Agency Cluster Questions

[umyboyblue]

lil roxie,
Go ask the siaa master agency face to face if he is going to give you access to all those companies with 15% (or so) commission. Take a tape recorder in your purse of course. If he says yes then sign the deal and let us know how it works out.

 

[roxiepup]

Thanks guys. Hey, another question:

I'm evaluating profitability bonuses (and differences in the contracts), do you know what the MEDIAN loss ratio is for most agencies? Furthermore, what the standard deviation is from the median.

I've noticed different contracts may have different loss ratio criteria to qualify.

If an agent was on their own and appointed direct with the company, what is the norm for qualification of bonus as far as loss ratio (minimum premium excluded)? If anyone has data on this please let me know. I would think most IA would know this, so they can gauge whether or not they think will make bonus at a given point in the year.

Thanks!

 

[Aram Fingal]

I think usually bonuses require in the neighborhood of a 60% or lower loss ratio. The big advantage to being a member of SIAA (or other groups) is that you qualify as a group not as an individual, so minimum required premiums aren't as big of a deal.

 

[roxiepup]

I'm doing some analysis of various IA contract opportunities and how profitability bonus may come into play. I'm coming from captive so need help from you IA guys.

To qualify for profitability bonus with most carriers in p and C, what is the loss ratio % you need to hit, to qualify? Is there a difference between personal lines and commercial, and if so, what is it?

And for all you iAs out there, what is your average loss ratio, your median, and what is the standard deviation (or variance) from the median? Basically I want to figure out if most people either clearly HIT the loss ratio target or don't hit it (which would be a large standard deviation). Or, is there a small standard deviation / variance, most of the time, and is it kind of a crap shoot whether you make the cut to get the bonus or not?

Thanks so much for any info!

 

[umyboyblue]

That could also be a disadvantage (being with siaa), if the group as a whole were not profitable. Small beans compared to the access given lil roxie. 100% of 0 is 0

 

[INSUREGEEK]

I did some work for Smart Choice too, and a few other clusters. I do not know much at all about Premier. My personal affinity was for SIAA because I know I worked with (pretty much FOR) 2 of the 3 largest and most successful Master's in my territory at the time.

Now, all Master's handle it differently. Some of that depends on what the carriers are willing/able to do in support. Can they dedicate an underwriter to help? When do you get a direct appointment? Do those carriers work in your market? Is the master going to bogart the good CL and make you pay a brokerage fee? Or are they going to send one of their staff in to assist at a more generous split? Do you even need that assistance?

I just think it's about what works for you....your individual strengths and weaknesses in production....the resources offered....your budget....and your tolerance for micromanagement.....or no direction at all.

I did see a lot of very green agents that got taken for a ride with fees from clusters/aggregators/whatever they call themselves entities. Those agents would have been better served by selling their books and looking elsewhere for a spot as a draw+comm producer in an established agency. Buyer beware.

ETA: Loss ratio expectations will vary greatly. Most companies will want a minimum book & loss ratio before granting a direct. I worked for one that gave direct appointments day 1.....but you better not be the newbie that sank the group!! It takes about 3 years to even begin to mature a loss ratio. If you live in a storm prone area like I do, you'll be glued to the weather channel more nights than not.

 

[roxiepup]

That could also be a disadvantage (being with siaa), if the group as a whole were not profitable. Small beans compared to the access given lil roxie. 100% of 0 is 0

Right. I'm aware of this. this is another reason I'm trying to get some more specific statistics as to what most agencies are actually doing (median, the variance, as well as average loss ratio) and what most carriers actually require to hit (I want a number to make a bonus.

As far as the Group qualifying or not, there are multiple variables to consider. 1. if you have a huge group, like SIAA, and profitability bonus are designed for most agents to hit it, you have more of a buffer to hit it as a HUGE group. A smaller group will have more variance than a large group.
2. If in most cases, they are designed for most agents to NOT hit the bonus, one could argue the smaller group has a beter chance of making it more times than not, because they will have a higher variance.
3. On the other hand to the above, the QUALITY in agents in a particular group could impact it as well. If one group has more quality agents and or less hungry (and less likely to push things through that is "stretching it"), you could also probably assume the group with the higher quality and less reckless agents will have better loss ratios, and THUS, the group has a better chance of hitting the bonus - therefor you do too as long as you hit your loss ratio required per your contract

 

[umyboyblue]

I understand what you are getting at... you have over-analysis paralysis. It is common among people making big decisions.

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I would look at it the same way insurance companies do. The more spread out the risk the least affect it will have. You may have a big claim with SIAA, but your name is not going to stick out as much to the carrier as if you were directly contracted possibly. Good and bad to everything.

 

[roxiepup]

I'm surprised no IAs on here can seem to answer what their typical loss ratios are and answer the question...or maybe im nkt making sense?

If you don't know the "median" loss ratio (the number you hit most frequently, and not significantly influenced by outliers...ie real bad loss yrs), what is your "average" annual loss ratios?

What do the carriers usually require for you to get profitability bonus? Since I'm moving to IA, I'd like to try and project how likely getting bonus is, or isn't.

Seems like a reasonable question to me

 

[scooter33]

I'm surprised no IAs on here can seem to answer what their typical loss ratios are and answer the question...or maybe im nkt making sense? If you don't know the "median" loss ratio (the number you hit most frequently, and not significantly influenced by outliers...ie real bad loss yrs), what is your "average" annual loss ratios? What do the carriers usually require for you to get profitability bonus? Since I'm moving to IA, I'd like to try and project how likely getting bonus is, or isn't. Seems like a reasonable question to me

Every carrier has a different agreement,...for most, if you have less than 55% LR, you get a bonus.