Fortifying urban agencies

The Insurance Cooperative connects inner city agencies to strengthen market access

By Phil Zinkewicz

About 10 years ago, Donald W. Lewis and James Peoples ran their own independent retail insurance agencies in the Philadelphia area. Lewis and Peoples found themselves challenged by limited market access, as well as limited access to developing technologies. However, sometimes out of adversity comes opportunity.

Today, Lewis and Peoples run The Insurance Cooperative, a network of inner city independent agents that provides market access, training and other benefits. The two men also retain ownership in their agencies, although they aren’t involved in day-to-day operations.

“I found that after 22 years of business, I was burning out,” says Lewis. “I also realized that I wasn’t the only one. Every inner city agent in Philadelphia was going through the same thing. So I came to the conclusion that if we could come together, we might be able to find a solution. Hank Hubbard of The Roberts Plan gave us the chance to start up a cooperative to write standard and preferred auto insurance.”

At that time, regulators in Pennsylvania were accusing insurers of redlining in homeowners insurance. “There were about 10 or 15 agencies that had come together to testify,” Lewis says. “I was chosen to represent inner city agents in Philadelphia. The cooperative began to take off after that.”

Lewis refers to a recent survey conducted by the Independent Insurance Agents & Brokers of America (IIABA), which showed that small to medium-sized agencies ($150,000 to $500,000 in revenue) and medium-sized agencies ($500,000 to $1.25 million in revenue) represented 51% of the agencies that responded.

“Our target audience at the cooperative is within that 51%, yet insurers tend to concentrate their marketing efforts on the other 49%. This is partly because they don’t know how to write inner city risks. They try to apply suburban models to inner city business and consequently lose money,” Lewis explains.

Moreover, many inner city agencies are at a loss as to how to attract carriers, according to Lewis. “Many small agencies have been so busy overworking themselves with the ‘spin business’ that comes and goes and hopefully comes back again that they haven’t taken the time to cultivate the internal agency qualities and caliber of client that attract a standard carrier,” says Lewis.

“This focus on the daily grind does not afford the small agency the opportunity to cultivate its staff with the industry technical skills and trade association participation needed to expand the agency into new product lines and niches. The need to have access to and be trained in the latest technologies is imperative in the 21st century. The inner city agency has no other option.”

“Even though the playing field has changed for the better, the inner city agency still needs one or two strong standard/preferred carriers that provide an anchor for the agency, the same way a large chain store provides an anchor for a strip mall,” he continues.

Producer development network

Lewis says that The Insurance Cooperative assists smaller agents and brokers in meeting the new challenges of the 21st century. He talks with gusto about the cooperative’s producer development network (PDN), which has been set up “to allow small independent agencies to accomplish as a collective what may not have been possible as individuals . . . to stay in business.”

Says Lewis: “We have found that the numbers of eligible and interested clients for PDN are growing as the economy worsens. The model has focused on providing the common services and access to insurance products that are a must for small agencies to survive and thrive, using the economies of scale based on the law of large numbers. This is accomplished without the agency giving up its autonomy and individual entrepreneurial spirit.

“Many of the limitations of small agencies have been blamed on their lack of ability or desire to become more proficient or professional. This is simply not true in the majority of cases. What the smaller agency needs is training, support, ideas, products and ongoing need for industry intelligence,” Lewis explains.

“These crucial, comprehensive offerings have not been widely made available to small agencies under one banner. PDNs address common needs in a collective way by sharing the cost, improving the quality and efficiency of rendered services on an à la carte basis, while maintaining the agency’s autonomy.”

Continues Lewis: “We all need to conserve our accounts but do not always have the staff or time to implement an ongoing conservation effort. Receiving centralized service where late pays are called at an affordable shared cost makes all the sense in the world.

“It can be overwhelming if the information an agency needs to stay abreast of a changing industry must be acquired by joining multiple trade associations and subscribing to multiple publications. Receiving the essence of that information from one source without experiencing great costs and lengthy time expenditures is essential for the small agency,” he explains.

“Our training programs do not involve massive amounts of unnecessary information that is not germane to sales and service. One example is the development of a curriculum focusing on the specific needs of small urban agencies, which was a collaborative effort of the cooperative with the Pennsylvania Insurance Department,” Lewis says.

“That curriculum has been afforded eight continuing education credits. As long as everyone in The Insurance Cooperative adheres to the sound underwriting practices and production growth strategies inherent in the model, everyone benefits.”

Praise from members

Bob Martin of Martin-Ghee and Don Gross of the Statewide Agency have been members of the cooperative almost since the concept’s inception. Both men speak favorably about the cooperative and its goals.

The Insurance Cooperative has opened markets for independent agents in inner city areas, says Gross. “The cooperative struck a deal with Rutgers Casualty to write inner city auto business. For all other lines, the cooperative has signed with Foremost. It’s been difficult getting carriers to write in the inner city.

“Farmers Group tried coming to Philadelphia a while back, but they ended up losing money,” he continues. “The reason was that they tried to apply a suburban policy and ratings approach to the urban area. That just doesn’t work,” Gross says.

Martin says that The Insurance Cooperative was “instrumental” in helping his agency reach previously unreachable markets. “In addition, they’ve brought more preferred products to the inner city. Our agency has made greater progress than before by joining the cooperative.”

Martin agrees with Gross regarding carriers’ lack of understanding of the inner city market. “They try to apply the suburban model to urban areas, and that’s wrong. They’re just not pricing adequately.”

Lewis sums it up: “The greatest challenge that faces the small insurance agency in the 21st century is the same challenge of every business, and that is how to make sure that revenues exceed expenses more times than not during the course of a day, a week, a month or a year. That may seem obvious, but sometimes the obvious is overlooked.”