5 Reality Checks to Ensure You’re Ready for Agency Ownership

This article was written by David Tralka and published in IA Magazine.

You’re at the top of your game. You’ve worked hard to become the No. 1 producer in your agency. You’ve won all kinds of awards. So, what’s next?

For many, owning an agency is the ultimate prize. Being an owner gives you the opportunity to build your own business, create a lasting legacy and then, reap the financial rewards when it’s time to retire. Think agency ownership is in your future? First, you need to take a good look at yourself in the mirror.

Here are five reality checks to make sure you’re ready to become an owner:

Do you think like an owner? 

Owning a business is not the same as working for one. Becoming an owner means you’ll need to make sacrifices. It may mean getting more education or moving to another agency where there’s more opportunity.

To find out if you’re ready, put yourself in an owner’s shoes. To gain this insight, talk to owners to get a taste of management and the decisions they make. Are you ready to make hard decisions about operations and personnel? Are you ready to have tough conversations with employees who have been with the agency for decades? Are you willing to spend less time selling and more time managing?

Do you understand the value drivers? 

Do you know what markets you want to be in? What will your book of business look like? How will you acquire new business and retain existing customers? More fundamentally, do you understand the various revenue streams of an agency and how some of them generate more cash flow than others?

You need to be familiar with the operations side of the business, understand how investing in new computers, office equipment or phones may be necessary to grow, and be up to date on agency management systems and how they help increase productivity.

Is your financial house in order? 

Show me a successful owner and I’ll show you someone who successfully manages their own money—the two go hand in hand. Take a hard look at your spending and saving habits. What’s your credit score? Do you have outstanding loans, a large mortgage or a second mortgage?

Take the time to consult with a financial planner and discuss your goals with your family. If you’re in debt, create a plan to get out of it.  Agents often have expenses associated with their business—such as entertainment, travel or a country club membership—that can be trimmed, so start saving money to invest in your future.

If you want to buy an agency, the chances are you will need financing. And if your personal finances aren’t in order, the odds of getting a business loan are virtually nil.

Do you have an organic growth plan? 

Whether you want to acquire an agency or eventually sell one, you need an organic growth plan. Organic growth is the value you create when you invest in your agency. Call it sweat equity. In contrast, inorganic growth is when you buy another agency or a book of business that someone else has developed.

Organic growth takes time and discipline but has the highest rewards. Organic growth comes from investing in marketing, office automation and producers.

If you’re thinking about buying an agency, look at the growth potential. What are the agency principals currently investing in that will lead to higher returns? How are they improving cash flow? Have they done anything to improve productivity and create a more efficient operation?

Do you understand the numbers? 

If you’re in the market for an agency, you should know exactly what are you buying? Do you understand how all the numbers fit together?

Essentially, you need to understand the costs of generating business, such as how many producers and CSRs you will need. You need to be able to see where the opportunities lie, and part of that is accessing and understanding the agency’s financials. Therefore, you must learn the basics of accounting. Do some digging and ask questions.

Finally, ask yourself: What’s my relationship with my principal? At some point, you have to raise your hand and say, “I want to own.” I’ve seen agencies sell and producers complain afterward, “I would have bought it. Why didn’t they talk to me?” Owners will say, “I didn’t know they were interested.” Spend some time with the owner of your current agency. Let them know that you want to own. That might be the best starting point.

Preparing yourself to be an owner begins with an honest self-assessment and a willingness to work on the fundamentals. Then, communicate your aspirations to those who can help you make ownership possible. Whether you’re a young agent wanting to own or an older principal wanting to sell, don’t be afraid to give a voice to your dreams and work on making them a reality.

David Tralka is president and CEO of InsurBanc. He is responsible for keeping the bank focused on being an innovative provider of financial products and services for the independent agency community. He is an expert on agency mergers & acquisitions, agency perpetuation and financing. He has also presented at numerous venues nationwide.

How customer success can grow your business

This article was originaly published by Agency Nation.

You might be surprised to know that running an insurance agency and a software company are more alike than they are different. At the end of the day, it’s about growth. Growth comes from acquiring new customers, selling more to the customers you have, and making sure the customers that you have continue to do business with you.

In the old days, we thought if you could deliver customers a great experience when they called you, it would be enough to earn their loyalty.

Not anymore.

Today’s customers expect a more personalized and relationship-centric experience. They expect to receive not only great service, but true value from the products and services that they are paying for at every step of their journey with you.

Hence the emergence of one of the fastest growing new disciplines around (with a staggering 736% increase in the number of job roles since 2015): Customer success.

