2001 Best Practices Study

Analysis of Agencies with Revenues Less Than $500,000

C OMMUNICATIONS – E MPLOYEE , C LIENT , AND C ARRIER

Because of their small size, these agencies find employee communications to be fairly easy. Everyone can gather quickly, either regularly or spontaneously as needed, to share information, get and provide feedback, and make decisions. Financial information may or may not be shared with non- family employees, but everyone has a good understanding of the agency’s goals and what it takes to accomplish them simply because they are discussed so openly and often. Generally these agencies communicate to the employees the need for honesty and integrity in all client and carrier dealings. One agency developed a statement signed by everyone in the agency regarding the “trust factor” and the confidentiality of client information. These agencies communicate the importance of the personal client relationships through such actions as sending birthday cards, attending client functions and personal events, and using gift certificates to say “thanks for the referral” or “sorry we caused you an inconvenience.” A surprising variety of vehicles are used to communicate information to clients and companies including comprehensive advertising (radio, cable, local newspaper) and the internet (websites, email). Frequent business communication is maintained through periodic phone calls, educational bulletins, industry news, annual renewal surveys, and correspondence as needed to keep the client informed of the status of transactions. Successful financial management for a small insurance agency is defined differently than it would be for a larger agent or broker. For the small, privately held firm the existing tax laws actually encourage owners to take money out of their businesses as opposed to building up their agency’s balance sheets. On the surface, this would affect liquidity and cash flow, but most of these owners are willing to put their personal resources in the business to meet payroll, invest in the purchase of physical assets, or make an investment to grow the business. For this reason, financial management cannot and should not be measured by the strength of the balance sheet. F INANCIAL M ANAGEMENT

“We work at being sensitive to the emotions and respectful of the person on the other end of the line.” “A letter goes out to every client with a claim telling them what to do, i.e. write down the name of the adjuster and phone number, etc. The letter spells out exactly what they need to do, what is going to happen, and what the expected time frame is and that they should call us immediately if anything is different from what we told them to expect or if they have any problems.”

“Our best practice for financial management is just staying on top of it. We watch our P&L very closely comparing it to the previous year, and we keep receivables in check. We do not let anyone get out of hand. We present the bill and tolerate 30 days. Period.”

“We watch bottom line profits. They are the reason we are in business... plain and simple.”

15