GAP chairman Charles B. (Chip) Compton, Jr.
It all began five years ago, when 10 agents gathered at an office in Waycross, Georgia, to officially launch what has since become a hugely successful partnership of independent agencies operating throughout the state.
The agents, representing a total of five agencies of varying size, had some traits in common. They all were located south of Macon, in the southern part of Georgia. Many were young and had come to know, trust, and respect one another through years of association at the young agents meetings held under the auspices of the Independent Insurance Agents of Georgia.
Add these common denominators to the inspired leadership of Leonard Blount and Chip Compton, partners in Glass, Compton & Blount in Savannah, Georgia, who envisioned a partnership of agencies that would embody the adage "strength in numbers." The result was the formation of South Georgia Partners.
Compton explains that the impetus behind the creation of South Georgia Partners came in part from the success he and business partner Leonard Blount already had enjoyed by combining the volume of their respective agencies. One of the primary goals of South Georgia Partners, says Compton, was to expand this proven strategy to help other agencies being challenged by company volume requirements in a persistently soft market and wrestling with a customer base that was often sparse and geographically scattered.
As Compton points out, fully 60% of Georgia's population is located within 80 miles of Atlanta, with the rest spread throughout much of the state's large southern area south of Macon. It was this demographic reality that South Georgia Partners attempted to address, hopeful that by combining members' production under one company contract, all could realize significant benefits in the form of contract enhancements and contingency payments. A year later, at the urging of an industry consultant, the group decided to expand its union to include agencies throughout the state, and Georgia Agency Partners, Inc. (GAP), was born.
Today GAP comprises nine property/casualty agency members whose commission income ranges from $1 million to $3 million, located throughout Georgia and led by agency principals with an average age of 40. In 1998 GAP members produced roughly $80 million in combined premium volume--$42 million from commercial lines, $21 million from personal lines, and $16 million in life/health business. GAP members, by virtue of their combined production, receive more competitive commission rates and contract terms, which not only translates into increased agency income but also enhances their ability to meet clients' coverage needs.
"One of the things that has made us so successful is that we're very careful to pick good, solid agencies," says Compton, who served as chairman of GAP from 1998 to 2000. He is quick to distinguish between GAP and the typical agency cluster, which he observes is often led by one or two strong agencies but comprises many others desperate for markets and on the brink of demise.
"The fact is, many insurance companies had a bad taste in their mouth from clusters," says Compton, who points out that dispelling the cluster stereotype was among the hurdles GAP initially faced. Yet it was a hurdle soon overcome, as an analysis of individual GAP members revealed strong, financially solid agencies, each writing quality business, and hindered perhaps only by the marketing limitations of their geographic locations.
"We originally started the company to be a marketing mechanism for insurance companies in the southern Georgia region," Blount explains. "But then we expanded the concept, and GAP members around the state have found that they have the best of both worlds--the benefits of partnership with other agencies along with the ability to maintain their independence and individuality."
According to Compton, a past president of the Independent Insurance Agents of Savannah, virtually all the members of GAP already knew one another through a variety of association activities before joining the group. In fact, principals of six of the agency members, including Compton, now 44, have served as chairman of the Georgia Young Agents Committee. The others, including Blount, 45, a past president of the Independent Insurance Agents of Georgia, all have been involved in the young agents organization and together have formed a company in which profits, leadership, and decisions are equitably shared.
As Compton explains, while individual GAP member are free to write business outside GAP, all the business they produce through GAP-represented insurers is written under one company contract, with each agency designated as a subproducer. GAP members share contingency payments in proportion to the volume they produce for a given insurer, and leadership of the company likewise is shared, with the position of chairman generally rotating annually.
GAP members also play an active role in the company's operation, given an opportunity to serve on either its sales/marketing or automation/agency management committees. Additionally, each member is required to serve on GAP's carrier management committee and is given specific responsibility for maintaining ongoing communication with one or two of GAP's 12 regional and national markets. GAP members also meet monthly in centrally located Macon to address issues as they emerge, and often to meet with a company representative in an effort to ensure continued strong relationships with their markets. Any new agency considered for acceptance into GAP must be unanimously approved by current GAP members and given the nod of approval from GAP's markets--both of which have occurred without hesitation as GAP has grown, Compton reports.
"GAP members have the best of both worlds: the benefits of partnership along with the ability to maintain independence."
--Chip Compton
"It's still a relationship business," says Compton, who observes that the long-term success of GAP ultimately depends on the strong relationships members have with one another and on their ongoing efforts to strengthen relationships with their markets. In fact, he adds, it is the relationship aspect of the business that has prompted GAP to adopt a controlled growth strategy, recognizing that if it grows too big too fast, it risks losing the attributes that have contributed to its current success.
"We have always been a group that can sit around the table, express our opinions, and get business done," says Compton. While GAP will be looking to bring in a few new, quality agencies over the next few years, its overall strategy, Compton explains, "is to take it very gradually. We want to grow at our own pace and with a definite game plan. Once you go beyond 15 members, things become unwieldy from a strategic and managerial perspective."
While controlled growth may be one aspect of its vision for the future, GAP has many other goals for the years ahead, each of which is intended to respond effectively to challenges identified in its most recent strategic plan: insurer consolidations; continued actions by companies to market direct; emergence of other key competitors such as banks and Internet marketers; and lack of a definitive perpetuation plan.
Acknowledging the need to tap additional marketing and premium volume resources, Compton says GAP will undertake a more aggressive approach to consolidating the brokers with whom they do excess and surplus business.
In response to the perpetuation issue, GAP will explore the feasibility of creating a holding company that would be poised to acquire any member agency should a change in ownership threaten the member's continued participation in GAP. Such a strategy, Compton believes, will help ensure GAP's continuity and enhance its ability to make and carry out long-range strategic plans.
Other goals Compton cites are streamlining GAP's operations, in part through enhancement of its online capabilities and implementation of a companywide e-mail system. GAP also intends to centralize more of its members' back office functions, which could include accounting and installation of a common telephone system.
According to Compton, based on 1999 results, GAP is on track to meet or exceed its volume goals with each of its 12 carriers. Looking ahead, he is confident of GAP's continued success, stressing its statewide geographic distribution, the integrity and reputation of individual members, and the "clout" GAP has earned with its company markets.
"GAP members are young, enthusiastic agents in tune with growth opportunities," Compton observes. "We are confident that GAP member agencies, acting in concert, will be further strengthened to maximize revenue opportunities and profitability, compete in the marketplace, and serve our customers." *
The author
Barbara A. Morris is a New Jersey-based freelance journalist who writes extensively about the insurance business.
©COPYRIGHT: The Rough Notes Magazine, 2000