Running an insurance agency involves a variety of skills. You need to be a sales person, a manager, an accountant and a strategist all rolled into one. There are people out there who have a knack for managing multiple roles at once and can fill each of these roles adequately. However, those people are extremely rare. The rest of us rely on the expertise of others to help fill the gaps.
We have encountered quite a few agencies where the owners have tried to manage the entire business without any outside help. In each of these situations, we have noticed common problems that have developed over time. Most of the time these issues can be resolved and avoided with the help of an outside consultant or financial advisor. The first step is to identify the issues, preferably before they become real problems.
Planning
Every business needs to plan. You need to have clear goals and strategies designed to achieve those goals. A lot of insurance agency owners do try to plan, but these plans are usually grounded in the short term. They set targets they want to hit, but they don’t look beyond that. They rarely set long-term goals for internal perpetuation of the business or external sale. Those long-term goals are pushed to the background. They become ‘something we’ll get to’, rather than a vital issue that needs to be addressed immediately. By the time they finally get to that long-term planning, it’s often too late.
Organization
Without a clear long-term strategy or goal, the organization of the business is often left to its own devices. You add a new producer here or line of business there and you just figure out how it works as you go along. Insurance agency infrastructures often become like balls of twine. You put one process in place, and then you add another whenever you make a change. Instead of changing the procedure, you just add a whole new one on top of it, and another and another until the ball is so thick it’s impossible to see where it started. Agencies like that spend the first 30 years of their existence creating the ball of twine and end up desperately trying to unravel it during the last five.
Recruitment
Alongside the organizational problem, recruitment mistakes are pretty common in the insurance industry. Adding a new producer is often seen as the solution to most problems. A new producer can help find new business and add some expertise, but that doesn’t make them a catchall solution. Better organization, or hiring of lower cost, lower expertise employees is often a more effective solution. It’s important to outline your needs and the potential role of a new employee before deciding that you need to pay for the expertise of a producer.
No matter how skilled you are at any or all of the disciplines required to run a successful agency, you could always use a second opinion or some expert advice. Before you do that, you need to take a step back and identify the things you’re already getting wrong.
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