Best Practices for Insurance Agencies

Welcome to the Agent Leader Podcast. The podcast to help you, the agency leader, gain clarity, build consistency and to make a commitment to become your best version possible. Always want to remind the listeners that our book the Best Version Possible is available. You can go to sitkins.com bvp and I happen to have the co author back with me as a special guest here today. Roger Sitkins is the co author of Best Version possible and again, sitkins.combvp you can also get the Audible version or go to Amazon if you want to do that as well. But you get a couple perks if you go to our website, so make sure you check that out. So I wanted to bring our very special guest and we had a series just recently that Roger Sitkins and myself went through about the eight clicks and hopefully you had a chance to listen to those. A lot of breakthroughs and things that we discussed in that. But I want to bring Roger on to get his reaction and his thoughts on something that just just came out, just was published and it's an annual publication. I'm sure many of you listeners look forward to this. And read this. It's the best practice of study that's put out by Reagan Consulting, good friends of ours and the big I and a lot of great knowledge and information in there. And what I wanted to do is bring Roger on, not wanting to get his reaction. And by the way, I'm going to share some of my reactions too. There are some things that jumped out to me, but also what does it mean to you, right, as an agency leader and with your agency, like, how do you digest this information? What are some things that we have learned from this that I think will help you and move your agency forward to help you become that best version possible. So, Roger, first and foremost, welcome back to the Agent Leader podcast.

Well, it's great to be back. I'm fighting a little bit of the leftover from COVID So if you see me, those of you that are watching on the video, if I'm coughing but clicked off, you won't hear it. But yeah, it's great to be back. I'm really excited about this. We're with the best practices study because I've really spent a lot of probably four days now of really deep dive on it, including a conversation with our longtime friend Tom Doran, one of the senior partners at Reagan that actually heads up the practice. I just got off the phone with him about 20 minutes ago and just I wanted to share some things that were just absolutely jumping out at me. Things that can really impact agency leaders. So let's go.

All right, we're going to get into that. I do want to just say thank you to many of you who are listeners I know that have reached out to Roger and our team. Now, Roger is not in Fort Myers right now. He's had his home in. Outside of Atlanta, northern Georgia there. We've had many of our team members impacted by Hurricane Ian. And, you know, I'm sure you've all seen the devastation there. And even my team tells me, which I can't imagine, I'm not down there, is that you see pictures, but you don't really get it till you're there and what people are going through. And so do want to make a note of just thank you to those that reached out to even reach out to me on behalf of my team. I know to you, Roger, you said, you know, it really is a great testament to the friends in this business. So anything that you want to share there.

I just be grateful for what you have. One of my favorite sayings in life is there but for the grace of God go I. And I know that I'm blessed, and most of our team is blessed. We've had quite a bit of damage at the office, but we'll get through this. We'll be strong. But just please keep people in your prayers, because there are some people there that have lost everything, and it's just. It's awful sad.

Yeah, it absolutely is. So, well, let's get to a more positive note. All right? I know everybody's dealing with that, but going back to the best practice study, and I'm going to leave this. This really is, you know, Raj and I didn't prepare any questions. We've had some conversations around this, but I said I just want to bring you on the podcast, and let's just riff. I want to get your. Your initial feedback from what's jumping out of you. So I'm really just going to turn the ball over to your court, Roger, and say, so let's go. Give me some of your big impressions on what you found in reading the study.

