Page 117 - The UnCaptive Agent

90 THE UNCAPTIVE AGENT

Once you’re appointed with a carrier and your flow
is at a level they consider adequate, carriers will look
for a certain level of volume and growth each year for
you to maintain that appointment. They’ll be very
direct with you about this. They’ll tell you how much
business they expect you to write with them in order
to maintain a contract, and over what period. This
volume requirement is the number-one thing that
keeps insurance agency owners up at night, in my
experience. The problem that you’re going to juggle
as an agency principal for the rest of your career, is
having enough companies to competitively serve all of
the prospects that you want to write, while at the same
time maintaining enough volume with your carriers
to keep them satisfied (and hopefully to keep you in
their bonus and profit-sharing plans).
This leads us to the last thing that carriers are looking
for out of their agencies, and that’s profitability. For an
insurance company to make money on their business,
as of 2020, they need to have a combined ratio lower
than ninety to ninety-five percent in a low-interest-rate
environment. In order to ensure that they make an
underwriting profit, they pay bonuses to agents who
produce agency loss ratios below fifty to fifty-six per-
cent (provided those same agents write enough business
with them). The amount of business generally required
is now $300,000 to $500,000 a year.

How Do Carriers Pay Agencies?

Agents with loss ratios consistently greater than fifty-five
to fifty-six percent (not including catastrophe losses)
are in danger of losing their carrier contracts. This has
obvious implications for the quality of the business that
you write and how you manage your book of business.