Focus key to surviving insurance industry challenges

The “big problems” facing insurance agents and brokers today are human resources; government intervention; sustaining agency revenue growth/profit; maintaining a consistent company strategy and tactics; and company consolidation, according to Peter Cazzolla, CEO of Capital Insurance Group. Those five issues might even keep insurance companies, agents and brokers awake at night, Cazzolla told the audience at the recent Insurance Brokers and Agents of the West Blue Ribbon Conference in Hawaii.

Human resources

The key concern with human resources, Cazzolla said, is to find good, qualified people to do the jobs in an organization. But creating an outstanding staff boils down to strategic direction and vision, he said.

The strategic vision helps “internally at the agency, in terms of giving your people a better feel for where your agency is going, in relationship to what companies are providing you, as agency and insurer of your product, to ensure in their minds that you have a coordinated direction and objective,” he explained.

Then, it is important to retain and motivate the team. It’s difficult to keep people long-term, when the norm is they work for a short period, get training, then leave for another company, he said.

Government intervention

The second challenge facing agents and brokers deals with government regulation at both the federal and state level. Cazzolla said the industry is facing increased regulation, and that environment is not going to change.

To manage increased regulation, Cazzolla challenged the audience to step up their commitment to advocacy. “You’ve got to step up to the bar, whether it’s money, whether it’s time,” he said. For example, agents and broker could do a better job of supporting McCarran-Ferguson, Cazzolla indicated.

The McCarran-Ferguson Act of 1945 includes a limited insurance antitrust exemption, which placed responsibility for insurance regulation with the states and has permitted insurers to engage in certain joint data collection, price trending and form and policy development activities. Congress continues to debate the insurance industry’s exemption from federal antitrust laws.

Whether a company participates in the debate to keep the exemption locally or in Washington, the bottom line is to keep it up, Cazzolla said. Stronger activism is needed to show that the industry’s communications are coordinated. That means insurers must be engaged in the advocacy process, too.

“If you want your companies to help in your advocacy, then say, ‘look, that’s part of our business partnership.'” Ultimately, Cazzolla said insurance companies need to work with agents to help maintain the independent agency distribution system.

To curtail government intervention, agents and brokers need focus, commitment to the system, and commitment of ardent supporters. Only then can companies sustain profit and growth, Cazzolla said.

Sustaining growth and profit

While, sustaining profit and growth in today’s environment is a concern, Cazzolla cautioned that too much diversification can detract from profit and growth.

“It’s great to have peripheral ways of generating business and revenue, but stay focused on your core,” he advised. “Stay glued to that thing, and use these other things as just icing on the cake.”

Then, Cazzolla suggested agencies figure out how to be “remarkable business people.” Companies that just sell insurance will wind up competing on price, he said. Today’s buyers are more informed and are more sophisticated, he explained. Thus, it’s incumbent for the agent to show the customer how products and services create value. Convincing buyers is dependent on the agent’s ability to present and market ideas, he said.

Additionally, independent agents need to be able to market themselves to insurers. If an agency comes up with solid ideas on how to build the partnership between agency and insurer, it will boost the agency’s reputation, Cazzolla said.

“I’ve been running regional companies for probably about 22 or 23 years, and I can count on my two hands when an agency or agent owner came to me and said, ‘I’d like to talk about something.'” The companies that did, illustrated their value to the insurer in the distribution system, Cazzolla said.

He advised agents to work with insurers to create new opportunities, as well as develop a consistent company strategy and tactics.

And believe it or not, part of a consistent strategy is the commission program, Cazzolla said. “There needs to be meaningful commission programs offered to agents to make sure that the agencies are perpetuating the [insurer’s] business and getting the revenues that need to be generated,” he explained. Part of consistency is for both the agency and insurer to be committed to the market.

Company consolidation

Commitment can be scary in light of all the company consolidation that is occurring in the industry. However, Cazzolla said agencies should accept that “change is inevitable.”

He suggested companies look at change no differently than how they evaluate a risk, noting frequency and severity. “Change is going to happen,” he said. “It’s just a matter of how frequent and how severe.”

To ease concerns about consolidation, Cazzolla advised agents to be well-informed and to talk to their insurance partners when they have questions.

Overall, to avoid sleepless night worrying about the challenges facing the industry, Cazzolla suggested agencies, determine their vision and strategy, then document the plan because it will help to “better manage your businesses and your life,” he said.

Agents should be true to themselves, nurture their relationships, and take action to improve their business, Cazzolla said. “Focus on what you do and do it the best you can. Gain the highest level of performance and good things generally will happen,” he concluded.