Agent-Carrier Partnerships Need Goal Clarity and Exit Strategy

The carrier executive tried to pin down agents on what they wanted from their insurers. Among the vague responses of exclusivity, underwriting authority and respect, one complaint stood out.

“When asked about why he wanted to change carriers, one agent said, ‘I don’t feel the love,'” quipped Margaret Zechlin, senior vice president and business leader at GE Insurance Solutions.

At a recent meeting of the National Association of Professional Surplus Lines Offices, Zechlin blamed the brief tenure of many agent-carrier relationships on a lack of specificity. Successful business relationships don’t rely on the love or any of the other vaguely expressed needs. Instead, they require goal clarity, objective alignment, communication, codification, performance assessment, and a solid exit strategy, according to Zechlin.

Five years in average
According to GE numbers, the average program duration with an agency is a mere five years, and most relationships fail because neither side sets up realistic expectations.

The first step is to clearly define expectations before entering in a carrier contract. This means establishing “SMART” goals, an acronym for specific, measurable, actionable, responsibilities identified, and tied to timelines, Zechlin said.

For example, agencies that rank underwriting authority and autonomy as a priority can solidify that goal by delineating line versus staff responsibilities; agreeing on who is doing what and by when; and agreeing what are the desirable and measurable outcomes.

Even more important is determining whether the potential carrier partner is a good cultural fit with the agency, Zechlin stressed. Zechlin recommended four steps in assessing cultural compatibility: conducting a cultural assessment by examining elements like the insurer’s risk tolerance, management and reward system; conducting an honest assessment of organizational fit by each attribute; reviewing each attribute with the insurer; and establishing a mutually beneficial operating agreement.

After the “honeymoon is over,” the insurer will be evaluating the agency, noted Lois J. Mazza, vice president and sales executive for GE’s Select Markets program. GE compiles a program metric scorecard, shared monthly with its managing general underwriters and examining how each program administrator manages its program, portfolio, and business in general. Areas under the microscope include monthly and year-to-date written premiums, price monitor, policy issuance, hit ratio and retention ratio. This system helps both GE and the program administrator determine whether they will meet their goals, how they’re performing compared with the prior year, and if there are any downward (or upward) trends.