Well, first of all, the data is overwhelming. There's just so much there that you can take a look at. And what's surprising to me is the small number of agencies that really will go back and compare their numbers at all to find out what's really going on. And they've got the various categories. It starts with 1.25 million and below and then goes as high as over 25 million. So I would just strongly suggest that if you're professional manager running a professional organization, you should know your numbers. There's no question in some of the narrative that it started off and it talked about the critical issues facing agencies. Some things really jumped out at me, Brent, and I've mentioned these to you, and I think it was probably one of the catalysts for us to do this. In the opening few pages where it's talking about the critical issues, the term development, develop or development was used at least eight times. Was used at least eight times. And they're saying the need to develop your people. Well, obviously that's something we talk about all the time, that great leaders, their job is not to make more revenues or more profit. Their job is to develop their people. And we've talked about this before, that will make more revenue and create more profits. But then later on after, it kept talking about the need for development, then it said in all capital letters, which kind of jumps out at you, it says it's all about the people. At the end of the day, they're saying, agencies that want to grow, agencies that want to prosper, it's all about the people. And then it said. I did write this one down. It said, agency owners and leaders must recognize that people are your number one strategic priority. And I want to repeat that. Agency owners and leaders must recognize that people are your number one strategic priority. Now, as we've been talking to agency leaders over the last few months and even some of our friends that are at the highest levels of the national insurance carriers, one of the things we keep hearing is staffing, staffing, staffing. We're concerned about staff, we're concerned about people recruiting our people. You know, a term that's used quite a bit in the report is lift out. Where they're going in there, you know, they're attacking or recruiting, if you will, producers and lifting them out. In fact, the analogy they use is the ncaa, the transfer portal where players can move from one team to another. Now, so they talk about the lift outs, but lift outs are also happening at the account manager level. So you looked at this and you say, number one, our goal is to attract and retain great clients. We talk about this all the time. Well, it's the same thing with team members. What are you doing to attract and retain the best team members? And at the end of the day, it's not just compensation. There's a lot more which we'll get into. But it's certainly about the culture, it's certainly about how people are growing. And what's happening. But I look at this overall and I say, okay, it's all about the people. People should be our number one strategic priority. And then I say, okay, what are agencies investing in training and education? Well, historically, and we've talked about this a few times in our movie, we talked about it on a couple of the podcasts. Historically, agencies spend 0.4%, not 4%, 0.4% on the training and development. In this study, the number came in at 0.24%, which is 0.16% less, which is really 40% less. Now, let's be realistic. A big part of that is the fact that Covid so the live training events, all of the things people would normally go to, did not happen as much, but they still are investing some money in the training and education, the development of their people. Okay? The majority of that for the average agency. And by the way, remember, these are best practices agencies. You had to apply to get in, you had to send your numbers, and you had to get into it. Okay, the average agency, where they're doing the 0.24%, again, a little bit less than a quarter of 1%. What's it for? What's continuing education? To keep your license or it's to maintain a designation. It's not so much about developing people. And this is something I would hope would come through on this. Yes, you want the technical knowledge. You need to know insurance. You need to know insurance that applies to your job. But what about the development of all of the other areas that will make you, as an individual, a better team member, as a leader, you will build a better team. So we look at this, we say, well, something we talk about all the time. Another acronym, spa. What are the skills, what are the processes, and what are the attitudes that should be in place? So when you look at it and you say, okay, people are number one, developing. Your people use date, times, et cetera. And then you say, yeah, but you're spending 0.24%, by the way. Brent, the average agency spends more on miscellaneous than they do on education and training of their employees.

Yeah. Yeah, I didn't see that.

Miscellaneous. What is it? I don't know, some crap. We'll just call it miscellaneous. They spent more on miscellaneous. I mean, I shouldn't even laugh. It's sad. They spend more on miscellaneous than training and development and education of their team. And again, so much of what they are spending is that, well, I got. Got to do my continuing ed credits. Got to keep that designation. What are you doing to Develop the people. And we use sports analogies all the time, but I can't imagine a team that's not developing their players. I can't imagine an orchestra, a theater group, a choir. I don't care what turns you on. But the best are always developing. And I look at this and it comes back to tongue in cheek, maybe, but it comes back to the fact that it's a great business. It's a great business. You don't have to do much and you'll still do okay. But the term that jumps out on this is, are you a lifestyle agency or are you a professional business that's growing? Are you a professional practice, a professional services company that's growing your people? Okay. If you're a lifestyle agent, it's okay, you know, you'll never engage with a firm like ours, okay? You won't, because you don't have to. Longer term, you're going to have regrets, okay? But the fact that you're sitting there and say, well, I'm doing great, I'm semi successful, I'm happy where I am later on in life, you'll have some regrets. Right now. Enjoy the ride. And it's a great business for that. But when you start looking at it overall and saying, okay, I'm a professional company that wants to grow, you know, if you've been a two and a half to $3 million agency for the last 10 to 15 years, you probably where you're going to wind up, okay? But when we look at the people we work with that are so committed, and we love working with them because they're committed to getting better, our part is coaches, as you know, is the easy part. Hey, based on our research, based on all of our experience, here are some things that should work. In fact, we know they work. They're simplified and proven processes that when you follow them, they work. And we'll see you later, okay, now they've got to execute. Now they've got to. And we help them, obviously. But getting the whole team aligned, getting everybody in the same playbook, if you will, doing the right things. So as the coach, go do this. But now you've got to do it well. The ones that are out there, and you've had so many of them on the, on the podcast already, it's so much fun to work with them because you see where they're. Some started as a lifestyle agency, maybe it's the next generation, but all of a sudden they get so serious about, wow, we're doing pretty darn good doing things halfway what would it look like if we would invest in our people? How much better would we be? So those are some long opening comments. I've got a lot more. But what's jumping out at you in that.

