It’s important to understand the type of organization you are working with, or going to be working with if you choose to utilize a broker. The reason it’s important to know is not only what resources and expertise that they bring to you, but also how they operate.
Insurance Agencies typically fall into 2 models. They operate similarly yet each work differently. I’m not referring to the small “Mom and Pop” shop, but rather the larger local, regional, or national brokerage firms.
The agency model that I spent a great deal of time working under was one whereby I was the Client Executive in charge of every aspect of sales and service: new business production, all service throughout the year, and the renewal of the group. I had a team to help me throughout the year with service and renewals but at the end of the day the buck stopped in my lap. I was responsible for everything that went on with that account. As such, I became an expert in everything associated with that account and all the aspects of-the administrator, the stop loss carrier, Compliance, the PBM, etc.
The other type of agency model is one that utilizes a similar structure to the above, but additionally includes a Producer. A Producer’s responsibility is strictly to bring on new business for that Agency. They are not involved in any day-to-day, month-to-month or even annual renewal responsibilities. They may become “a” relationship manager” after onboarding a new client, but really have no service interaction with the account throughout the year. It is the responsibility of the team to carry out all the functions that are necessary.
In my opinion, the problem with the Producer model is that once a group is on board, the Producer who sold the account and whom the employer trusted and bought from, is no longer in the picture. The Producer stands on the sidelines hoping that their team will do a good job and do what is necessary to lower the costs that were promised by the Producer. It’s all about managing expectations. If the employer who is a new client trusts the Producer but the team doesn’t move the needle, the entire relationship is in jeopardy. People buy from people, and when the people that were originally in the transaction are not included, it potentially creates disappointment.
My experience is that in the Producer model the rest of the team may become rather complacent because they don’t have the same relationship with the employer that the Producer did. It’s easy for the team to maintain the status quo with regards to service and not bring innovation to the table. It’s easier to provide good service on claims issues administration etc. but bringing change to the employer requires work on everybody’s part, and some teams resist change more than others.
The Client Executive/Account Executive model also has its challenges. Perhaps the biggest issue is the pressure to bring on new business for the Agency. When a Client Executive is responsible for everything, something always has to give – especially as their book of business gets larger. The Agency will not allow them to sit back and just service their groups; they must continue to grow their book. This ultimately creates a capacity issue, and a capacity issue doesn’t always a good outcome for the client.
This issue also carries over to the compensation paid to the agency and all of the people involved. In the first model above, the Client Executive who is responsible for all activities (new and renewal) is compensated by not only bringing on new accounts but also renewing accounts and has a direct financial stake. They benefit financially in renewing each and every one of their clients, whereby in the Producer model, the team doesn’t get compensated for any of the work they do throughout the year – none of the team has a direct financial stake in keeping client happy or the account on books.
When the person who is talking with you making presentations on behalf of their Agency and what they have to offer, how do you make sure that those promises are going to be kept? How do you know you’re going to get what was represented to you? How do you know the people associated with the agency have a passion for moving the needle?
I will discuss resources in another issue.
Unfortunately the brokerage business is one which is overpromised and under delivered.
You don’t know what you don’t know.