Customer success is more than fixing problems. In fact, unlike customer support whose primary purpose is to react to issues when they arise, customer success is a proactive function based on a mission to help customers succeed.

It’s a practice that focuses on ensuring a customer is getting the most value out of the product or service they’re paying for. And a robust customer success program has become the gold standard in the Software as a Service (SaaS) space.

Moving from Service to Success

Before I joined Vertafore, we were one of many tech companies that had substantial customer support but limited focus on customer success.

While we’ve undergone a transformation in our customer support process—drastically reducing hold times, bringing back live chat, and using artificial intelligence to provide answers to the most common questions 24/7—the real game-changer for our customers was the creation of an entirely new customer success team.

From my first hire to our current team of over 50, we’ve kept one mission in our sights: create ways for our customers to achieve success and realize the value in what they’ve already purchased. How have we done it? From big initiatives like launching our monthly newsletter “The Radar” and creating our ongoing “Did You Know?” videos to the everyday things like more training, improved product launch awareness, the launch of Office Hours… And the list goes on.

Has it worked?

A resounding yes! Just one of many examples is that customers are regularly using our videos and newsletters to help onboard new employees and we hear they are realizing significant time and money savings in doing so.

But… I’m not in software

Customer success programs, and likewise, Chief Customer Officers like me, are becoming more and more commonplace at software and SaaS companies.

But that doesn’t mean the same lessons don’t apply to your business!

Whether you’re large or small, high-tech or low-tech, you can benefit from applying a few basic rules of customer success to your business.

“Value adds” really do add value: How much time do your account managers and producers spend looking for ways to add value for your customers at no additional cost? If they aren’t doing this, they should be! For example, if you sell employee benefits, there are often ancillary services that come included with policies that your customers may not be aware of or utilizing. Often times, a group Life or Disability plan will include an Employee Assistance Program or even something as valuable as worldwide travel accident coverage. If you’re not actively looking for—or even asking your carriers to provide—these value-adds, you’re missing out on an opportunity to impact customer success.

Listen and look for the missing pieces: Paying attention to detail and being thorough is more than just a good business practice. When you build relationships with your customers through in-depth conversations and great listening, you can find opportunities to correct something that was missed or overlooked in the past. This can be anything from noticing a policy is lacking an important rider to anticipating upcoming needs and requests before a customer even has them. Make it your mission to pick up on clues and go out of your way to make sure your customers have everything they need and that it’s done right.

Create a consistent one-on-one service model: There’s almost nothing customers hate more than having to introduce themselves to a new person each time they need help. Having a designated account manager—and retaining your employees for a consistent customer experience—is one of the simplest (and at the same time, most difficult) things you can do to achieve customer success. Few companies intend to provide customers with a revolving door of contacts, but are you actively doing everything you can to keep the people on the front lines of your customer relationships consistent? If you have a problem with turnover, look at your employee satisfaction and what you can do to improve it. Not surprisingly, employee satisfaction and engagement are huge drivers of customer satisfaction, and thus, retention. Making sure that your customers know who their dedicated contact is and helping that contact stay consistent will make a difference in how successful your customers feel.

At Vertafore, we’ve embraced the concept of customer success and I’m proud of the team we’ve built and the resources we provide.

And, while we’ve invested lots of time and money to build a world-class program for our customers, it really boils down to some simple ideas that any company can put in place. Think about the companies you love being a customer of. What is it about them that makes you want to give them your business again and again?

I’d bet it has something to do with great people and the feeling that they don’t just care that you buy their product or service but that you’re also using it, getting the full benefit, and achieving the results you want. That, my friends, is customer success.

Meet Cassidy Smirnow

Having spent her entire career in the software business, Cassidy knows the vital importance of leveraging the customer’s voice to drive innovation and service delivery. With a proven track record of success in improving and sustaining customer satisfaction, Cassidy’s expertise lies in executing against business strategy to drive growth and a positive customer experience. Cassidy Smirnow is currently the Chief Customer Officer at Vertafore.

Shining A Light On Trucking Rate Increases

This article was originally written by Andy Hamilton, and published by JM Wilson.

