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Agency Financial Management Feeling pressured by carriers? That's a good thing Turn frustration into motivation By Rick Dennen When I swam competitively at Indiana University, I had no idea that many of the great lessons I learned would prove to be so helpful in life and business. One such lesson was the value of pressure. Just when I thought I'd given as much effort as possible and reached my peak, my coach, the legendary James "Doc" Counsilman, who won 23 Big Ten Championships and seven NCAA Championships, inevitably would present me with a new, lofty goal along with a grueling training regimen to help me achieve it. His goals didn't always seem possible, but I consistently improved. At the end of the day, pressure from Doc was good. Most of us were fortunate enough to experience some kind of healthy pressure in our younger years that contributed to our drive and success. Now that we're professionally established, however, we can easily perceive today's "unwanted influences" as negatives that impede our plans, preferences and progress. In recent years, agents and brokers have felt more pressure than ever from the carriers they represent. Those carriers set high expectations for new business, and they use all sorts of inducements to encourage agents to meet the targets they've created. Sometimes that inducement is a nice incentive, such as a larger commission. Sometimes, it's a less-than-gentle push from a regional carrier representative. At other times, the inducement is a thinly veiled threat to withdraw your appointment and pass your hard-earned business to another agency or brokerage. Running a business in today's marketplace is tough enough without feeling the additional unwanted pressure from carriers. It may be tempting to throw your hands up in exasperation and insist that there's nothing you can do, but that's not exactly a productive approach, and it won't do anything to enhance your relationship with carriers. That's what brings me to the value of pressure. Instead of responding with frustration, turn it around and use it as motivation to take your business to the next level. Because carriers are hard pressed to grow and increase profits, it's a safe bet pressure will only increase. So why not accept it as a fact of doing business and work hard to achieve those targets? After all, if you succeed in meeting (or exceeding) carrier expectations, you will reap some benefits too. In addition to gaining additional revenue in the short term, you'll gain the long-term financial benefits of a larger book of business, greater diversity and more opportunities. Pressure from carriers is the perfect prompt to get you to candidly evaluate your business. What are its strong points? What are its weaknesses? Where has it been losing ground over the last year? Do you have the right people? Are you compensating them in a way that aligns growth and loyalty? Which recent marketing efforts are producing business and which aren't as effective? You may also find that a pushy carrier just isn't a good fit for your business. It may represent only a small percentage of your revenue, or your clients may be less than pleased with the service it provides. In that case, replacing that carrier with another may be a very productive move. On the other hand, if you're getting pressure from an insurer that represents the lion's share of your business and profits, it will probably pay to do everything you can to step up your efforts. Study your competitors to help determine if you are on the right track. When was the last time you paid close attention to the way they operate their businesses? You may be able to identify new areas in which you have a significant competitive advantage. Or you may find that you're both fighting over clients who are not particularly profitable. The better you know yourself and the businesses with which you compete every day, the more effective you'll become. The main point here is that how you respond to carrier pressure boils down to attitude. It's easy to resent the pressure, but by allowing pressure to motivate improvements and growth, everyone comes out ahead—you, carriers and clients. The author Rick Dennen is president and CEO of Oak Street Funding, which provides commission-based lending for insurance agents that need capital to buy, build or sell their agency. He is an instructor of venture capital and entrepreneurial finance at the Indiana University Kelley School of Business. He can be reached at rick.dennen@oakstreetfund |
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