Question for Property and Casualty Insurance Agents

Wolfman97 · Post by **Wolfman97** » Fri May 26, 2006 8:11 pm

Here is a hypothetical question.

Suppose there was a sales lead company that was offering completed commercial property insurance applications for sale. Here is the deal:

They come to you with a completed application for an account. The account is various kinds of commercial real estate and the total annual premium is about $100,000 -- commission of about $12,000. You are told what kinds of properties are in the account, and the zip codes where they are located. The application contains everything you will need to quote the account, including all the required information, pictures, documents, loss runs, etc.,

All you really need to do is to put your cover letter on it and submit it to the carrier of your choice.

You can buy this completed application, for submission to a carrier of your choice, for about $1,000. If you buy the package for submission to a particular carrier, you will be the only agent permitted to submit that application to that carrier.

If you make the sale, you own the account, including any additional business that may come from it that was not included in the original application.

In short, you get a shot at a $12,000 commission account for $1,000 - with all the work of finding the account and collecting the data already done for you.

In truth, that is probably less than you would spend if you spent your own labor to track down the account, try to get an appointment, and collect the information.

If this was available, would you buy it? The numbers are samples, the accounts could range from $10,000 in annual premium to about one million. Assume whatever range of premium seems right for you.

Questions and comments are invited. Thanks.

InsAgentSF · Post by **InsAgentSF** » Sat May 27, 2006 3:55 am

I personally wouldn't. I remember how i got an account with 750,000. The risk was 75 Charter Buses. I spent over 1500 trying to get this accoun, ordering MVRs and things like that only to find out that EVERYONE was on tis account. Literally every carrier was quoting this. So the moral of the story, unless you sure that you have the RIGHT markets, i.e many admitted carriers, don't work on such accounts

Wolfman97 · Post by **Wolfman97** » Sat May 27, 2006 6:22 am

Thanks for your input, but I think you missed some of the major points:

1) There isn't any work involved. You are handed the complete application package ready for submission. No getting MVRs, photos, or anything else. You just put your stamp on it and mail it.

This isn't one of your ordinary "leads". This is a COMPLETED APPLICATION. No work required.

2) If you pick a carrier for submission then you are the ONLY AGENT ALLOWED TO SUBMIT TO THAT CARRIER. There won't be any competition with your chosen carrier. That's one of the major points -- to eliminate that problem of everybody in the world trying to beat you to your carrier's door.

As for knowing which carriers to submit to -- that seems to me like a basic skill of being in business. If you don't know which carriers are good for particular kinds of accounts then you aren't going to make it no matter what.

I should add one additional point. The people who are proposing to do this have a good idea how many carriers will actually be in play on any given account. This example rather assumes that there would be about five carriers in play. The total amount paid by the agents for the applications will never exceed half of the commission. In other words, if the total commission on the app was $10,000, and there were 10 application packages sold, the price on each would be $500 or less.

Therefore, if you bought the application for submission to all the major player carriers -- and locked every other agent out in the process -- you would spend $5,000 and get $10,000 in commission.

I should add that, if you were just an average agent under this system, getting applications and submitting them more or less at random, you would make a 2-1 return overall. Naturally, some agents will do better than others but --- on average -- if you spend 100 on application packages, you could could expect to net 200 in return.

Given a clearer understanding of what is happening -- now would you do it?

scott · Post by **scott** » Sat May 27, 2006 8:38 am

The insurance decision has three components:

--The program perceived to be the best price/coverage
--The current agent/broker/insurer
--The agent/broker/insurer who is most trusted/respected

Whoever owns two of the three wins the business.

Your program is missing a way to build the relationship the agent has with the buyer.

Bidding without a relationship means you're a commodity to the buyer.

Wolfman97 · Post by **Wolfman97** » Sat May 27, 2006 8:53 am

scott wrote:The insurance decision has three components:

--The program perceived to be the best price/coverage
--The current agent/broker/insurer
--The agent/broker/insurer who is most trusted/respected

Whoever owns two of the three wins the business.

Your program is missing a way to build the relationship the agent has with the buyer.

Bidding without a relationship means you're a commodity to the buyer.