These days, it’s common to hear our trucking agents ask “Why did my insured’s rate go up?” It’s a good, and honest question; especially when the insured has had no claims, a clean driving record, and no endorsement activity. It can be hard to deliver a 5% increase without having a good explanation. Here we’ll attempt to arm you with such info, so when that inevitable question does come, you’ll be ready. As you’ll see, there is not just one answer:

There Are More People on the Road

10 years ago, there were 209 Million Americans with Driver’s Licenses; today, we’re looking at close to 228 Million. The increase is also representative of truckers. “Truck Driver” is the most common occupation in 29 States. As 72% of all material goods in the US are moved by trucks, and with the economy over the last few years on the upswing, there are simply more trucks on the road than ever before. The economic demand for trucking has been so great that it has led to…

A Driver Shortage

Currently, there’s a driver shortage in the U.S. of nearly 60,000 people. Think of the Cleveland Browns stadium being completely empty, and needing to fill it up with truck drivers; that’s the current gap. This need is only expected to accelerate as the aging population of truck drivers retires, with shortage estimates of 160,000 over the next decade. This has led to more aggressive hiring of not-as-experienced drivers. This hiring has, in part, led to… 

More Frequent and Severe Accidents Involving Commercial Trucks

The combination of more Americans on the road and less experienced commercial truck drivers has created an environment for more accidents. Since 2009, (when the truck-related fatality rate was at its lowest), there has been an increase each year, with 2017 showing a 30% increase from 2009 levels. If you remember, something else started happening around 2009… that’s right…the Smartphone starts becoming more ubiquitous. Pew started keeping statistics on this in 2011 when the percent of U.S. adults that were smartphone users was 35%. In 2019, that number is 81%. Most of us are aware of how pervasive a problem distracted driving has become.  If you don’t believe me, just wait until the next time you sit through an entire left turn light with the driver in front of you oblivious; no doubt, head tilted down, and eyes on the screen. Correlation doesn’t always equal causation, but there’s been a strong link to the culture of interruption helping drive the increase in traffic accidents involving large trucks. Because large trucks often weigh 20-30X more than a passenger vehicle, when something does go wrong, it can often be severe. This severity has led the trucking industry to be…

Targeted By Sophisticated Law Firms

If you Google “Truck Accidents”, the entire first page is dedicated to law firms, or law firm searches. Many of the websites of these law firms are astute enough to list the size of potential settlements, as well as past settlement amounts. One law firm lists their $80M Settlement from just a couple of years ago, while another touts a $101M award. The industry refers to these as “Nuclear Verdicts.” With Federal insurance requirements of $750k to $5M, trucking is a targeted industry (anyone that’s driven on an interstate no doubt has seen the law billboards asking “Injured by a Truck?”) The injury settlements from truck cases have become so lucrative, that third party financiers have gotten in on the action; providing funding for litigation in hopes of reaping investment returns. Insurance companies are keenly aware of the increasing size of civil jury settlements and pay particular attention to the areas of the country whose jury pools are generating the largest awards. As insurance rating data evolves and continues to get smarter, a risk that drives many miles through a high jury award area may be rated differently than a similar risk that doesn’t. Insurance carriers are also aware of the younger demographic shift in juries. No matter our opinions, Millennials and Gen Z have grown up in a “social justice” culture, and this thinking has directly contributed to larger settlements, but also contributing to larger settlements are…

Rising Healthcare Costs

Large settlements are due in part to sizable medical outlays directly associated with a trucking accident. Large rehab bills and the incentive to treat come in to play when damages are calculated. Medical cost inflation is certainly on the mind of every truck insurance carrier when calculating their latest rates. This fact comes as no surprise to anyone that’s received a medical bill in the last few years. The average annual income increase of the American worker has not kept up with the increase in healthcare costs. Estimates put health care spending at right around 18% of the U.S. GDP. To use a familiar timeframe, the average healthcare cost per person in 2009, was $8,134; in 2017, it was $10,739 ( if you want a real shock, in 1960, it was $146/person). When you factor in more traffic, distracted driving, less experienced drivers, increased medical costs, and larger legal settlements, the picture becomes clearer as to how…

Trucking Insurers Have Not Been Profitable 

Since 2010, the commercial auto insurance space has not returned an underwriting profit. The components listed above have proven to be formidable when underwriting to a combined ratio under 100; leading insurers to move rates northward (or exit the commercial auto market altogether). The commercial auto combined ratio has performed at around 15 pts worse than that of the rest of commercial lines insurance, putting its close management of risk profile pricing high on the priority lists of Chief Underwriting Officers and actuaries alike. 

So, while having the conversation surrounding rate increases is never easy, we hope that you’ll be better equipped to deliver value, as well as educate your insureds when answering that age-old question… “Why?”  

A Fine Line: When Commercial Auto Isn’t Enough

This article was written by Walt Capell, and originally published by IA Magazine.

Inland marine: Just the name leads to confusion for many business owners, especially those who are not familiar with the insurance buying process.