Well, I mean, those are all great opening comments. And I, you know, I said we, you know, we didn't, you know, go through. And here's a bunch of questions I want to ask you. I just want to get some of your feedback. We've had some, some short phone calls on this, but you know what hit me? And again, there's, we'll get into the people. And you hit that home pretty well. It was just, it's interesting because you talk to agencies out there and you typically say what's, what's frustrating you and you, and you will get people, talk about the people, but oftentimes you'll hear, and I hate to call these surface issues because they're not always that, but you hear things. Well, it's, you know, it's, you know, we got to do more in technology and, you know, we've got issues here with organic growth and all that kind of stuff, and those are real issues. But it's interesting, as you look at the part of that study that I looked at, that in one of the situations, technology was listed eighth. Yeah, right.

And top 10 things or elements for an agency to prosper as a privately held firm. And everybody talks about technology so much, which we support at the very highest level, but it was number eight out of 10 items that they were concerned about.

Well, and it's, again, this is what's going to cause a cause to prosper. I love that. Thanks for, thanks for highlighting that. And it was eighth. And, you know, the first three were. And I don't remember the order you probably have in front of you, but it was people, culture, and leadership.

That. That's the order. Yeah.

And, and you're like, okay, well, why is it that we spend. And again, I'm just making some of these numbers up at this point, but the majority of the time or a big part of time talking about these kind of surface things on technology and whatever and what I wrote down, Roger, as you were speaking there, is it, it feels like we're doing something when we treat a symptom, but we're not always getting to the cause. And I think that's what hit me, if I had to have one overlying thought, is that there's a lot of symptoms that are trying to be treated. Band aids, whatever analogy you want to use. But why are we Bleeding. And you know, part of that is it's because we haven't addressed the focal point. And like you said, if, if you want to be a lifestyle agency again, God bless you, good for you, go for it. But if you're really wanting to grow and you say you want to grow and you want to expand and do more and be more and get not even out of greed by the fact that it's what people should do is we should grow, we should get better, we should develop. I think it's just part of, you know, having some satisfaction in life. Then we've got to start with the most important resource that we have, which are these human beings that are part of our team. And I'm going to say one more. I know you've got more to jump on on this but you know, we do use sports analogies a lot. I think I told you we had part of our conversation this week, you know, like unfortunately and they're getting better because you were commenting on my fighting a line I hat that I wore on Saturday. And, and they've been a, this is being kind a really bad football program for about 20 years. Well maybe 15 because they were okay in 07, but for a long time and you always go why would an individual, and maybe it's not the top top, but why would a quality individual want to go play for a program that's not very good or hasn't been very good? And then all of a sudden they start getting better and they get a few recruits and you talk to the recruits, what made you decide to go to this program? And maybe you could have gone to a bigger, more established, well known program. And this isn't always true, but one of the answers you'll hear is because I believed in the way that the coach and their staff was going to develop me, develop my talent, get me to the next step of where I want to go. And the other thing you hear is I felt like I was part of a family, right. Or there was, there was a culture around that. So I know you sports analogy, but it's true. And you hear agencies that I know this is a real issue. I get it. I, you know, I've spent time with agencies. We just did the Leadership Institute a few weeks ago that I was at. I know attracting and you know, finding talent, keeping talent is a challenge. But a big part of that is if we don't address the root cause, you're always going to struggle with that. So there's my little soapbox man. Anything Roger, you want to add to that.

