Relationships Are Everything When Working With MGAs
Managing general agents need retail insurance agents; retail agents need MGAs. That much is true. So, given this reciprocal professional dependence, why are working relationships between these two groups sometimes burdened with anxiety and mistrust? And, what can be done to improve those relationships?
The need to develop and nurture relationships emerged as the most important factor in a panel discussion between MGAs and retail agents held recently at the Independent Insurance Agents of Texas’ Joe Vincent Seminar.
The IIAT and the Texas Surplus Lines Association joined forces in an effort to examine those questions and explore the expectations of both groups through a joint IIAT/TSLA survey, “Best Practices for Working Relationships Between Wholesalers and Retailers,” and the panel discussion, “Working Smart with MGAs,” grew out of that survey.
The survey task force asked members of both the TSLA and the IIAT to respond to questions regarding such topics as establishing relationships, contracts, binding authority, certificates of insurance, submissions, renewals and quoting. More than 300 people participated in the survey, 41 from the 84-member TSLA and 271 out of IIAT’s approximately 1,700 members. The results of the survey and the task force’s recommendations are covered in a 60-plus-page publication that was released at the Joe Vincent Seminar.
Moderated by Baron Garcia, with Oklahoma General Agency in Oklahoma City, the “Working Smart with MGAs” panel consisted of Paul Rainey, RSI International, Arlington; Dan Oberheu, PLUS Inc., Austin; Gary Grissom, Texas Insurance Associates, Austin; and Rick Bondurant, Frost Insurance Agency, Fort Worth.
Garcia, a past president of the American Managing General Agents Association, asked the panelists to comment on the state of the market. There was general agreement that while the market may be showing signs of softening, or leveling off, plenty of volatility still exists out there, with standard markets continuing to segment. Grissom voiced concern over reductions in coverage and wondered how agents would manage to fill the gaps in coverage and at what price. “The market, to me, is still very hard regarding coverage, because coverages continue to be more restrictive,” Grissom said. “While price … maybe that’s leveling off or not increasing as much as it has the last two or three years.”
Offering the viewpoint of wholesalers regarding coverage restrictions, Garcia commented that in the post-9/11 marketplace, “everyone is more conservative from an underwriting standpoint.” He added that “it’s like you knew Sally all for all these years, but then Sally became a witch all of the sudden … What she let you do all those years is now taboo. She wouldn’t talk to you, ask you about your kids. She would say ‘no’ and that was the end of the conversation. Well, that’s what we have to deal with from a wholesale standpoint.”
Garcia noted that one interesting thing about the IIAT/TSLA survey was that a similar survey was done in Oklahoma in early 2003, albeit on a smaller scale, and that the answers were almost identical. “What that’s telling me is that everyone’s looking for the same answers. There are many issues in the survey that don’t have right or wrong answers,” he said.
Issues that retail agents in the audience seemed most concerned about included: certificates of insurance—who can issue them and who can’t, and whether or not they’re issued on a timely basis; getting renewals placed on time, as well as policy changes at renewal; proof of E&O coverage; and perceived understaffing at wholesale operations.
RSI’s Rainey agreed with Garcia that many questions have no right or wrong answers, particularly certificate of insurance issues. “To be honest with you, just like Baron said there are no correct answers,” Rainey said. “You’ve got wholesalers that do issue them, you’ve got wholesalers that refuse to issue them, you’ve got wholesalers that let their retail agents issue them … there are numerous ways certificates are handled.” He added that communication and education are keys to resolving many problems with certificates. Rainey asserted that wholesalers must educate their staff members, who in turn need to communicate with their retail agents, about the specifics of each carrier in regards to their certificate of insurance policies.
Grissom noted that, “from the retail agent side the communication issue is critical.” He added that “one thing when you read through this survey [you notice] as retail agents, we have not done our proper due diligence. …
Maybe that goes for both sides … and I think that’s something we need to step up and review—and know exactly what each company does and how they do it.”
Garcia stated that he realizes that retail agents carry the burden when a certificate of insurance is not issued in a timely fashion. “When I was a retail agent, my theory about wholesalers was they were a bunch of thieves,” Garcia said. Stating that it is “a real sticky issue,” he noted that “from a carrier perspective and from a reinsurer’s perspective, they want to know how far down the food chain” the certificates are issued. He added that some carriers will only let wholesalers issue them and some carriers won’t let wholesalers issue them. Still, Garcia said, “We have a lot of agents that we’ve done business with for several years that are competent, that pay their bills on time … we allow them to issue certificates.” He noted, however that majority of his company’s retail agents in Oklahoma, New Mexico, Arkansas, Texas and Missouri are not allowed to issue certificates.
Bondurant, with Fort Worth’s Frost Insurance Agency, said many of the problems to be worked out between wholesalers and retailers should be looked at from a supply chain management perspective, “where you identify the partners who are going to be the best fit.” He commented that early in his career he spent a lot of time at companies, as part of an educational process, observing their operations and getting to know how they got things done.
“I’d like to say that the insurance [company] people spent the same amount of time coming into our operations, looking how we do things and then using that as a jumping off point for how we can establish best practices between the two entities,” Bondurant said. “I think we could do a better job of selecting those relationships, committing to those relationships” if teams from each side could spend time in both the retail agency and the wholesaler’s office. That way, Bondurant noted, each group would be able to see the challenges faced by the other. He suggested that complementary goals and streamlined operations would result from such interaction, adding, “ideas come from the people doing the work.”
Garcia admitted that wholesalers, faced with the challenges of the past 14 or 15 months, have not done a good job discussing issues with agents, such as explaining to them why their forms were rejected. “That’s not good enough, that’s not the way to establish a good relationship,” he said.
Still, he agreed that retail agents should concentrate only on the wholesalers that are a good fit for their risks. “If you’ve got ten wholesale operations and five brokerage operations … in the vicinity of where your office is, the worst thing in the world” is to try to deal with all of them. Agents, he explained, need to develop and work on relationships with wholesalers that offer the products they need.
Staffing issues, particularly what is perceived as understaffing at MGAs, was the concern of at least one audience member, who questioned why MGAs aren’t hiring additional staff, as overworked “underwriters are jumping out the window.” (One wholesaler in the audience jokingly commented that the solution to that problem is to “put some mattresses in the parking lot.”)
“We’re all aware of demands on staff,” RSI’s Rainey said adding, “A lot of us are trying to add staff strategically.” He said one problem is the need to make sure that there’s a spot for that person when the market softens.
Garcia noted that his firm had added four people in the past 11 months, but he worries “about the time I don’t have money to pay those people.”
In the end the consensus was that greater communication between the retail and wholesale sides is an absolute necessity, and, as Garcia put it, the bottom line is, “know your MGA’s market appetites.”
Editor’s note: To find out more about the IIAT/TSLA joint survey, contact the IIAT at (800) 880-7428 or visit www.iiat.org.