P&C recomendations...independent

Dec 23, 2007

  1. rdavis85
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    rdavis85 Expert

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    I need some good advice on my next step. I am licensed Life/Heath agent starting my on agency. Do you recommend doing P&C and Personal Lines (whatever that is...cant get an answer to that one). If so what companies? Any info would be appreciated.
     
    rdavis85, Dec 23, 2007
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  2. djs
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    djs Super Moderator Moderator

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    Personal Lines is exactly what it says, it is insurance that you need personally, such as home, auto, life, health, umbrella, etc. This is as opposed to commercial lines, which you need for businesses. Personal lines includes P&C.

    Rule number 1 to succeed in this business is focus with a plan. Based on that, just adding P&C doesn't do much, unless it's part of a plan for you to grow your business. Like health, P&C has lots of niche markets you can get into, so you'll have to figure out what type of P&C you want to sell before you can get much advice on what companies.

    Things to let us know:
    - What state do you work in? Carriers vary by state.
    - Why do you think getting into P&C might be a good move? This would help answer what companies will fit that market.
    - Is there a specific part of the P&C market that you want to get into? Do you know 18 used car dealers and want to sell auto policies? If so, you'll need to get into the substandard auto market, something you would normally avoid. Do you know 20 mortgage brokers and want to focus on home? Lot's of areas to explore.

    The advantage to P&C over health is the sales process is much easier. People need home and auto insurance, they don't question that very much. It's a bit less about price (though still price sensitive) and more about being in the right place at the right time, not very hard to do. P&C takes longer to get established, since it's less about the 1st year commission and more about residuals. It's also a higher service market. People buy new cars, have accidents, have late payments, refinance their homes, etc, etc, a lot of things you don't deal with in the individual health market.

    Dan
     
    djs, Dec 23, 2007
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  3. Agent Jeff
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    Agent Jeff Expert

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    Dan, you've mentioned before that you have had success working with used car dealers. Have you found it necessary to pay for referrals from them? What sort of marketing expenses are involved in building and maintaining such relationships?

    (The reason I am curious is that it seems that with the possibly low retention obtainable with some of these clients that it could easily get to be an unprofitable business if acquisition costs are not controlled.)
     
  4. Chkndinner14
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    Chkndinner14 Super Genius

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    Before you enter this area of the P & C business, ask yourself a few questions, "Why did I get involved in the P & C business? Who did I want my clients to be? What did I want to do for them?" You will not build many long term relationships with this model of business.

    The car dealership business has these issues that you may not be accustom too.

    1. Extremely low retention
    2. Weak applications- i.e. they are the only driver in the house, then your company will send you a list of 5 other licensed drivers. The claim comes before the drivers are listed.
    3. The car dealers have one thing in mind, selling the car. DO NOT HAVE THEM ASSIST YOU, some agents do and this can come back to bite you.
    4. I would check with my state DOI before giving referral fees. Some DOIs view this as paying commission to an unlicensed person.
    5. Increased exposure to E & O.
    6. Increased insurance company investigations of apps. You will have a lot of first term claims which companies will scrutinize.
    7. Get a copy of the RD 108. Many people will try to insure the car in some other person's name.

    With that being said, it can be a viable business model. You will have to bonus to make it so. The majority of your policies will not make it 6 months. Commissions are high, but then charged back. When you stop writing new business with this model, you are in for a long six months. It is a difficult model to do over a long period of time, only a certian few have the skill set to deal with this operation. You may be one of them, I am not. I have friends that have been very successful in the short run with this. They usually abandon it after a few years, not due to money, due to the stress of this work.

    If you are big enough to have staff do it, have them do it. But, same problem, high turnover and when they leave, what do you do? You will be constantly interviewing. It is a non stop process.

    You asked about acquisition cost. You can't spend a lot of money. You have to walk and talk and be available all hours of the day.

    Going back to my first point, "When I first started, why did I choose this business?"


     
  5. djs
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    djs Super Moderator Moderator

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    Going after used car dealers is easy, but it's not good in the long run for your book of business. That said, if you need policies, you can write all you can handle.

    I do not pay for any referrals from dealers. I offer them help in getting their clients insured. This is important to them so they can get the deals funded, no bank will pay the loan until they have the insurance in place. The ones I work with understand that I will take care of their customers, and in turn, take care of them. They don't need a token referral fee. That said, they may get something nice for thier birthday or the holidays.

    The type of business you write will have higher claims, ruining your loss ratios, go delinquent on the first payment, causing a lot of payment nightmares, and have a lot of lapses. The good news is, I do run a profitable business, even with the claims, most lapses happen once, their car becomes unregistered (thanks to new California laws) and the bank threatens forced placement, and then I reinstate the policy and do pretty well at keeping them in force from that point on.

    You'll end up working Friday evenings and Saturdays. Only work with local dealers, I try to meet the clients at the dealers when they are getting their car. Tracking them down later is much harder.

    You'll have to deal with a lot of people who answer questions in strange ways.... Do you have any tickets in the last 3 years? No. Well, your MVR shows 4 and a suspended license, how about those? Oh, I paid those. Well, they still count. Why? I paid those off. Yes, I have this conversation once a week at least.

    If you're independent, get appointed with Unitron (Financial Indemnity) for substandard auto stuff, hope you never have a claim, and write. It's all about monthly payments and downpayments.

    ChknDinner is right with everything he says. It's not for many people, which is why there isn't much competition if you want to go after this market. You'll burn out quickly, so plan on it for a year or less. If you don't have a staff person, don't do it. There is to much of a lost opportunity cost in this market, with what you could write if you weren't servicing late paying auto clients.

    Dan
     
    djs, Dec 27, 2007
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  6. Agent Jeff
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    Agent Jeff Expert

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    Thanks Chkndinner14 and djs for these outstanding posts. Much appreciated. These are great, detailed insights into the business that we must consider.
     
  7. FELLNINS
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    FELLNINS New Member

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    :no:First : I would make certain I knew what P&C was (Property and Casualty) and understood a good majority of the coverages. Many P&C agents specialize in either Personal Lines or Commercial Lines; some of the coverages are similar but both are much different than the L&H. I am dual licensed and find P&C to be much more difficult than L&H, but also more fulfilling. I occasionally sell some life or health to an existing customer, but I am not an expert. If I were you I would either stick to what I knew or hire an expert. You could opening yourself up for a large E&O claim if you cannot fully explain and advise your client, especially when you start handling any large commercial accounts. If I didn't have brokerage firms for my dabbling in L&H I would be lost, they are a great source of help.

    :jimlad:Stick to what you know!!!JOE.............
     
    FELLNINS, Dec 30, 2007
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