Page 126 - The UnCaptive Agent

INSURANCE CARRIERS 99

its principal is loyalty. An agent has no obligation of
loyalty to a customer or client, only a responsibility of
fair dealing, honesty, integrity, and so on. This is a legal
obligation as well as an ethical and moral one. If you
want to put your customer or client first, you should be
a broker and give up the agency business.
The other thing you’ll want to do from the very
beginning of your agency is to make sure you are spread-
ing your business around. I’ve had conversations with
new agents over the years where they had eighty percent
or ninety percent of their business with one of the three
or four companies they represented. Typically, they were
very excited about the volume they were producing for
that carrier, but not thoughtful about the fact that their
other companies were unhappy with them—and, in some
cases, considering canceling their contracts. They were
also not thoughtful about the fact that they had really
become a captive agent for one of their independent
agency companies! As you build your business, look for
clients that meet the market appetite for all the carriers
you represent and spread your business around.
How does all of this affect book management, you
may ask? If you reflexively and routinely sell a carrier’s
products for the lowest possible price, you will inevi-
tably raise the loss ratio your agency experiences with
that carrier. Consider, hypothetically, that you always
decrease pricing by ten percent. You will automati-
cally increase the loss ratio by the same amount. Profit
sharing eligibility ceases for practically every carrier
above fifty-five to fifty-six percent. It’s tough to keep
loss ratios in the forty percent range in the best of
circumstances, because carriers tend to reduce rates
when that happens. So, if you take this price-cutting
to its logical conclusion, you will make it impossible
to ever get a profit-sharing check. In a typical case, on