Seems to me that on any new business you are bidding without a real relationship. In that respect, your position with this is the same as any other broker at the time. Yeah, when you make that first call, you are definitely a commodity -- and they have no particular reason to talk to just another agent pestering them like all the rest. You gotta open the door before you can build the relationship and this is an open door with a red carpet.

Besides, this is an account you probably wouldn't have seen otherwise, anyway. This is probably somebody who is unhappy with his current agent and is shopping for a new one. If somebody dropped this in your lap, how many times would you have to take them to lunch before you would feel comfortable accepting their business?

And, if that is really your concern, then buy the packages for all the major carriers at once and you are guaranteed to get the account and double your money in 30 days or less at the same time. Then you will have the rest of the year at your leisure to build a relationship and mine the account for other business.

Edited to add:
I should add that, on this account, the owner has already instructed his secretary to automatically direct all incoming calls from insurance agents to the company with the application. The only exceptions to this rule will be agents who are currenly in the process of preparing a quote. Therefore, you wouldn't have a chance to establish a relationship at all with this particular client unless you went through this system.

I appreciate your comments and find them interesting. With this better understanding, would it be something that you would buy?

Thanks.[/b]

Wolfman97 · Post by **Wolfman97** » Sat May 27, 2006 11:54 am

scott wrote:The insurance decision has three components:

--The program perceived to be the best price/coverage
--The current agent/broker/insurer
--The agent/broker/insurer who is most trusted/respected

Whoever owns two of the three wins the business.

Your program is missing a way to build the relationship the agent has with the buyer.

Bidding without a relationship means you're a commodity to the buyer.

One more thing I should add. Under the terms of the agreement with the property owner, they give an exclusive to the company providing the application service. In other words, if any agent calls, the secretary just directs them to a web site where they can find the information -- the call goes no further -- no chance to talk to the decision maker.

The only people who will talk to the decision maker are those with a quote in progress or the agent who won the account. The agent who won the account is going to have the advantage of that original agreement. That is, any competing agent who calls is going to be directed to the web site. You will have an entire year of excuses to call and opportunities to build a relationship without competition from anyone else. The property owner's secretary will act as your private bulldog to guard that account for you.

How does that sound?

InsAgentSF · Post by **InsAgentSF** » Sat May 27, 2006 1:32 pm

Sounds like you are not asking opinions but trying to convience us to do something

Wolfman97 · Post by **Wolfman97** » Sat May 27, 2006 6:06 pm

InsAgentSF wrote:Sounds like you are not asking opinions but trying to convience us to do something

No, not at all. Just trying to clarify what seem to be some misimpressions. I can fully understand that people would take the attitude that it is somewhat too good to be true. Surely there must be some catch to this, right?

I would be thinking the same thing. It isn't available for sale yet, and won't be for a while, so this is just legtimate market research. You couldn't buy it now if you sent me a suitcase full of cash, so this is no sales pitch.

Honestly, if you think there are any other negatives to it, I would love to hear them, because I would really like to construct this to be a "no-brainer" for agents.

But the truth is, there is no catch. It is simply what I described. You get a complete app, ready for submission to a carrier of your choice for five to ten percent of the expected commission. From that point on, it is your account to make or break according to your own skills.

If you are still suspicious and think there is something wrong with this, then please do tell me. Honest.

92builder · Post by **92builder** » Sat May 27, 2006 8:23 pm

Suspicious? Hell, if I had your name I'd turn your license in.

Where are you getting all the data from? How can you possibly know everything there is to know and not write it yourself? Why would I pay you 1K for an acct that I then only get 5 to 10% of the commission for? It sounds to me like you're dumping your bad accts to the highest bidder; I think you're trying to sell your renewals on the open market. I honestly also doubt that you have any chance of "guaranteeing" to me that I would be the only submitter of the risk. How would the insured then feel, knowing that their "new agent" doesn't care about them, but he/she simply paid for the app? I understand that this is no different than buying a lead, but does the insured care how I got the data? I would think that in these days of ID theft, a commercial acct is pretty tight on who they give policy data to. How are the companies going along with this? My money says that they won't.

