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The Rough Notes Company Inc.



April 26
12:14 2021

Inside Matters

By Mary M. Belka, CPCU, ARM, ARe, RPLU, CIC, CPIW


The time to formalize the function is now

To ensure the best results, insurance agencies, like all businesses, require “360-degree” management of sales, financial, and operational components. All are interdependent—and none is more important than another. It doesn’t matter who has responsibility for each; all must be addressed.

Due in large part to the evolution of technology over the past 20 years, the scope and importance of operations management has expanded to the point where, regardless of agency size, it is the crucial component that supports all other roles.

No longer is it enough to simply react to what happens that could affect your agencies, your clients, or your employees. You must prepare for the next big thing, whatever it may be.

This past year, COVID-19 has placed the spotlight squarely on the need for what most agencies have continued to do without: intentional, proactive, professional operations management. The pandemic dealt a blow to those agencies unprepared to operate in a completely automated environment with some or all employees operating remotely.

Forced change was immediate, and some will be permanent.

Agency owners without dedicated operations management had to stop, regroup, reset, and become more involved in operations in order to continue serving clients. Our industry is fortunate to have recurring revenue and the ability to operate remotely during the pandemic nearly as effectively as pre-COVID, depending upon each firm’s level of readiness.

Ops management

As we continue toward a “new normal”, there is no going back—only forward. Operations management is part of this new normal.

  • Operations responsibilities include but are not limited to the following:
  • Agency productivity, increasing capacity and profitability
  • Service and administrative staff hiring, management, and development
  • Technology oversight
  • Human resources oversight
  • Procedures/workflow development and auditing for compliance
  • E&O, cyber liability, and regulatory concerns
  • Staff insurance education and training
  • Accounting oversight

Depending on the agency, a chief operating officer likely has broader job responsibilities, for instance in the area of human resources, than an operations manager. Areas of responsibility often vary by agency size and scope.

Is it any wonder that operations requires full-time attention, even for agencies of modest size? Account managers, in particular, are more successfully managed by someone who knows every aspect of the account manager position; this is often best achieved if they’ve actually done the job. An individual with laser focus in these areas can support the sales effort by creating more time for producers to spend their energy adding revenues, and for account managers to keep their focus on providing extraordinary service to agency clients.

Role evolution

When the earth was cooling, agencies typically began with one or two producer/owners, adding an assistant or “CSR” as the organization grew. In times of agency billing, a bookkeeper was seen as the next logical position. This individual often developed into the “office manager”; at times, a CSR took over some or all these duties.

The office manager was rarely afforded the appropriate training to take on global management—many preferred not to learn these aspects of agency management. Few were given the real authority to make decisions regarding employees or processes. The position was largely one of administrative oversight. While there were some exceptions, few became agency owners.

Fast forward to 2021. The various facets of agency operations management have expanded exponentially. The office manager position has faded, for the most part, particularly if bookkeeping duties were primary, as direct bill is now the norm. The time is now for taking the proverbial leap and creating a level of operational oversight and accountability common to successful businesses in other disciplines.

Operations responsibilities are commonly divided among multiple owners and others. Worse yet, in some cases they’re not directly addressed at all. The vast majority of agency owners are better salespeople than they are operations managers, yet they hesitate to consolidate and delegate these critical duties.

The most common reasons agencies do not make this investment include:

  • Lack of a strategic plan. Agencies that fail to plan or set specific goals find it difficult to define the position and quantify the expected ROI.
  • Many entrepreneurial owners believe the position is “too big” for one person. It can be difficult to delegate authority and share power that was previously concentrated only in the ownership ranks and spread out among several individuals. The tendency is to split the duties, which generally does not result in operational effectiveness.
  • Expense vs. investment. Owners are hesitant to dedicate the necessary resources to invest in full-time operations management. A robust sales organization can see the value and return on this investment, regardless of size.
  • Lack of a comfort level with operational accountability—rewards and consequences.

Recipe for success

I’ve found that, once the strategic decision has been made to create the role, developing an operations manager from within is generally more successful than recruiting someone from outside the agency. There are several reasons, top among them the importance of the agency management system to overall agency operations. A deep understanding of the system employed by the agency is critical to any operations manager’s success.

Client and prospect detail, submission activity, accounting, suspense/activities, applications, download, and more all are tied to reporting, procedures, workflows, and the ability to audit, all of which fall within the operations manager’s area of responsibility.

The potential for success is greater if the operations manager is familiar with the agency’s particular system. The best operations managers can adapt, of course; however, the tendency is to try to steer the organization toward the past system, with which the individual is most familiar, and this is not always in the best interest of the agency.

Choosing someone outside of our industry or someone who has never worked in an independent agency is a recipe for failure or at least will lead to difficulty in adapting. It can be a heavy lift for someone from a captive agency or from the carrier side to manage an independent agency effectively. The learning curve is steep.

Supplementing on-the-job training with appropriate industry education and creating an educational career path is critical. It is particularly important that the operations manager has served as either a commercial lines or personal lines account manager. The account manager position is the fulcrum for so many critical relationships—with clients, producers, carrier personnel, adjusters, insurance departments, mortgagees, and other third parties.

Account managers, in particular, do not have patience with those lacking “street cred” in understanding the challenges of the position. Coverage knowledge and industry expertise are critical. It does take the right person; ultimately, time in the account manager position within the agency provides the best over-all training ground to handle the job.

Personality testing also is essential to identifying the ability to handle this position. Resiliency, effective communication skills, critical thinking, and an organized, solution-oriented approach go far to ensure success in the role.

A note about outsourcing: It is prudent and cost-effective to outsource responsibilities outside the agency’s core business. For instance, many agencies effectively outsource IT and various aspects of HR, accounting, education, and training. The operations manager must work closely with such partner firms to assure performance quality and ROI.

However, I don’t recommend outsourcing the agency’s core business—sales and service of insurance accounts. These represent the essence of what the agency provides to its clients. “Service” includes some degree of processing and is critical to effective account management.

A good operations manager is continuously searching for ways to increase productivity and profitability without sacrificing true service to clients, which is a subject for a future column.

Our new reality

The brave new world will test us all. It already has. No longer is it enough to simply react to what happens that could affect your agencies, your clients, or your employees. You must prepare for the next big thing, whatever it may be. We have to grow in spite of difficult times and have the operational structure in place to support that growth.

Looking ahead, keep the following in mind:

  • Various forms of working remotely are here to stay. Account managers may be located somewhere outside your immediate vicinity.
  • Zoom meetings are the norm, and their use is ever-expanding.
  • Coverage changes and a hardening market are not just on the horizon. They are here!
  • Clients’ exposures and expectations are changing rapidly.
  • Effective handling of email remains the bane of operational efficiency. Clients and others working from home have served to increase this volume and will require discipline and oversight for staff to remain productive and effective.

All of these and more will bring operational challenges—and opportunities. Who will you have in place to manage for the best outcome? It starts with a plan and creating the position, and then adding the right ingredients, including the right person, who can develop in the role. No one possesses all of the criteria at first, but you can set the bar.

Every time you make a hire, be sure to test for future operations management potential. Whenever you have the opportunity, “hire up” and create an environment where you can remain nimble, proactive, and as ready as you can be for that next big challenge and opportunity.

The author

Mary M. Belka is owner and CEO of Eisenhart Consulting Group, Inc., providing management and operations consulting to the insurance industry. She also is an endorsed agency E&O auditor for Swiss Re/Westport. A graduate of the University of Nebraska, Mary holds the CPCU, ARM, ARe, RPLU, CIC, and CPIW designations.

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