March 24, 2020
Producers and Service Centers
2 min read
Topic: Growth Agent Insight Video Insurance Agency Management strategy Grow an Agency
“Never hire a producer until you have no other choice”. What does that mean? Most successful insurance agency owners are producers. It's possible to be a service person and then hire producers and make that work but most successful agency owners are producers.
Successful Agency Owners are Producers
What typically happens is that new owners begin to build their agency, and they start to get busy. The agency owner is doing everything. They are the chief cook and bottle washer. They're doing the sales and the service.
Sales growth begins to fall off as the owner gets busier and busier taking care of the business they've already written. Seeing that, they react by saying "I've got to sell more business. I need to hire a producer". That's exactly the wrong thing to do!
A Better Way to Grow Your Agency
The reason it's the wrong thing to do is that the owner is now taking the most talented producer in their agency – themselves – and making that person a really bad service person. Instead, if they hired a service person, or even better an insurance company service center to do that kind of work, and focused their own efforts on continuing to produce insurance, their business would grow faster. I tell agency owners “don't hire a producer until you're spending 100% of your time as a producer; until you're producing all the business you can produce and your growth is beginning to level off.” That's the time that you ought to think about hiring another salesperson.
Service centers are one of the cheapest things that you can use in an insurance agency. Unfortunately, insurance companies who don't know how to sell things (that's why they hire agents) keep telling agents that service centers have a cost. They don't have a cost, they have a savings.
Insurance companies charge agents about 1 ½ to 2% of the commission that they would otherwise pay them to do the service. What that means, is that a service center costs around 10 to 15% of revenue. If you hire an employee, all the benchmarking studies show it costs somewhere between 25 and 30% of revenue to provide the service. So service centers save almost 50% of the expense of providing customer service with employees. In addition, they do it 24 hours a day, 7 days a week, and on holidays.
Service centers are the best bargain in the independent insurance agency system. That's why large agencies who are run by really smart businesspeople use service centers, 2 to 3 times to 1, compared to smaller agencies.
Whether an agency owner decides to use a service center or employees to provide customer service, the most important thing is to not do it himself. The owner (the most talented and successful producer who will likely ever work for the business) must keep selling. This means hiring service people not salespeople!
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.
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