July 14, 2020
Insurance Agency Staffing: The Three Essential Functions
4 min read
An independent insurance agency is a sales organization: everything you do in your business should be oriented towards selling insurance. With that in mind, an insurance agency has three main roles:
Read on to learn about the different roles required in insurance staffing, how to choose them, how to manage them, and when to let them go.
The Sales Function
As your agency grows, you should seek to eliminate from your daily work as many non-sales functions as you can. I had a friend many years ago who was running a two-million-dollar agency. He had nineteen other employees in the agency but was the only producer.
This is the ideal situation, since it maximizes revenue by allowing you to focus on what is likely to be your greatest talent: selling! It's difficult to replicate, but it's an ideal you can strive for.
With my friend’s example in mind, when should you hire your first insurance agent? My answer is simple: when you have replaced all of the non-sales activities that you perform personally, and you have run out of time personally to sell any more business, that is the time to hire another producer!
Taking Care of Business – The Service Function
The second function that you must provide for in any insurance agency is customer service. Most agencies in the insurance industry provide for this service through a combination of their own client service agents, insurance company service centers, and self-service options.
If you want to hire and train your own team, remember that good service employees are among the most difficult to find in staffing firms and employment agencies. That means you should be looking for a new employee long before you need one, especially because you want them to be able to sell along with their duties, and it will take time to train them in the ins and outs of professional liability insurance, workers compensation insurance, property damage or whatever insurance coverage you want them to work with.
One tremendous advantage service centers offer is that they are usually open twenty-four hours a day, seven days a week, and three hundred sixty-five days a year. Many small agency owners have resisted using service centers because they believe they cost too much, but they are in fact highly cost-effective. The average insurance agency spends about 25% of its revenue on insurance professionals to provide service to clients (not counting staffing agency fees and whatever you pay a temp agency to cover illnesses and vacations), while insurance company service centers typically charge agencies 1.5-2% of the commission they would ordinarily pay the agent. If the fee for the service center is 2%, and the average commission rate is 15%, then the cost of the agency service center is 13% of your revenue, or about half the cost of serving the clients with your own employees.
Statistics now show that insurance consumers are enrolling in insurance company self-serve options (including service centers, websites, and apps) 50% of the time.
Creating self-service options for insurance consumers is easy.
You can, and should, provide options on your website using the technology available from your automation vendor.
Administration and Accounting
The third essential function in the agency is accounting and administration. Who will do the tasks like filing, ordering, and making sure that everyone in the business has what they need to do their job? As the agency grows, you will find that someone needs to be tasked with the myriad and miscellaneous administrative responsibilities. This individual is often called the agency manager.
One increasingly popular way to take care of these kinds of tasks is by outsourcing them. In many cities, businesses now exist that fractionalize almost all kinds of work, including administration. It would be a worthwhile use of your time to investigate whether this is available in your local community, as it will likely save you time and money.
Agencies are responsible under a raft of state and federal privacy, data security, and other laws, as well as insurance carrier contracts for maintaining the integrity of their data. These services are widely available from firms that specialize in doing them for companies just like yours. You should contract with one for your needs the minute you open your doors.
Accounting and Finance
The question is not “will you do accounting?”, but “who will do it?” Most good salespeople lack the necessary attention to detail to make them excellent accountants, so a better solution would be to pay a monthly fee to a bookkeeping service or to your CPA firm initially. Another option is to hire an insurance accounting service. Several businesses operate online, and they can do agency accounting for you, regardless of where you’re located.
Eventually, as your agency grows, you may want to consider hiring a staff accountant. This will generally not be necessary until your agency revenues exceed $1 million.
Hire smart, pay wisely, and don’t throw good money after bad - especially on a producer who is not meeting their goals. These are the golden rules for staffing an insurance agency.
Tony Caldwell is a modern “renaissance man,” who is not only immensely successful in the field of insurance, but is also a writer, children’s advocate, mentor and even a licensed pilot.
Always keen on helping others make their dreams come true, Tony and his team have helped independent agents grow into more than 250 independent agencies. This has made OAA the number one ranked Strategic Master Agency of SIAA for the last 5 years, and one of Oklahoma's 25 Best Companies to Work for.
Tony loves to share his knowledge, insight and wisdom through his bestselling books as well as in free mediums including podcasts and blogs.
Tony and his family are members of Crossings Community Church, and he is very active in community initiatives: he’s chairman of It’s My Community Initiative, Inc., a nonprofit working with disadvantaged people in Oklahoma City; and chairman of the Oklahoma Board of Juvenile Affairs., and he has served through many other organizations including the Salvation Army, Last Frontier Council of the Boy Scouts of America, and the Rotary Club.
In his spare time, Tony enjoys time with his family. He’s also an active outdoorsman and instrument-rated commercial pilot.