Commentary: No Time for Basking in the Glow of the Hard Market

It’s finally here! Strike up the band, pass out the cigars, the hard market has arrived! We still have availability of product and our renewals are up at least 10 percent. Workers’ comp premiums are up an average of 20 percent and the economy is booming, creating positive audits and increased premiums for our renewals. All our problems are solved, right?

Not quite. It’s a great business and the opportunities are endless, but we can’t afford to hide behind the hard market’s veneer of success and well-being. The basic components of our future have not changed.

The stark reality is that within 10 years, potentially 50 percent of insurance companies will either merge or retire from business. In addition, 50 percent of the current agencies will also merge or simply go out of business. So while we are prospering today, we must diligently prepare for the future.

Fortunately, there are many options for ensuring a successful future. Following are just a few of these options.

You can grow your firm through aggressive sales and new business development.
You can implement aggressive cross-selling initiatives that expand the services you provide your clients, increasing your value to them, and, therefore, increasing your retention and value of each account.
You can merge or sell your organization and become part of someone else’s future, capitalizing your equity and preparing for retirement.
You can develop an internal perpetuation plan that enables your employees to acquire your interest.
You can restructure your operations to maximize profits, create surplus capital, and fund a lucrative retirement program.
If you plan to grow your firm, increase market share and increase volume, then you will need to make technology your partner. Specifically, this will require continuous investment in state-of-the-art hardware and cutting-edge software. In addition, your clients will expect (demand) that you create bilateral communication to facilitate and manage their insurance program “over the Net.”

There must be continuous improvement in your productivity and quality of service. Do not let the hard market lull you into complacency. At best, you have an 18-month window to enjoy increased growth and profits as a product of the hard market. If you continue to improve productivity and the quality of service, you will be protected as the industry enters into a “softer” environment.

Efficient management of the demographics of your agency is another important factor. Continually strive to increase the value of each account.

Explore insurance company service centers and try to partner with one or two carriers that you believe will be the survivors and who are dedicated to the integrity of the company, agent and client relationship. Service centers offer the opportunity to sustain excellent cash flow on the smaller accounts that otherwise would be unprofitable.

Commit your agency to providing a full range of financial services to your clients. Your goal should be to continually increase your value to your clients.

Essentially, that’s no different than what you’ve always done, right?

Paul Bronow is co-founder of In-Focus, an insurance consulting group located in Westlake Village, Calif. For more information, please visit www.infocuss.com.