Why is P&C So Terrible

[the mayor]

Great write up FlInsa!
I started in the comm P&C market a year and a half ago.
What I thought I'd go after for niche markets didn't work out because the agency didn't have carriers that were competitive.
One niche that I fell into has faded because a carrier we don't have has come up with a much better product...and I'm trying to save the clients I have.
Add in the price wars here in the North East....
It has been a tough but rewarding first year.

 

[txagt39]

How many P and C guys are actually writing 100K in either personal or commercial lines every month??? I doubt very few.

In today's market/economy I agree with you! I work my
A _ _ off everyday, all day and this year which is my 16th year in the business...it's gotten harder. Customers are not loyal, you are competing against everybody who doesn't always quote apples to apples and customers just look at the price, nothing else - till there's a claim. Then we have our own companies over saturating our market with new recruits, competing with our own company who has purchased other companies trying to drive business through the internet - don't let anyone fool you, it is not a boat ride in the park. I still like the business and wouldn't do anything else but you cannot kick the shoes off after 5-7 years at least in my market and survive. With the whole insurance delivery system in constant change you better not get to comfortable. Companies want more, more, more at whatever the cost. We take on more and more of the service so we don't just sell, we service and at our expense. It is tougher and tougher to be profitable, meet everyone's needs and stay cool with the customers who want to jump ship to save a nickel.

 

[Bertolinoins]

Bertolinoins, so these "guys" then aren't REALLY producers right? They are more like an Account Executive? Because remember, producers they sell. They don't manage or "control" accounts, they sell. That is it.

Because you see, it is very easy for a producer to say, hey, I have this big of book of business, the agency is making a ton of money, so really, why do I need to prospect anymore!

I demand my producers to keep in touch with their clients periodically so at renewal time clients won't say "well, how come I only hear from you at renewal....", but outside of those PR calls, my producers know that their job is well, to sell and leave the servicing of the account to the Account Manager.

Over the years working as an employee for a few retail agencies, I've come to the conclusion that many - or even most - of the agencies out there (not saying this is you Bertolinoins) don't know how to develop or even manage a true producer. Because that is how it was with me!

Most agencies I worked for, with the exception of one, had absolutely no clue on how to give me the leadership and confidence to succeed in this business. They didn't understand that at that time I needed someone to help me set out goals for myself, and then help me reach them. I don't blame them though because as I said, they just had no clue.

Once I went to work for an agency though that gave me all those "intangibles", boy, I flourished. Went from a newbie-small-time producer to a big time producer and now owner of an agency. All in part because someone taught me things that most didn't know how to teach.

To the producers that come work for me I tell them, listen, you can't be jack-of-all-trades, so choose 2 niche programs you want to go after and I will support your marketing, support you with the back office, support you with a nice base salary and support you with furthering your insurance education. But you have 6 months to show me why I should continue supporting you.

If after 12 months, between these two niche programs, you are not putting on 100k of new biz every month, we are not the agency for you.

And for the producers that do make it after 12 months, I give them profit sharing and retention bonus. They are happy and I am happy.

As always though, your mileage may vary.

As you said... YMMV.

I find that niche producers and guys who just produce and don't service end up running on a treadmill with very average or below retention. I also think every producer hits a point where they cannot or don't want to handle anymore business so they coast and write $50-75K in new business off of referrrals.

Under your model... you must have guys with $3M commission books and 3/4 AE's because all they do is sell... right? I doubt you do. Big clients will accept some day to day service from an AE but the agent who sold them in the first place has to be very active if you plan on keeping that account for more than a few renewals. Just stopping by a few times won't cut it.

Even the best, most aggressive producers I know have cycles where they do really well and where they don't based on their personal lives and the stage they are at in their career. Guys don't just pile on $150-200K in new business per year forever and if you crap on them when they slow down... they take their book to an agency like mine. CA does not have a non compete... so I roll over 3/4 "sunset" producers per year that are burned out from working at the national and large regional shops. They get tired of Monday morning meetings and pipeline reports answering to some pencil necked sales manager or 3rd generation agency owner. I don't have to pay a draw, train or support them... I just give them the markets and a fair deal while they roll over 60-75% of their book from the old shop.

 

[Air Jer]

As Bertolinoins says.

 

[FLInsa]

As you said... YMMV.

I find that niche producers and guys who just produce and don't service end up running on a treadmill with very average or below retention. I also think every producer hits a point where they cannot or don't want to handle anymore business so they coast and write $50-75K in new business off of referrrals.

Under your model... you must have guys with $3M commission books and 3/4 AE's because all they do is sell... right? I doubt you do. Big clients will accept some day to day service from an AE but the agent who sold them in the first place has to be very active if you plan on keeping that account for more than a few renewals. Just stopping by a few times won't cut it.