Yeah, I mean, absolutely. Because what happens is in the old days when it was easier to find people, okay, the answer was we'll just throw more people at the problem. We'll just throw more people at the problem versus going to the core of the problem. What's the source? Why do we have a problem with this? Throwing more people that are not doing business the way you want it done is not the response that works. Our content partner, Angela Adams. Angela Adams Consulting. We've mentioned her more than once and one of the things I reinforced with her in a phone call two days ago, I said, okay, what percent of the technology is the average agency using that they have their agency automation system and any add ons and her number is always the same, about 50%. And then what percent of them have really documented their processes? About 50%. What percent of the employees are following them? 25%. But yet it's such a great business. You can have really terrible statistics from an operational standpoint and still do. Well, one of the things that jumped out at me now again, best practices, but the revenue per employee, once you get up to that $2.5 million and $5 million agency and above, it's over $200,000. That used to be unheard of, okay, Some of it's rate, some of it's capacity, whatever. But when I look at the need for staff, which we hear, you know, 99.9% of the time and again carriers telling me this is what they're hearing from their best agents. I think one of the things people need to look at is what is your staff capacity. We talk about it with producers, you know, we somewhat say again, tongue in cheek, the world's greatest producer recruiting program. Get your producers out of the red zone, get them in the green zone, get them producing. The vast majority of the time Our goal is 80% of the time in the four key money making activities we've talked about a million times. Okay. It's the same thing with the staff utilization of the staff. You've got great staff members, you've got people in part of your team for a long time now. Maybe you're not developing the way you should, maybe they're kind of just floating along because you're floating along. But I look at this and I say, okay, if we have this money invested in technology and again, both of us surprised it was number eight on the list, really should be higher. Okay. If we're going to maximize our staff so we can pick up staff capacity, if we'll get Technology used properly. Another part of that is, okay, are you having client facing people doing processing work? Now, that's about as basic as we can get. And certainly Resource Pro and all of the others that are out there, people are outsourcing. In fact, Resource Pro now has a. I was told the other day they actually have an office in Nebraska too. Okay, not just China. And they're a great firm. A lot of our clients use them. But I look at this and I say, okay, if we can't develop our own, we've got to make sure that what we have are doing the right thing. So again, process versus client facing. But Angela also brought up to me, she said one of the things we're seeing in the best agencies is they are hiring staff. They're doing their process internally so that people can learn the business well, because let's face it, the talent pool is drying up. We're not creating a lot of new insurance people. I wish we were more. In fact, one of the things I've seen through the years is that the universities like University of Georgia, Mississippi, Florida State, the ones that have insurance programs, 100% of the students get hired. They get a job. They all want one, but they get a job. Okay, so something that really jumped out at me, Brent, in this, and I've talked to you a little bit about it, not as depth maybe as we're going to go now, but it's the use of service centers. The use of service centers through the years. I was not necessarily a big fan of it, especially when they were saying, well, it's going to cost you 2% and now it's 1%. Well, it's 1% or 15%, so it's really 6.7%. But the big thing that happens, and I remember talking a few years ago about with a gentleman at a carrier that was head of all their service center and he said it was either 52 or 54%, whatever, 53, we'll take the middle. 53% of the incoming inquiries they get are from agencies calling on behalf of their client and it's a client they'd already turned over to a service center. So you've given up 6.7% and still doing the work versus saying, look, if it goes to the service center, it goes to the service center. And looking at the numbers, if you take the six categories of the service center, and I do have some notes on this one, I'll get them accurate. Personal lines commissions, 14.8% of personalized commissions are in a certain carrier service center. If you take out the small category and go more to the, the middle three or four categories, it's 21.3% of revenue goes there. And on one hand, from an efficiency and staff capacity perspective, I say, well, that's great because now I've freed up my staff from let's theoretically say 20 some percent of the transactions. Now they can do a better job on the clients we keep in house. Okay, we can do more client facing work. We can get it out there. Commercial lines, this was, I was surprised by this, but it might have been a size. It's hard to define the size that's in there, but in commercial lines it's 5.1% of revenue and over and if you take it, take the smaller ones out at 6.1%. So something we've talked about before and I already mentioned, but you know, get the transactions out of your office to free up your team, keep the vast majority of the revenue, yet it might cost you 6.7%. But I think we've talked in one of our click conversations about that agency in the Midwest where we took, we found that the bottom 50% of the customers were 6% of the revenue and we helped them negotiate with their carriers. They got a big bonus and they got the accounts moved. And by the way, retention is normally higher in a service center. Okay. So I look at this and I say it's not for everybody. Nothing we talk about is for everybody. But if an agency will at least make an informed decision, that's I guess, my big frustration in a lot of areas and I shouldn't be, but I obviously care about our clients and friends. My frustration is too many times agencies don't go deep enough on their numbers because they don't have to, because they're still doing well. But when they start looking at their numbers and they say, well, what's really going on in the bottom 50% of my personalized book of business? Okay, what's going on the bottom 80. We talked about this recently too, that pure 8020 doesn't apply if you look at personal line, standalone or small, commercial standalone, but it does apply universally. What we found through our studies is that the top 20% of the customers are 50% of the revenue. The bottom 80% of the customers are the other 50%. So what would you do if you took the bottom 40 or 50% and realize it's only 3 or 4% of your revenue, but it's a high number of transactions? These are things you just need to be aware of. So again, service Centers aren't for everybody. In certain states, like Florida, even before Hurricane Ian, it really wasn't viable because we have so many separate coverages broken out. You know, nobody's going to do it all but make an informed decision. So if we can get our people, our internal people, our service team doing what they do best, which we would hope is client facing or getting them taught there, getting as many transactions out, whether we use Resource Pro or whoever, or develop our own, but create the capacity where your team can have much more revenue. I was somewhat surprised by what I would consider to be the low revenue per employee handled by the commercial lines and personal lines service team. Okay. And it varied quite a bit. I could, I couldn't do a fair average on it, but it just hit me that that's a relatively low number. When you, when you divide out by the average revenue per customer in those classes of business, they don't really handle that many transactions. But because they're not following, you know, 25% of them follow the process. So theoretically, does that mean that 75% of them handle transactions ineffectively? Maybe. Okay, maybe. And so maybe we get into a situation where we're handling this is a couple of the Sitkins 101 type rules. You handle everything one time, the first time, and only handle if you have any premium bearing endorsements. They've got to be handled one time, one and done. Because if you handle them twice, you still only get paid once. But what we see is the inefficiency because of not training, not developing, not holding people accountable is we're handling these transactions and that hysterical activity. But at the end of the day it's a great business. We're making money. So that's, I guess end of sermon at number two, three or four.

