PIA calls for moratorium on commission cuts; offers program to reverse loss of marketshare.
Bailey's plea. which was contained in an open letter to company presidents, asked the executives to "resist the historical temptation of reducing agency compensation" during the current market conditions The PIA President also said that reducing corn missions now would jeopardize the industry's economic recovery and thwart its hope of regaining marketshare.
PIA also released a program, bylined by its president, called: "Building Marketshare In The American Agency System."
In stating his case. Bailey said, "'An insurance agency, like any business, must profit in order to recapitalize, automate, add salespeople and create new marketing plans. Without growth, the agency system will never recover fully. Growth in production and marketshare cannot be stimulated by reducing commissions in the name of competition."
Bailey was critical of companies thinking to reduce compensation when many agents suffered financially during the last [our years of soft markets conditions. "The reality is that agents are just beginning to be made whole again," he emphasized.
Agents are coping with abrupt changes in the current marketplace, and are diligently reselling higher-priced renewals to often, skeptical consumers, Bailey said, adding "It is inconceivable that their dedication and professionalism be rewarded by cutting their commissions."
Now that reality is returning to insurance pricing. "no one should construe that agents are being enriched with high commissions and thus should contribute to the industry's recovery by reducing their commissions," he said.
Bailey's open letter was mailed to several hundred company executives. It was accompanied by a reprint of the "Building Marketshare" recommendations.
Commenting on the marketshare plan of action. Bailey said" The simple truth of the matter is that if the American Agency System is to grow in marketshare, it will require company and agent to commit to the following:
* an agency commitment to a specific annual growth in policy count and premium in specific lines for a period of at least 5 years.
* agency stabilization of the book of business;
* agency commitment to a partnership with its carriers
* a company commitment to a stable market tot at least five years:
* commitment to stable pricing for the same period of time:
* commitment of standardized underwriting criteria which remains constant;
* a company commitment of realistic compensation for the agency which provides an economic incentive for sales, marketing and growth;
* a commitment to improved and subsidized sales training agents for their agents;
* a company commitment of market analysis and marketing expertise;
* a simplified rating system;
* a simplified and timely policy production system
* a realist, renewal issuance system; * a uniform standard approach to processing business; and
* the elimination of duplication of effort in the areas of underwriting, audits, inspection, engineering, policy issuance, endorsement issuance, claims handling, billing and collections
Bailey said the reason some independent agencies are turning to market offerings from Allstate, Nationwide, Metropolitan Life and others "is because their own markets are not stable or constant. If an agency is to sell more. it needs to have confidence that the markets, underwriting, pricing, production and marketing commitment will be there when applications are taken and submitted."
The PIA president said agency companies lost marketshare over the years because neither agent nor company was committed to a long-term stable growth program. "Companies that provide a profit for agents are assured of a viable sales force," Bailey said.
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|Title Annotation:||LOOKING BACK ... Insurance Advocate, 25 years ago|
|Date:||Jun 21, 2010|
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