Explaining a client’s need for commercial auto or even commercial property coverage is easy compared to doing the same for inland marine. But for many clients, a commercial auto policy is not enough—it does not cover all the expensive equipment they have in their car, nor does it cover the equipment they have loaded up on a trailer attached to their vehicle.

This is where the fine line between inland marine and commercial auto lies. Here are three steps for making sure your client understands all their insurance needs in these areas.

Start with the basics

The first conversation an agent has with a new client frequently revolves around general liability and workers compensation—coverages that are required by law in most states. It makes sense, then, that most first-time entrepreneurs start there when purchasing insurance.

Establishing trust with your prospect is crucial at this stage. The sooner the client trusts you, the more likely they are to listen to your advice when it’s time to discuss more difficult coverages.

This is also a good time to discuss commercial auto—another common coverage that’s usually easy to explain, if only because the business owner likely has a personal auto policy.

While personal and commercial auto policies are not exactly the same, their common ground makes the sale much easier—giving you another opportunity to establish credibility.

Move on to more complicated coverages

Explaining the need for a hired and non-owned auto policy, by contrast, may be a little trickier. The business owner may not understand the liability involved with their employees driving their own cars on company time.

This is a good time to broach the topic of inland marine, taking care to use terms like “floaters” and “equipment coverage.” A rookie business owner is much more likely to understand that they need coverage for the specialized equipment they use daily for their trade, but that connection isn’t immediately clear when they hear “inland marine.”

Close with a BOP

Closing the conversation by suggesting a business owners policy prevents difficult conversations—especially after a claim occurs that is not covered. A BOP can help bridge the grey area between commercial auto and inland marine.

Walt Capell is president and owner of the Insurance Shop LLC, the rapidly growing national insurance agency he founded in 2005.

Stuck in the Middle: When Two Carriers Refuse to Pay a Roof Damage Claim

An insured notices water leaking from their roof and calls a commercial roofer to make repairs. The roofer informs the insured that the roof has sustained significant hail damage.

The insured has been insured under building and personal property coverage form CP 00 10 10 12 since January 2015. Along with a hired engineer, the carrier claims adjustor inspects the roof and uses satellite images to determine that there is no hail damage to the newer roof panels, which had been replaced within the last three years. The team notes that the hail impacts were rusted, indicating to them that the damage occurred before January 2015. The carrier therefore denies the claim.

The agency then submits a claim to the carrier that insured the building prior to January 2015, also under form CP 00 10. This carrier goes through the same adjustment process and determines that there is hail damage, but that the damage occurred after 2015. As a result, this carrier also denies the claim.


Which carrier is responsible for paying this six-figure claim?

Response 1: 

Whichever carrier was on the risk when the hail damage commenced.

Response 2: 

Your state’s department of insurance or a judge will have to tell you.

Response 3: 

Has the insured received a written and dated denial from both carriers? And do you have a confirmed date of loss referencing the dated satellite imagery? Check with surrounding property owners to place a better time frame for the date of loss. Also, check the form number. This should be a CP 10 30 special form. Based on the age of the claim, I’m guessing the best you’ll receive is actual cash value, less depreciation and the deductible.

Response 4: 

Invoke any arbitration provisions in the policies. If that doesn’t work, sue both carriers and let the courts figure it out.

Response 5: 

I regret to say that I think this is a legal matter beyond the scope of this forum. I’m also sorry to hear about carriers acting this way. Neither company is covering itself with glory.

Response 6: 

At this time, your insured might need to repair their own roof to prevent further damage. Given the dueling insurers, your insured will likely need to retain legal counsel to move matters to arbitration under the policies' provisions or file litigation.

Response 7:

I am sorry to say that this situation may require the insured to seek legal assistance. But if you want to hold off on that route, try asking each insurer for additional proof that it is not responsible.

For example, if you can find out what hailstorms occurred in recent years, the size of the hail damage can be measured to determine which event caused the damage. Hail damage leaves dents, and the size of each dent can be used to pinpoint which hail event caused the loss. 

The current insurer claims that the presence of rust proves that their policy was issued after the actual damage was sustained. Maybe ask if any other property in the area sustained hail damage since the effective date of your insured’s policy. Hail damage does not affect only one property. If they had other losses in recent years with damage similar to your insured's loss, then you have a case for arguing that the rust that developed could in fact be related to past events during the coverage periods.

This question was originally submitted by an agent through the VU’s Ask an Expert Service, with responses curated from multiple VU faculty members. Answers to other coverage questions are available on the VU website.

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