No, I mean, and I love the fact that you went into some of the, I mean the bottom line of all of that is, I mean the word I took out was capacity. And just being. What does that mean? What does that look like? And again, whether using a service center or something else, it's just, it's the awareness. And I wrote something down. Rogers, you're saying this and I think, and I've been guilty of this too in different areas of my own life, right. So I'm raising my own hand. But you know, part of our job is, you know, role and I think the fortune of being a coach and a consultant, kind of looking on the outside but knowing the industry really well is that I think sometimes people disguise the truth with their feelings. Right? I mean like, you know, you get into 80, 20, or you get into service center stuff, and the feeling is, well, you don't understand. And the relationships that we have and, and this is how we work. And, and. And, you know, and then you get into it. And I know, Roger, you've been part of these conversations too, certainly even with producers, like, oh, well, you don't understand this. And I said, let me ask you, like, how often are you proactive to reaching out to that bottom? 25, 30, 50%? Never. When do you. How often do you talk to them? Well, not really ever. Usually just a renewal gets shipped out to him. But I'm still the agent. I mean, I know there's exceptions to this. I get it, but you really dive into it. It's like, that is not a truth. You're based not on a feeling. And, and what I wrote down is honest awareness leads to thoughtful actions. And I think too often we really don't have honest awareness. We just kind of go on hunches and feelings, and that's the way we've always done it. So you're nodding, shaking your head, so I'll let you respond to that.

Well, no, I mean, I agree 100%. It's, you know, it's a feeling. You know, feelings, a song, whatever. But it's. It's by not knowing your numbers. One of the things that's always jumped out at me is the bigger the agency, the more the leaders know the numbers. Okay. And, you know, there are hundreds of examples of this, but when we, when we talk to agency leaders and whether it's a current client that we're working with, one of our private clients that we know very well and we know their numbers, or someone that's inquiring and at some point get down pretty quickly because it's one of our best litmus tests. What's your revenue per employee? Okay. And the minute I hear, well, it's about, then I know they don't know. Yeah, it's about okay versus saying no, I absolutely know what it is. And some of them, like, I won't mention this one, I won't mention the name of the agency, but they were well over 50 million of commission income. And this was a long time ago. And I said, what's your revenue per employee? And it was like, it's $172,118. I mean, that's how well the CEO knew and still knows his numbers. Excuse me. The other big thing just looking at this and getting staff capacity is if we can get staff capacity because we're getting transactions out of the door or the wrong transactions, maybe the right transactions out. If we get more staff capacity, service staff capacity, now, we can support the producers more. Okay. And I'm not talking about the producers that have mastered the art of hiding behind activity. I'm saying the ones that really want to get out there and produce, but they feel stuck, they're trapped. Okay, let's develop our team. Well, you know that service person, he couldn't handle something like that. Or she couldn't handle. Why not? We have never developed them. And it's again, not just the insurance and not just the technology. It's the skills, it's the processes, the attitude, the mindset of the individuals. I would jump all over that. A couple of things that really jumped out at me in looking at the analysis. We've already talked a little bit about 80:20, and in the best practices, they don't measure 80:20 exactly like we do, but they have two categories. One is the largest single account, what percent of your revenue is it? And then the other one is the largest 10 accounts, your top 10 accounts. And for most agencies, that's way less than 5%. We always talk about the 5% or 15%, but in the.