Manage Your Agency’s Loss Ratio or Face the Possibly of Carriers Cancelling your Agency

By AgencyEquity.com

Many agencies across the USA, especially in California, are getting word that they can no longer write business with their preferred carriers. Carriers like Nationwide have publicly announced that they are limiting new business in all states and are even pulling entire agency appointments. While the big culprit is inflation, the other culprit is agencies with high loss ratios. This article offers key insights that will help you keep your extremely valuable agency appointments.

Overlooking loss ratios is the biggest mistake an agency can make. The consequence of not being profitable is losing the valuable preferred carrier appointments. Being part of an agency network will no longer shield an agency from their poor underwriting results. Furthermore, it’s just good business to have a profitable agency, as a profitability bonus can make a huge difference to an agency’s total revenue. Turning away unprofitable business will, in the end, make your agency as much or even more in revenue without these bad risks, because profitability bonuses can make up the difference. Even more importantly, turning away bad risks will save your agency from losing key appointments.

Here is how you can make your agency more profitable:

1. Make sure applications are accurate, and never assume anything without verifying the information.
2. Never omit information; it’s better to lose a client than to omit key information. An example of this is leaving out underage drivers.
3. Always win the entire account. The best customers are going to want to do business with one agency.
4. Sell high lability limits. The best, most profitable customers want high limits.
5. Refuse to do business with customers who are dishonest. These people are nothing but problems for your agency and your loss ratio.
6. Never advertise that you have the cheapest rates! Instead, advertise your professionalism and credentials.
7. If someone is only interested in rates and not coverage, move on. This type of policyholder often works the system wanting to pay the cheapest rates and will likely squeeze as much as they can on a claim. Furthermore, they will have no loyalty to your agency.
8. Be knowledgeable about policies and coverages. Educating a prospect can often change them from rate shoppers to those interested in coverage.
9. Get the best business by providing great service because this wins profitable referral business..
10. For commercial accounts, don’t push the limit on scheduled credits. If you have to win the account on price, now might not be the time to win these accounts if you want to keep your carrier relationships.

Trying to push as many applications through the system won’t serve you or your agency well. Turn your focus to quality instead! The bottom line is that prospects who push you on price are always going to force you to cut corners, and these clients end up being unprofitable accounts. Furthermore, never behave as if it’s your job to get them the best rate; behave as if it’s your job to help them best protect their assets. This way, you change the conversation from prices to coverage. Your relationship with your carriers depends on doing the right thing, and while it may mean losing some business, the benefits of keeping your carrier appointments is infinitely more important than gaining a dishonest or cheap client. Remember, you will likely make up the difference in profit sharing bonuses.