As far as your idea goes, if I pay you 1K for a lead that sounds 99.9% like a sure thing, then there better be at least 3500 in commission on the other side.

Wolfman97 · Post by **Wolfman97** » Sat May 27, 2006 10:10 pm

92builder wrote:Suspicious? Hell, if I had your name I'd turn your license in.

For what? It is a straight sale of data. Consider it a very highly qualified lead. Besides, the company doing this won't sell insurance and won't have a license.

But, just to set your mind at ease, it is all completely honest and above board. If you get the concept entirely you will understand that openness, honesty, and fair dealing to all is an absolute requirement for this kind of venture. Think of it as a kind of Ebay for commercial insurance.

Where are you getting all the data from?

Directly from the property owner.

How can you possibly know everything there is to know and not write it yourself?

The owner enters it, or we enter it on their behalf, complete with all the required documents, pictures, etc. The data is put through a quality assurance phase to make sure it is complete before we sell it to agents.

Why would I pay you 1K for an acct that I then only get 5 to 10% of the commission for?

It sounds as if you may have misunderstood that part. If you win the account, you get the full commission. The account is yours, just as if you had paid for a regular lead and won the account. Your only expense in that case is the price of the lead.

What I was explaining was that -- no matter how many application packages we would sell for one particular account (never more than one per carrier) -- the total price that we would charge all the agents who bought it would never exceed half the total commission on the account. We aren't going out and papering the town with these things just to rape all we can from each application. Sales are strictly limited, and the terms are always set so that agents will make a more-than-respectable profit from doing business with us. We wouldn't be in business long if we made a practice of screwing the people who are buying our product.

It sounds to me like you're dumping your bad accts to the highest bidder;

Nope, not at all. These are accounts like any other you would find. They are not the castoffs from any insurance agency. In fact, many of the first accounts we already have interested are what you would call prime accounts. For example, one is about 25 properties -- apartments and office buildings -- in the best areas of Los Angeles.

You will be told what is in them before you buy. This will include the type, size, and general location of the properties, and various other details. We hadn't made any particular plans to highlight any special issues with the accounts but now that you mention it, that sounds like a pretty good idea. If there is some kind of bad claim history or something, then it would be helpful for our agents to know that before they tried to place it. I will make it a point to make sure that such things get into the account summaries beforehand.

So . . . thanks for the idea. That was helpful.

I think you're trying to sell your renewals on the open market.

I do not sell insurance. Therefore, I have no renewals to sell. These are what I say they are -- they are original accounts developed much the same way you might develop them -- direct mail, regular advertising, cold calling, etc. Nobodies castoffs at all.

I honestly also doubt that you have any chance of "guaranteeing" to me that I would be the only submitter of the risk.

That's a part of the regular contract. Any agent who buys the package and submits it to another carrier other than the one they chose loses their right to participate. Besides, the property owner has also agreed up front that only the designated agent has the right to submit the app to a particular carrier. Any agent who violated that might be in danger of losing his license for privacy law violations, among other things.

If you choose the carrier, that is your carrier and no one else's. If you find anyone violating that rule, we want to know because we will take action against them.

How would the insured then feel, knowing that their "new agent" doesn't care about them, but he/she simply paid for the app?

Well, with $100,000 of premium at stake I notice that feelings tend to take a secondary position. But why do you care if you got the account? Do you need all your clients to love you before you will accept their business?

Tell you what -- if they feel bad about it, you will have a whole year completely without competition from any other agent -- to give them a shoulder to cry on and accept their other business. How's that?

Besides, did it ever occur to you that one of the reasons they may be doing this is because they are pissed off at their current agent and looking for someone new? You would rather they went to the Yellow Pages?

I understand that this is no different than buying a lead, but does the insured care how I got the data? I would think that in these days of ID theft, a commercial acct is pretty tight on who they give policy data to.

The data is given only to the agents who buy the packages and that is approved ahead of time by the property owners as part of their contract with us. We don't distribute any private data to anyone they have not already approved.

How are the companies going along with this? My money says that they won't.

We are in the final stages of discussions with a few major carriers -- names that you would instantly recognize -- who are seriously interested in purchasing it for their agents nationwide.

