Smart Choice® helps agents stay independent and prosper
When times get tough—and they’re certainly tough these days—independent agents respond in different ways. Some try to hang tight and ride out the storm. Others acquire another agency, are acquired, or form a cluster. Still others shake up their staff, buy a new agency management system, or attend seminars with titles like “From Zero to Sixty: Jump-Start Your Agency Operation.”
Some of these initiatives succeed while others fail. The good news is that there’s an alternative to these strategies that’s proving successful for several thousand agents around the country. It’s the Smart Choice Agency Program, established in 1994 by Doug Witcher, president of Worldwide Insurance Network, Inc. (WIN).
WIN contracts with insurers and makes these markets available to Smart Choice® agency partners, who today number some 4,700 in 43 states and place some $3 billion in premium through WIN. As a small agent himself in the 1980s, Witcher experienced firsthand the frustration of trying to obtain company appointments, and that was his motivation for launching Smart Choice. Today member agents can choose from more than 85 carriers that offer personal and commercial lines, life and health insurance, and business builder and business saver programs.
“At Smart Choice, we match markets with individual agents. The agent gets a direct sub-code, and his or her name is on the dec page,” explains Andrew Caldwell, president of Smart Choice. “It’s like any other relationship between a local independent agent and a carrier, except the agent is accessing that carrier through us. An agency that struggles to gain access to five or six national markets may be able to get two or three on its own, and it comes to us to get access to the other markets,” Caldwell says. “Our agencies tend to be smaller shops that may not be able to meet the requirements imposed by national carriers.
“In each of the states in which we operate, we have a state director: an agent who gets paid a percentage of the business written by the agencies in that state,” Caldwell continues. “Compliance and licensing issues are handled at the Smart Choice office. Commissions are processed through us, and we pay them out to our agencies twice a month.”
Growing and expanding
As the numbers cited above make clear, Smart Choice is experiencing strong growth in all areas: number of agents, number of states, and premium volume. Since the 2008 profile was published (see “Instant Brand for Agents” in the August 2008 issue of Rough Notes), Caldwell says, “we have expanded into a number of Western States. We’ve seen a lot of growth from Oregon, Washington, California, and Texas.”
What’s more, he notes, “Over the last eight years we have refined a lot of the training tools we use with new and younger agents. We’re light years ahead of where we were in 2008. We’re also receiving substantial contingencies from some of our national carriers, and since we made changes to our contract in 2011 we’ve been sharing those contingencies with our state directors.”
Adds Paul Taylor, executive vice president: “Much of our growth has come from former captive agents who are leaving those platforms. Those companies haven’t affected us all that much as an organization, although I know that individual agents have experienced competitive pressure from them. In the Smart Choice program, probably 40% of our new agents over the past three or four years have come from direct writers and exclusive agency companies. That has helped us grow tremendously.
Is there an “average” Smart Choice agency in terms of premium volume and mix of business? Traditionally, Caldwell says, the organization focused on smaller agencies that wrote primarily personal lines. “With the changes we made to the contingency piece in 2011, we began to attract larger agencies. As Paul noted earlier, much of our growth in recent years has come from the ranks of former captive agents. Typically, when a former captive agent joins us, he or she is going to become a leadership agent in our program, and it’s going to be a larger agency in the Smart Choice network. Leadership agents are agents who have reached a certain level of commission split with Smart Choice. After reaching this level, they receive 100% of their commissions. The reason these agents join us is that they want access not only to markets but also to the contingency commissions we pay our leadership agents.
“Because of the 2011 changes to our contract, we are going to be the first choice for many smaller agencies because we don’t charge any up-front fees,” Caldwell explains. “We operate solely on a commission split for business written through carriers that we add to the agency. We don’t take a percentage of ownership or a commission split on a book of business that the agency already has.
“With those changes as well as the contingency change, we’ve also become attractive to mid-sized agencies,” Caldwell asserts. “So our membership represents agencies of all sizes, and we believe that this diversity is a significant advantage for Smart Choice.”
Commercial lines focus
Originally, Smart Choice focused on offering its agents access to markets for personal lines. More recently, Taylor says, the organization has begun to emphasize commercial lines. “In 2008 I would say we were 95% personal lines. Our goal is to get to at least 30% commercial over the next year or two.”
