How do you stack up to your competition?

Many in the insurance industry complain that the competition is brutal, unfair, or that the larger and more established firms have all the advantages.  To these complainers I would argue that they need to stop complaining and increase your own competitive edge.  The more established firms have the advantages not because of their age, but because they built their organizations like a building – one brick at a time.  Their age is a benefit only in that they’ve had more time to build.

Who wants to win...

I’m a proponent of working SMARTER before you work harder.  Here are a few ideas to kick around when you feel you are behind your competition…

  • Why reinvent the wheel if you an awesome one already exists?
  • Where is the industry going and how can I be the first one there?
  • What will the customer expect next and how can I be the one to give it to them?

One of the biggest advantages that newer and smaller agencies have is that they can be – if they are willing – to be the nimblest in the industry.  Just think of how hard it would be to implement something as simple as electronic signatures to 100+ users in your organization and then to monitor to make sure their usage is in accordance with agency policy.  Now contrast that to a 3-5 employee agency where such implementation, training, etc. can be handled within minutes of the decision to implement the new workflow – Now that’s an AWESOME advantage!

What do TOP PERFORMING Insurance Agencies do that that smaller agencies do not?

Larger and more established agencies typically have set processes and procedures in place and the adherence to them is mandated and monitored in an almost militant fashion – everyone performs the same functions and/or tasks the same way every time.  And the BEST agencies then continually review and collect feedback on their processes to improve and implement better processes in a continual cycle.  Some such processes include:

  • Fully Utilized and INTEGRATED Agency Management System(s)
  • Workflows that are standardized throughout disciplines and across the organization
  • Ancillary functions integrate and are intertwined with service system – Reception (phones, fax, etc.), Accounting, Document Management, etc.

Nobody should be intimidated by the above items as the smaller the agency, the easier it is to implement changes to meet or beat the current “best practices”.  And even “best practices” are somewhat subjective as they are usually a minimum of 1-2 years out date and are based on voluntary participants that are voluntarily providing the information.  Paradigm shift or what are known as market or industry disruptions are seldom created by the leaders in a specific industry, rather they are created by the smaller, many times newer, and almost always more nimble and agile entrants.

Other areas where the larger agencies have advantage are:

  • Higher and Steadier Commission Rates
  • Favorable and/or Maximized Contingency Income (Profit Sharing, Bonuses, Etc.)
  • Advertising Funds on co-op and/or first dollar basis
  • Subject Matter Expertise in house
  • Stronger Carrier & Vendor relationships – they have more zeros behind their figures so they get more face-time with higher-ups at the insurance companies and with   vendors.
  • Fully staffed service units, accounting, and other specialties

How can my agency compete with the “Big Guys”?

Competing with the “Big Guy” competitors in the marketplace isn’t about being as good as they are, but about being different and more desirable than they are.

Being that revenue is tighter for smaller agencies as carrier contracts typical pay lower commission rates and lower contingency/profit sharing amounts to those with smaller books of business, it is important to maximize the utility of every dollar spent.  It also helps to look to merge or partner with an organization that allows you to benefit from operational cost efficiencies and obtaining a more favorable commission contract.

I’m a believer that contingency revenue as it has historically been viewed will continue to be squeezed until it is no longer a meaningful part of an agency owner’s income.  It will be converted to incentive payments based on not just growth and profitability, but on how the agency has helped the carrier meet its immediate objectives.  As a smaller organization you will be speaking with carriers in terms of smaller dollar amounts and this is to your advantage.  Many times you will be able to get an “X” percent bonus approved by your carrier partner for this or that type of new business whereas the larger competitors are not given the same latitude.

The Benefits of Automation

When it comes to automation you’re damned if you do in the short term and ABSOLUTELY damned if you don’t in the long term.  Many argue that they cannot afford a top of the line system or that they don’t need it and to each I call bull****.  Paper file agencies are dying off faster than the dinosaurs following the meteor crash and those on archaic systems will be soon to follow.  This is an area that is well worth the investment and is MANDATORY if you’re looking to build an enterprise.

Machines should work, people should think

Some of the largest and most successful agencies that I’ve seen are unfortunately also the organizations that have automated and compartmentalized so much of the work that their people – the assets of the business that can do both the most harm and the most good – no longer think about their job.  This means that they do not provide the benefit to the agency of recommending process improvements.  As we grow our agencies we need to remember that it is supremely important to grow and nurture our people as much if not more than we do any other part of our organizations.  In the end it is our people that sell, service and retain our clients for us.  One good way to think about people is to look at other assets you have in your life…  Do you have the least expensive car?  Do you have a 5 year old flip phone or are you chomping at the bit to buy the latest iPhone?  Now having thought of that, would you ever pay the least in your industry or area for your people?  I think not, but that is what many of the larger agencies are doing and where we as the more agile and free thinking agencies can take advantage.

I am truly excited to be in our industry at this time and my only concern is that there is so much opportunity that I don’t want to get sidetracked from my goals.

Matthew Davis, MBA, CPCU, AAI