The Competitive Advantage: A Scary Trend
Maybe “trend” is inaccurate because the data is scant, or maybe “trend” is a presage. The “trend” does not yet exist, but it will. The “trend” is companies taking drastic action against, or at least quite detrimental to, their own agents. Examples of arguably (from specific perspectives) reasonable but aggressive actions I see carriers taking against their own agents include the following.
Egregious: E&O Claims.
According to some of the errors and omissions (E&O) claim data I have seen, companies are much less shy about suing their own agents to recover claims they have paid. Some specific areas include:
Binders. Issuing binders that exceed the agent’s authority, writing binders when the agent should not write a binder, changing the terms of binders, or using the wrong binder form. A fundamental issue I have seen in many agencies is that no one, or at least almost no one, has any idea what a binder really is. It is a temporary insurance contract. A binder is not proof of insurance. It is best to not write binders unless the situation really requires it and the agency truly understands its binding authority. Claims. Learning of a claim and then giving the insured the option of turning the claim in. I understand well, and personally, the price paid for turning in a “claim” that is not really a claim and having the insurance company treat the nonevent as if it was the most egregious claim it has ever seen. However, from an agent’s E&O perspective, read your carrier contracts. Probably every contract requires you to notify the carrier if you learn of a claim, even if it may be a “non-claim.” The exposure is that if that claim gets large, the company can play the white knight, pay the claim, and sue the agency to get its money back for violation of the company- agency contract.
Taking Ownership of Expirations. When I wrote about a company taking ownership of expirations, arguably forcibly and definitely without cause, some readers flat disbelieved me. I get their disbelief. I was in disbelief, too, when I first read the new contracts. To this day, I do not understand why this has not become more public, especially because affiliates of that carrier have expanded the expropriation of expirations. I do not think a large portion of agency owners are reading their contracts, especially benefit contracts. Options other than bending over do exist if agents will communicate loudly with their associations. Service Centers. Another example is purely the agents’ fault, and that is using company service centers. Think about it just for a second. This is simple. If a company services your clients well, the company does not need to pay the agency a renewal commission. If they do not need to pay the agency a renewal commission, they do not need to leave agents with ownership of expiration rights. This is not rocket science. The writing is on the wall — though in invisible ink, for now.
A carrier suing its own agents for educating clients on which coverages are better. Unfortunately, for all involved, the carrier with the worst forms decides it would prefer the public not know this so it sues agents for describing the differences between the better and worse forms. Rather than improve its forms, the company sues. I sometimes see similar actions at the broker level. It seems parts of the industry refuse to improve and become more competitive, whether with products, rates or quality of employment, so it sues to institute ignorance and serfdom.
Many carriers, agents and brokers do not have a clue how to grow organically. They literally do not have a clue. This is not my opinion. This is a fact backed up by reading the financials of carriers and brokers and analysis of privately owned entities. Some can’t grow because they have no money after acquisitions. Some do not have even an inkling of a sales culture. Some see their strategy as litigation rather than better products. Their strategy must be to invent damage whenever a key employee (or when they deem an employee as key) leaves or when agents move business to other carriers. These behaviors smell of desperation.
Many carriers and agents and brokers do not have a clue how to grow organically. They literally do not have a clue.
How to Protect Your Agency
My suggestions for protecting yourself and your agency from these trends include: