7 Reasons to Consider Program Business Opportunities

As the insurance marketplace continues to harden, many carriers may be looking to further tighten their underwriting guidelines and appetites – primarily as it relates to new business. Accounts they may have considered, quoted or written in the past may now fall outside of their appetite and/or interest – leaving the agent to have to spend more time, expenses and effort marketing the account, searching for a competitive proposal.

In addition, and sometimes surprisingly for insurance agents focused on retaining their customers, providers’ in-force books of business are also coming under increased scrutiny – at times even when they may be historically profitable. Driven by corporate pressure, fear of loss and other factors, companies may non-renew, change terms (from slight to major) or increase rates significantly on well-performing accounts to trim their book or push them away. It can seem like the underwriters are trying to stay as close as they can to the middle of the lane and away from accounts that may vary even slightly from the core, or “perfect” account.

In addition to the increased effort it creates for agents, it can leave the insureds with a sour taste for that market – “After all, didn’t I stay with this market for ‘x’ years, through the marketplace changes and have low to no claims – and now you don’t want my account?” say the agents and insureds.

So, with the above as a backdrop – what about considering the pursuit of program business if you have not explored it before or taken advantage of it for some time.

First, for the purpose of this article, program business is being defined as accounts having common operations – homogeneous risks if you will – like manufactured housing as an example. Or, more broadly – a set of operations that while not homogenous, may be of similar and defined risk types – like trucking and truck dealerships. Across the program there would be a level of commonality, similarity of exposures, operations, and in contrast to, say, general commercial business or even BOP (business owners policy) accounts.

7 Benefits of Programs

Pursuing specialty program business can bring agents and brokers many rewards. Here are some benefits to consider as an agent/agency if you are writing program business.

Being similar in their segment, structure and focus, the agent can relate experiences from one account to another. Being familiar with the class/type helps the agent build expertise. It can also be tied to the benefit of predictability. All risks are not exactly the same, yet working in a niche or similar business can be very beneficial.

Rather than trying to be an expert in all types of business across a broad spectrum, the agent may have a faster learning curve. Not necessarily a “once you’ve seen one, you’ve seen them all” mentality, but the experience and the expertise can tend to have a building block effect – establishing a base of knowledge for the producer and/or account executive.

This has a few aspects – first, predictable income. While program business does vary, often the types of accounts can run a more consistent or predictable range of pricing. Knowing this and developing a book of program business can make it far easier to forecast production and revenue. In addition – predictability of work effort – meaning, that if you know your average account is $50,000 of the type of program business you’re pursuing, and you have a goal to generate $2 million of written premium, you know you need 40 binders to meet that goal, and you can then back into the hit ratios and efficiency ratios (submit to quote) to estimate your work effort.

By writing program business and with some effort to repeat with additional prospects and/or insureds, you can begin building a relationship and, ideally, a partnership with the market. This partnership can be mutually beneficial – affording the agent a reliable, predictable home for the specific type of business while affording the program a more well put together, complete, and actionable submission for them to work, propose and win. You are likely to be able to develop a deeper and stronger relationship with a market or MGA than branch office or one-off account underwriting. This can be more rewarding, more efficient, and seemingly less of a grind for the agent and account manager.

You may find that as you build your program business book in a particular segment, you have prospects approach you – either from referrals or simply from insureds acknowledging the breadth and scope of your agency’s involvement in a particular segment. This can be most helpful as you grow your book of business because you can become more of a stronghold, rather than a one-off producer in the segment. This can help strengthen agency retention and help your bottom line.

When an agency produces program business there can be real cost savings. These can be in the form of IT savings, by virtue of the repetitive and reliable communications with a recurring partner for the business segment – features like electronic upload and download can save time and therefore expense. Other processes like proposals, endorsement requests and delivery, as well as billing an electronic policy issuance can all be easier once executed a few times, thereby easing the burden on agency staff, increasing efficiency, and saving cost. This can allow for more focused use of agency staff where needed for other projects and tasks.

The niche you choose may have one or more local, state or national organizations. This can afford you an opportunity to sample and evaluate them for membership. Presumably many, if not all the members, would fit your program niche, so you’ve saved time and effort in tracking down “suspects.”

Many of the associations offer associate memberships, or some other category of membership, to insurance agents and vendors to be a part of the group. This usually comes with a membership list – again, helping to favorably impact overall lower acquisition costs.

As with anything, check it out. See what the specialty program or company is offering. Conduct some due diligence of your own and connect with the program business provider to ask questions, vet them, see whether they are responsive to your needs and whether they may be a fit for your organization. Given its specialized aspect, program business can be beneficial to agents and brokers and relatively easy to access. Good hunting!