Even the best, most aggressive producers I know have cycles where they do really well and where they don't based on their personal lives and the stage they are at in their career. Guys don't just pile on $150-200K in new business per year forever and if you crap on them when they slow down... they take their book to an agency like mine. CA does not have a non compete... so I roll over 3/4 "sunset" producers per year that are burned out from working at the national and large regional shops. They get tired of Monday morning meetings and pipeline reports answering to some pencil necked sales manager or 3rd generation agency owner. I don't have to pay a draw, train or support them... I just give them the markets and a fair deal while they roll over 60-75% of their book from the old shop.

I am not going to give away my so called "secret formula" because I don't want agencies in my State and around me to "catch on", but when I hire a producer, aside from the basic "stuff" (base salary, support, leadership, education, etc...), I also give them deferred ownership of the book of business AND profit sharing of the agency.

The "catch" is that I only start paying my producers on this deferred compensation plan on the third year AND I only pay a percentage of the profit. So in other words, if a producer who has been with me for 2 years wants to leave, he/she would be forfeiting say for an example $20,000 for that third year, $25,000 for the fourth year, $30,000 for the fifth year, and so on. So in other words, I make the producer think long and very hard "do I really want to forfeit thousands and thousands of dollars?".

By default this model takes care of two things:

1. Turnover of course; again, put yourself in a producer shoes, would you walk away from say $65,000 in deferred compensation just to start everything up again with another agency?

2. Client retention. As I tell my producers, "hey, if you lose that client it will hurt my pocket, but it will also hurt yours".

Now of course for this to work you have to get a few things right and that starts right from the beginning - and that means interviewing. For example I have 3 interviews with all applicants. The first interview is for me to see if he/she has the right "stuff" - great attitude, professional demeanor, self-starter and driven. The second interview is for us to determine if the applicant is a match for the agency. The third interview is at a local restaurant where I ask the applicant to make me a presentation exactly as he/she would present it to a prospective client. And finally If I am interested I call the candidate a few days later to come to my office to discuss money.

Also as Bertolinoins said, you can't put producers on a pressure cooker and expect good things. You have to be their friends. Someone they see that they can rely upon. That I believe is where leadership skills kicks in.

And one last thing I tell my producers, and this is important, is that I am not doing this deferred compensation to "buy" their loyalty. Because the day that they don't want to work here anymore and I sense it, they are out. But I do this because I want them to invest and commit themselves - long term - to this company, the same way I invested and committed myself to them.

 

[Bertolinoins]

FLInsa,

Your approach to recruiting and training is different than mine but you get it... there has to be something in it for the producer to keep grinding away year after year above and beyond the splits offered. If they don't have any stake in the overall success of the agency they will eventually wise up and find another shop or they will learn to play the game by piling on crappy business that sticks for a year or two... you see that a lot with agencies that offer higher than market new biz commission and a lower than market renewal commission.

 

[tospears]

You would be a fool to enter the P&C world with the mindset that "Oh, I'll just write a $50k (premium) policy every month and wait for the money to roll in. The truth is that you wont make it out of the blocks like that. Most P&C guys start out writing non-standard auto (SR-22) and other specialty markets. If you have the cash on hand (i do mean CASH $50K+) you can purchase a book of business or engage in some serious marketing. It takes time to actually get you books in the "black". Life Ins guys are a dime a dozen. it seems like you can throw a rock into a crowd and hit a life salesman.

 

[crimsontideagent]

I am not going to give away my so called "secret formula" because I don't want agencies in my State and around me to "catch on", but when I hire a producer, aside from the basic "stuff" (base salary, support, leadership, education, etc...), I also give them deferred ownership of the book of business AND profit sharing of the agency..

What kind of "base salary" do you pay new producers you hire?

 

[FLInsa]

What kind of "base salary" do you pay new producers you hire?

Depends very much on the producers experience.

If a producer has say 5+ years in the business, has a proven track record of building a profitable book of business (read 3 million + in premium), and has experience then I have no problem paying $30 - 40k base or even more more - again, depends on what the applicant brings to the table.

Now a young guy/girl fresh out of college with no license, no experience, BUT with the right "ingredients" (positive attitude, professional demeanor, etc.) with potential, I offer $20,000 until he/she gets licensed which normally takes about 90 days. After the 90 days if everything is going well I bump it up to $30k.

But again, there is no one answer to this question. What I always tell my producers is, show me money, and I'll show you the money.

 

[Bertolinoins]

What kind of "base salary" do you pay new producers you hire?

I don't pay a base salary. My producers either have a book of business they are rolling over or they have a way to last the first year until renewals kick in. The only "green" producer I have hired was a NYL agent that wanted to get into P&C... she is married to an attorney and can afford to build a book of business off of commission only.

IMO- A large base salary is the kiss of death for P&C producers. Unless a guy has a book of business to roll over or poach from (if he was with a direct writer) then they will have a tough time getting through the first 3 years if you are expecting them to turn a profit for you. Starting up in P&C isn't easy and those that succeed know that and are prepared for it. If you need money fast... go sell cars, yachts, timeshares, etc. because P&C insurance isn't the business for you. This is a business where you get rich slowly but once you get the big snowball up the hill and rolling down the other side... the money comes faster and easier than you can comprehend.