Edited to add: We had a meeting on Friday with the decision makers at one major company. The head of underwriting said he foresaw a day when this kind of submission could be required.

As far as your idea goes, if I pay you 1K for a lead that sounds 99.9% like a sure thing, then there better be at least 3500 in commission on the other side.

Well, whether it is 99.9 percent a sure thing depends on what you do with it. All we can do is give you the completed app and let you make your choice of carriers and your best play to the property owner.

As far as the money goes, if the app costs 1K, then there would be at least 10K of commission in it for the person who gets the account. And, like I said, if anything else comes from that account, like maybe a big life policy, W/C, or a fat high-end homeowner's account -- that is all yours. We have nothing to do with that.

And don't think I was put off at all by your rather straightforward answer. Not at all. I appreciate it.

How does it sound now?

Wolfman97 · Post by **Wolfman97** » Sat May 27, 2006 11:13 pm

Just to give you a hypothetical example of the costs.

Let's assume 100,000 in premium.
12,000 in commission

If we sell five of these packages (let's assume there are only five insurance carriers that might be interested in this particular risk) then the price per package would be about 1,200, or less.

For example, five agents would buy one package each for 1,200 and one of them would win an account with 12,000 in commission. If one agent bought all five then that agent would pay something less than $6,000 in total, and would collect $12,000 in commission.

If we sell ten of the packages, then the price for each package would drop to less than 600.

If it is the kind of package where 100 insurance carriers might realistically be interested in it, then the price per submission package would fall to something less than 60 dollars.

See how that works? Our total take is the same, no matter how many of the packages are sold. If there is more competition for the account, then the price drops in proportion to the competition. There would never be a case where we sold that app to 100 different agents for 1,200 each. We wouldn't get any repeat business at all if we did that.

92builder · Post by **92builder** » Sun May 28, 2006 12:23 pm

You get a complete app, ready for submission to a carrier of your choice for five to ten percent of the expected commission

This is the part I was talking about.

Okay, I've read and read again and re-read this post 'til I can't see straight. Email me - I'm in.

Wolfman97 · Post by **Wolfman97** » Sun May 28, 2006 1:23 pm

92builder wrote:
You get a complete app, ready for submission to a carrier of your choice for five to ten percent of the expected commission
This is the part I was talking about.

Okay, I've read and read again and re-read this post 'til I can't see straight. Email me - I'm in.

Yeah, I reread that myself and I can see how you might have gotten confused. My bad for not phrasing it correctly. I guess I should have said that the price YOU PAY for that application is about five to ten percent of the expected commission. You get 100 percent of the commission if you win.

But, this discussion has brought me to think that maybe a better method would be to just let the agents set the price themselves by bidding on each package for each carrier. It might be a bit more work to keep track of, but it would eliminate all the questions about pricing. It would also allow some agent who thought they had a long shot with Podunk Mutual do it at a price that was appropriate to their chances of getting it.

Sorry, but it isn't available for sale just yet. We are planning to start operations before the end of the year so I will keep your note handy and let you know when the time comes.

Thanks.

InsAgentSF · Post by **InsAgentSF** » Sun May 28, 2006 3:53 pm

It all sounds good and stuff, but all i personally care about is the history of the account i.e loss runs and the carrier he is with. That's it. If the property owner currently pays 65 cents with lloyds of london and i can take it to a carrier for 25 cents, then i would pay 2000 for the account because it's easy to write... Can you give me this kind of information before I buy the account?

Wolfman97 · Post by **Wolfman97** » Sun May 28, 2006 5:02 pm

InsAgentSF wrote:It all sounds good and stuff, but all i personally care about is the history of the account i.e loss runs and the carrier he is with. That's it. If the property owner currently pays 65 cents with lloyds of london and i can take it to a carrier for 25 cents, then i would pay 2000 for the account because it's easy to write... Can you give me this kind of information before I buy the account?

Yep. Loss runs are collected and summaries would be available. We wouldn't show the details of every loss but we would show number of claims, total amount, and some details about any that are especially big. Current carrier wouldn't be a problem, either.