some people might consider this article libelous or a violation of the much-outdated anti-disparagement laws. A number of parties within the industry, not always the best players either, take advantage of anti-disparagement and libel laws knowin

As I was drafting this article, there must have been something in my subconscious related to a love song. Hence my thought that agency owners and producers are awfully prone to falling in love with carriers that are incompetent but employ nice people. In fact, I recently read two surveys that show the top carriers as rated by agencies. Seventy-five percent of the carriers listed as "great" have limited futures because their financial performance is so poor. I am not suggestin

What is the best way to reduce your exposure to EPL suits and DOL investigations? Employ fewer people. I received an email newsletter from a national law firm summarizing the new employment laws in each state. These laws are going to make employment so fair that, especially with Chat AI, employers will simply find alternatives to employees. That will take time. What can you do now? Employ fewer people. Employing fewer people means fewer exposures to suits and investigations a

As the saying goes, we all have our strengths. Some people's strength is running really fast. I run fairly slow. Some people's strength is jumping high. I'm pretty good at jumping low. Some people can sing multiple octaves with tremendous vibrato. I can’t quite carry a tune in a bucket. My music downloading skills are decent though. In college there was a truly intelligent engineering student in my residence hall who lived a few doors down from me. He came from a family with

When you need an agency valued, check this list first: What kind of valuation do you need? Different agency values exist, exactly like different property values exist. In insurance, you have replacement cost, actual cash value, market value, stated value, and so on and so forth. With a business, you have Fair Market Value, Fair Value (for investment and likely a different value using the definition of Fair Value for divorces), and so on and so forth. What level of valuation d

"Having no destination, I am never lost." --Ikkyu "If you don't know where you're going, any road will take you there." --Tom and Ray Magliozzi, a/k/a Car Talk. Ikkyu was a Japanese Zen Buddhist monk who lived in the 1400's. Tom and Ray Magliozzi hosted Car Talk on Saturdays on National Public Radio for several decades. They were from the Boston area and were brilliant men who made me laugh every time I listened to their show. The quotes listed above illustrate two apparently

I began working with some of my long-term clients, agencies with whom I've been working with for decades, when I was hired to conduct voluntary E&O audits. The proactive leadership exhibited by these agency owners to take definitive steps to protect their agencies and to make them better is the foundation of these long and wonderful relationships. Many, probably most, agency owners look at the cost of an E&O audit and decide they will take their chances. It is hard to believe

I recently read an article in A.M. Best regarding a carrier I thought had long since gone the way of other poorly run carriers, and I was right, but also wrong. I have an interesting history with them. Circa 2002, give or take a couple of years, I analyzed that particular carrier and predicted (relative to their better agents only), that the carrier had no future and that those agents should find an alternative soon rather than waiting for all of the carrier's agents to begin

There was a recent article in the Insurance Journal, about a tragic shooting in which a young child shot itself after finding a loaded pistol in the home where the child's family was visiting. One aspect of the resulting lawsuits is that the employer of the home’s owner was sued for the failure to ensure a safe work environment. The employer happens to be an insurance agency. Regardless of the merit of this specific suit, the risk exposure is real and huge given how large the

An insurance agent went to an attorney and asked him to draft a producer contract. A month later the attorney sent back a contract accompanied by an invoice for $4,500. The agent got what she requested. The attorney had fulfilled his duty. The agent did not know what clauses and conditions should be included in a producer contract (that is why she went to an attorney!). Ignorance was bliss for the agent until one of her producers left, with clients, and the judge held the con

"The thing to be known grows with the knowing." Nan Shepard, "The Living Mountain" Ms. Shepard wrote this now famous mountaineering book in the mid 1940's, though it was not published until the mid-1970's. It takes place in the Cairngorm mountains of Scotland. The quote above succinctly summarizes knowledge, any kind of knowledge, but is specific to people who are conscientious enough to continue to learn purposely. Learning purposely causes a person to realize how much more

I read about an E&O case where an insured asked for complete auto coverage but failed to explicitly ask for collision coverage, so the agent only sold them comprehensive and liability coverages. Why the agent did not verify with the client that they did not want collision coverage is beyond me, but the agent did not ask. The insured had a collision, discovered they had no coverage, and sued the agent for E&O. The agent's defense was that the insured asked for complete coverag

An extremely simple, common experience upon which you can assess yourself and your managers are these scenarios: At the agency/broker level, if you have a producer who everyone likes but is mostly incompetent at increasing sales, will you fire them within a year? Ninety percent of agencies will not fire that person. At the carrier level, if you have a marketing representative who everyone really likes, agents included, but nothing ever gets done, will you fire them? It almost

I watched a documentary about the late writers Jimmy Breslin and Pete Hamill. I was too young and too distant (my local papers did not often carry their columns) to read their work in their heydays. However, when I later read some of their writings, even when I completely disagreed with their perspectives, I admired their work, especially Jimmy Breslin's writing. I appreciated how he enjoyed fighting for regular people and what was right. I often disagreed with what he though

I was speaking with a COO regarding carrier strategies. He is knowledgeable and one of those people who tries to do things the right way the first time. Our conversation ended with him commenting that too much slack still exists for carriers to get real about the need to improve their operations. His comment bothered me and I started to protest. Any halfway knowledgeable carrier executive, board, investor, or regulator should see that substantial improvements are required now