Agents Fight to Attract Best & Brightest

The battle to attract the best and thebrightest from competitors, other areas of insurance, universitiesand other industries is not expected to get any easier forindependent agencies during this economic downturn, whether forthose looking to take on top-grade rainmakers as part of aperpetuation plan, or simply to attract new blood into theindustry, leading agents warn.

Agents who have dealt with the challenge of perpetuation sayprincipals can no longer rely on simply passing down their agencyfrom one generation to the next. The demand for growth by carriersis too intense and customers' desires for services too vast for asmall group to continue to run an agency forever, these agentsadd.

Thus, perpetuation plans today must not only set the stage for afuture transfer of ownership, but also must address how to bringnew talent, expertise and capabilities into an agency to deal withthe expanding role of independent agents as full-service financialand insurance centers.

“Im not sure agencies are doing enough to plan forperpetuation,” said Jeff Newman, vice president at Gelfand NewmanWasserman Insurance in Los Angeles.

In his additional roles as president of the IndependentInsurance Agents Association in Los Angeles and member of theWestern Regional National Young Agents Committee representing 11states, Mr. Newman meets with a lot of agents. He said he is oftensurprised by the lack of planning by agency heads when it comes tothe future of their businesses. “They are avoiding the inevitable,”observed Mr. Newman, explaining that many agents fail to realizehow much work and planning it takes to bring in someone to takeover.

In the end, the process of perpetuation should not wait untilthe principal becomes ill or close to retirement, agent officialswarn.

In North Carolina, the conversation has been forced for manyagencies because of the intense competition from banks getting intothe insurance business, according to Duncan Jones, an accountexecutive with Senn Dunn Marsh and Roland, an insurance agency inGreensboro, N.C. The answer at Senn Dunn Marsh and Roland has beento create a limited liability corporation where members of theagency each obtain a share in the company and no one or twoindividuals are responsible for the whole book of business.

The biggest problem with perpetuation is with small agencies offewer than 10 employees, observed Mr. Jones. Such agencies, hesaid, are prone to doing things “the traditional way” and sometimesfind they cannot keep up with the times. In most cases, he said,they end up selling their book to banks because there are no otherperpetuation options.

The pressure is also on for agents to perpetuate their firms byincreasing their volume of business and variety of services,according to Mr. Newman. Clients expect more than just insurancefrom an independent agency these days, including financialservices, and carriers are demanding far higher volume, hesaid.

“Agencies have to grow to keep their business and survive,” saidMr. Newman.

If there is one piece of advice to give agents in planning theirperpetuation strategy, Mr. Newman said it would be “go through theprocess now.”

“The key thing is not to ignore it,” observed Mr. Newman. “It iscoming, it is a problem, and it needs to be addressed.”

While agencies are definitely facing tough challenges these daysin setting up perpetuation plans, the most difficult manpower issueis recruitment of new talent, top agents say. A softer labor marketwith more people looking for work might not necessarily makerecruitment any easier because of institutional barriers, theseagents warn.

The only observable benefit in hiring during an economicdownturn will probably not be evident until next spring, whencollege graduates might be hard put to find work in their chosenfields if the economy continues to weaken, observed Dick Jackson,president and chief executive officer of Barker Phillips JacksonInc., a full-service insurance brokerage in Springfield, Mo.

“It would not surprise me that, over time, the economic downturnmight have an effect, but I dont think it would effect the agencyend on the availability of people,” according to Mr. Jackson.

A major reason Mr. Jackson cites is that many of todays highschool and college graduates do not think about getting intoinsurance until later in life. There is only one certifiedinsurance program in the state–South West Missouri State Universityin Springfield, Mo., he noted. However, he added, many of thosegraduates will come out with actuarial degrees and move onto theinsurance company side.

It is only after years of exposure to various aspects of thebusiness that their interest in other fields of the business mightbegin to develop, prompting them to consider moving onto somethingelse–possibly becoming an agent, Mr. Jackson said.

“Its hard to get good, quality employees,” said Mr. Jones ofSenn Dunn Marsh and Roland.

As chairman of the Young Agents Committee in North Carolina, Mr.Jones said many people coming into the insurance business on theagent side initially worked in other fields. One way to discover ifan individual will be suited for a career in insurance is toadminister a vocational aptitude test of some sort, he added.

“How you pick the right person can be difficult,” said Mr.Newman. “Each agency has its own type of personality. The businesscan be taught, but the personality has to fit as well to keep thephilosophy of the agency intact.”

“Not everyone is suited for insurance,” he added.

Reproduced from National Underwriter Property &Casualty/Risk & Benefits Management Edition, October 29, 2001.Copyright 2001 by The National Underwriter Company in the serialpublication. All rights reserved.Copyright in this article as anindependent work may be held by the author.

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