What is wrong with this picture?
 Or why should you automate your insurance agency?

by Ron Webber

In the past twenty-four hours, I have telephoned twelve insurance agencies in several states.  I had to leave messages at all twelve, because they were too busy to talk.  Well, busy is a good thing, right?  I thought so at first - until the returned calls started coming back to me.  When I asked, “How is business”, 80% of those that returned my call told me how lousy and slow it is these days. 

Wait a minute! Something is wrong with this picture!

Business is lousy and slow, yet they are too snowed under to take phone calls.  I know they weren’t avoiding me, because many of these agents had called me first and I was returning their calls.  Maybe we need to examine a typical specialty auto insurance agency in America today.

First let me say that the average specialty auto or non-standard auto insurance agency has about 1500 active clients, 60% to 80% percent of those clients will have a six-month personal lines policy.  More than half of those clients renew and pay their installments in the agency office.

Insurance companies tell us that the average number of endorsements in the non-standard Specialty Auto market is 4.3 changes per policy.  So if the average agency of 1,500 clients renews 70% of its’ policies, that’s another 1,050 policies, or 2,550 altogether.

Next, assume writing 450 new polices during the second six months and add those to our 2,550 for a total of 3,000 policies in our agency.  Now multiply the 3,000 policies times the average number of changes per policy (4.3) and we get 12,900 policy changes.

If that wasn’t bad enough, we usually handle the customer file two times (once when they make the change and once when the policy comes in) equaling 25,800 times to take care of the change. Lets not leave out the activity required to write these 3000 policies which makes our total around 28,800.  Whoops!  We need to double that 3000 number to accommodate verifying the policies when they come in to the agency.  Now the total is huge 31,800 for a 1500 client agency!

How many nonproductive calls do you get a day for coverage verification, underwriting questions, accident reports, etc.  That number can be quite large, but lets just use 10 – 12 per day, 250 workdays per year equals another 3000. Now our total is 34,800 and lets just add 1200 miscellaneous calls you have to handle from company representatives, salesmen, your bank, etc.  Our grand total is 36,000 activities in a typical non-standard Specialty insurance agency in America.

Wow, I am surprised anyone called me back.  Now lets breakdown those numbers into averages.  36,000 activities divided by 250 days equals 144 per day.  Then, 144 divided by the number of employees including yourself.  Averages tell us that the typical agency that I am describing has 3 employees and a owner.  Some owners write business and handle customers and some do not, so lets call it 3.5 employees handling 144 activities equals 41 activities each.

Now we have a manageable number to work with.  41 divided by average 8 hour day equals 5 per hour or 12 minutes per activity.  Now we all know that writing up a new customer that has never been in your agency takes a little longer than other activities like verifying policies or renewal.  But, we’ll allow 12 minutes for each activity as an average.

Remember, so far I have not even mentioned the time it takes to open the mail and sort it daily.  Nor did I mention, taking some 10,000 payments or processing all of the work of the agency.  I didn’t mention balancing your cash and making a deposit daily.  I didn’t mention corrections needed for up-rates on policy errors.  I haven’t mentioned reconciling company statements or bank accounts.  How about making up the payroll?  Then maybe a convention or trade show or reading industry journals.  Or,  how about studying marketing methods including the Internet or maybe even creating a web site. 

All of these overwhelming facts are why in 1990, I automated my insurance agency and have since worked and helped over 250 agencies nationwide do the same.  I have written many times about how automation will help you be more productive.  But it doesn’t help to write more if you can’t keep it on the books.  It doesn’t help to write more, if you can’t handle the paper.  It doesn’t help to write more if you are totally out of control with cost of payroll in relationship to your income. 

If you are not going home at night with a smile on your face and a fat wallet in your pocket, then you need to seriously consider automating your agency.  If you are automated and still don’t have everything under control, then you need to step back and have a look at your agency operating procedures.  Most of the answers you need are common sense.

Electronic customer files, automated receipting, deposits, check writing and processing of your work is the first step.  Electronic follow up to prevent E&O, and loss of income is second.  Transactional filing in combination with document imaging is the next step.  Finally automated renewal processing and electronic reconciliation of company statements is a reality that automation provides.

Instant electronic management accounting and reporting is a feature that automation handles with the easy press of a few buttons. But the real benefit is organization of your agency and complete control of every situation. That will bring a very tangible sense of peace of mind and relief to you, your employees and your clients

Many times I see agencies struggling and more times than not, their answer is to hire more people. They believe that it is the only way to grow and straighten out the mess they are dealing with today.  Believe me that is not the answer. The answer is Automation.  Automation will make you more productive and more profitable!

Remember "Automation equals Productivity and Profitability."

Ron Webber

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