Adds Caldwell: “In 2015 we made a significant investment in strengthening our position in commercial lines when we brought on board two key executives: Steve Ford, who is vice president for commercial lines, and Oliver Travieso, vice president for sales and distribution. We now have as many executives in charge of commercial lines as we do for personal lines,” he says.
“Among independent agents, I know there’s considerable fear about direct writers and nontraditional markets coming into commercial lines,” Travieso observes. “In fact, it’s already happening. Years ago, the same thing happened in personal lines. While there’s a lot of brand recognition for Esurance, Allstate, GEICO, and Progressive, at the end of the day there are multiple generations of people who are still going to buy through an independent agent. That agent is their next-door neighbor, and he or she is writing the homeowners, the auto, the life policy, and the business insurance as well. This is the typical Smart Choice agent. We’re trying to provide that all-around solution for our agents by making good markets available to them for all lines of business.”
As part of its commercial lines initiative, Taylor says, Smart Choice offers two models. “One is called Smart Start, and it’s an online platform for smaller agents who may not have much experience with commercial insurance,” he explains. “The traditional model is for experienced agents. For our larger agencies with significant commercial business, we will get them directly sub-coded with our national carriers.”
Adds Travieso: “Smart Start can cater to the agent in a couple of different ways. For the agent who focuses solely on personal lines but occasionally comes across a piece of commercial business, and doesn’t necessarily want or need a sub-code for a commercial carrier, we can place that business through Smart Start. The agent will still receive the commission on it and is able to accommodate the customer without having to turn that business away.
“Another example is an agency with a high concentration of commercial business that’s working toward gaining appointments with carriers,” Travieso continues. “This way he or she can place a piece of business through Smart Start. This way he or she can either obtain a sub-code with a carrier or, if the agent doesn’t want to represent the carrier, he or she can still place the business with that carrier through Smart Start and gain a competitive edge.”
Adds Ford: “Earlier we talked about the competitive pressures on the independent agent, especially on the personal lines side. From my perspective, Smart Choice gives these agents the opportunity to spread their wings and get into commercial lines. We want to help agents who have focused primarily on personal lines become proficient and profitable in the commercial market.”
Notes Caldwell: “Currently 2,562 of our agents are participating in the commercial lines program, which represents over half of our total membership, and about half of those agents are highly engaged with us.”
Smart Choice also has a Smart Start program for personal lines, Taylor notes. “Agents with very little experience in this area can access our personal lines carriers. A comparative rater gives them a real-time quote, and the information is sent to our in-house underwriting team before the application is submitted to the carriers.”
Another program, Express Markets™, offers agents quick access to multiple carriers for both standard and nonstandard business. A 100% commission is paid directly to the agency.
Agent partner qualities
What qualities does Smart Choice seek in a potential agency partner? “Number one, they should want to grow,” Caldwell says. “Our carrier partners look to us for growth; we are a large source of growth for them.
Number two, the agency should want to be part of a family. Our Smart Choice agents, our directors, we’re all in this together, and we work, play, fight, and joke like a family. We want an agency that will play nicely with others, follow the rules, and be willing to work with us on the new programs we create, such as our commercial lines initiative. One of our key catchphrases is ‘freedom to succeed,’ ” Caldwell says. “Smart Choice allows you the freedom to succeed provided you’re willing to take our advice, use the training we provide, and become knowledgeable about commercial lines because there’s pressure on the personal lines side and commercial offers the opportunity for growth. The independent agency can own those commercial accounts and those relationships. We want our smaller agencies to come along with us down the pathway of becoming commercial experts for their clients and prospects.”
With nearly 5,000 member agents and a strong commitment to helping them remain independent and prosperous, the Smart Choice Agents Program offers a set of precision power tools that promote growth and success.
For more information
Smart Choice Agents Program Web site: www.smartchoiceagents.com
“We want an agency that will play nicely with others, follow the rules, and be willing to work with us on the new programs we create, such as our commercial lines initiative. “
—Andrew Caldwell President Smart Choice Agents Program
Article written by Elisabeth Boone, CPCU