As agents and agency owners we live in a world of numbers!  Numbers are our business and we deal with lots of them every day.  When you stop and think about it a lot of them are really important to us:  sales number, profit number, our “nut”, minimum production requirement number, etc.

With all those numbers to consider what is the most important number?

It’s the loss ratio with each of your carriers.  Production numbers are nothing in comparison.  You can’t make up losses on volume right?  Total sales numbers pale in comparison if you’re losing money on every sale and so forth.

For the long term survival of an independent agency, not to mention current year profitability, nothing is more important than loss ratio.  Consider that with poor ratios you’ll get your contract cancelled, you won’t be able to convince competitive companies to give you a contract, you won’t make “profit sharing” (the profits of the typical small agency), you’ll continually have to remarket your customer’s accounts raising your costs, your retention rates will suffer as customers are cancelled or move their business for pricing reasons, you’ll spend more time looking for new carriers than selling and on it goes.

Let’s do something about this!  Let’s manage our loss ratios.  Here are 10 quick, easy, practical and essential ways to do this:

  1. Account round.  That’s right the more lines of business the lower the claims ratio on an account basis.  Plus you make more commission!
  2. Review all open claims quarterly and ask for lower reserves when justified.
  3. Write the business where it belongs.  Don’t force business into a carrier just to get the lowest price.  This always backfires.
  4. Don’t write the business with anyone for the lowest price when you don’t have to.  Protect your companies from themselves!  Give customers the best value not the cheapest price and your loss ratios will improve.
  5. Move customers to markets that don’t pay profit sharing, or you have low volumes with when they file lots of claims.  Who says you have to slit your own throat just to give someone who doesn’t deserve it the lowest price.
  6. Advise customers to “right size” their deductibles based on their claims history and ability to withstand loss.  Everyone doesn’t need the same deductible!
  7. Counsel customers about claims filing.  Sometimes they should think about it carefully before just filing a claim.
  8. Fire customers who are poor risks.  Think about this.  If you write a guaranteed loser you will make some commission.  Maybe a few hundred dollars.  But you may destroy thousands of dollars in profit sharing.  Manage your own business risk.
  9. Be proactive when losses happen.  Believe it not it’s cheaper to get claims settled quickly when they do happen than to let them linger.
  10. Set standards for where business goes and then ENFORCE IT with your  staff.  The excuse that its “the CSR’s” that are the problem is BS.  Manage your business.
  11. Here’s a bonus.  Know what your stop loss options are and use them!  The thing we as agents have to manage is our Ex Cat loss ratio and this is an important tool.

Here’s to a “profitable” 2015 for you and your carriers!

 

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