The Consultative Broker™ Briefing
Volume VIII, Number 2
A Free Publication of C.R. Ekern & Company
888.670.1177
www.crekern.com
Copyright, C. R. Ekern & Company, 2007

Brokers and Agents Unite!

This is a special edition of the Consultative Broker Briefing.  We highly suggest that you forward this to all the carriers you work with.  The prior 70 or so briefings have all dealt with how brokers differentiate themselves.  This one however, is about your relationships with carriers.  We have noted a real disconnect between successful Consultative Brokers and many of their carriers as regards their joint futures.  In many cases, their business styles are misaligned.  It is time we all get on the same page, before we lead each other over the abyss of price and commodity once again.

I was speaking several weeks ago with one of the leading consultants who analyze the comings and goings of insurance carriers.  (In the past several years mostly goings!)  We took a look at the number of national multi-line carriers who licensed agents and brokers.  What we discovered was very interesting.  In the year 2000, there were 17 national multi-line carriers who controlled $60 billion in revenues.  Today, there are 7 and they control $76 billion.  That’s right…seven!  So, over the course of the last 5 years the number of national multi-line carriers shrunk by 57% yet their market share increased by 9%!

So, what does that mean to you as a Consultative Broker?  You can’t allow a prospect or client to “fragment” the marketplace by forcing you to compete on a bid basis between carriers.  That is why more and more of you are coming to the conclusion that competing on a “conceptual basis” is the only way to go.  It allows you to focus on the needs of the client first, before spinning the shrinking marketplace into play.

One of the phenomenon’s that is now occurring inside the brokerage industry is the growing number of you that are competing on a “broker of record” basis.  According to our 2005 year-end survey, you have told us that your hit ratios and number of accounts gained have grown tremendously through competing with your capabilities and quantification of TCOR.

But there is a force working against you.  A number of you who are reporting 70% to 80% hit ratios, are being criticized by some of your carriers.  Their personnel are arriving in your offices and telling you that your relationship is in jeopardy because of the slowing submission flow they are receiving!

Let me get this one straight.  You are running your business more profitably; your success is increasing; the accounts you are sending the carriers yield them a higher hit ratio (i.e. lower expense ratios); and the clients are learning to understand a value proposition.  In short, you are elevating yourselves as Consultative Brokerages.  Yet, your main suppliers are upset with your improving business style?

It is time for our industry to come together on a basis of value.  It is critical that the three sides of the equation all work from the same page.  The brokers, the carriers and the clients all have an opportunity to change the course of this ship.  We absolutely cannot head into the price and commodity rocks one more time.  It is absolutely imperative that we all spend 2006 truly establishing and understanding our joint value proposition.  What we do as an industry at this critical turn of the cycle will determine our fate for at least a decade or more (if history repeats itself).

So, as Consultative Brokers here is what we all must do to provide leadership:

1. Screen your carriers.  Do not blindly work with carriers that cannot demonstrate their value proposition.  Frankly, unless they understand exactly what that is, they are simply purveyors of price and commodity.  Ask them this specific question “How does your company intend to differentiate itself over the next 3 years outside of the commodity and price?”
2. Don’t fall into the commodity trap.  I was with a brokerage firm several weeks ago that had just been given a carriers “target industry” list.  It held the same industries as the list of 1975.  It may surprise some to learn that wholesale distributors or machine shops have been attractive for some time!
3. Educate your carriers.  Those of you that have made the evolution to Consultative Brokers must educate your carriers about what your value proposition is.  You must ask them to align themselves with your pursuit of excellence through the quantification of your value proposition.  They may not even know what your value proposition is.  Explain TCOR, show them your resource capabilities, and demonstrate how those of you who know how to compete conceptually are among their most profitable brokerages.  This is because you do not fragment the marketplace and protect them (and yourself) against low hit ratios.
4. Explain the perils of marketplace fragmentation to prospects and clients.  There are only 7 national multi-line carriers who license agents.  Most of you represent these Magnificent Seven. Some of these carriers are much better than others at understanding their own value proposition.  A buyer needs to work with an experienced broker who knows how to access the capabilities.

Now do your part.  Distribute this briefing to your carrier partners.  Those of you that have made the commitment to become Consultative Brokers must lead the way.  It is time that you raise the standard of excellence before it is too late.  Until your carriers understand how to demonstrate a value proposition that aligns with yours, we will continue to be an industry of vendors and suppliers.  The main losers will be our clients who must be served through a value proposition that entails Total Cost of Risk, rather than simply the price and commodity of insurance.

And of course we will continue to be here throughout the 2006 renewal season and beyond.  As the leading sales consultancy to brokers and carriers, C. R. Ekern & Company is committed to helping you improve and elevate the industry production style to a unified, quantifiable value proposition.  If you keep reading…we will keep writing.

Best regards to all Consultative Brokers,

Rob Ekern
President
C.R. Ekern & Company

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Consultative Brokerage® Techniques are utilized by agents and brokers across North America in the development and retention of upper middle market revenues.  The Consultative Broker Briefing is delivered electronically free of charge to selected agents, brokers, and other insurance professionals across North America.  To subscribe to The Consultative Broker Briefing, please click here.

Copyright 2007 C.R. Ekern & Company