I spoke with Brian Bartosh, Chair of ASCNet’s Board of Directors, about his 2011 road trip which involved visiting as many of the ASCnet chapters as possible around the country. He began his trip in January and will be concluding it at year’s end. Brian’s mission: To discuss the top 10 factors affecting independent agency valuation and demonstrate how utilizing and capitalizing on available technology can help agency principals increase their valuation. In each of the sessions across the country, there have been about 25 to 75 principals participating.
Brian is the president of Top O’ Michigan Insurance in Alpena. He’s been in the insurance business for 30 years, and has been extremely involved in technology for the past 25 years, most of his time spent with ASCnet. In fact, this is Brian’s second stint serving on the Board of Directors as he was president in 1994-1996.
I spoke to Brian as he was making his way down to San Diego on behalf of ASCnet.
Annie George (AG): Let’s begin by talking about why you returned to serve as chair of the ASCnet board and what the mission of your trip is.
Brian Bartosh (BB): “I felt that our industry was going through some interesting times, and wanted to return to ASCnet to be a part of it. There are critical changes underway in technology and I wanted to talk to agency principals about how seriously they were taking these changes. I wanted to help redirect some of the user group’s efforts, so we created a vision statement earlier this year with the primary focus to promote technology utilization to create agency value and build profitability and efficiencies. With ASCnet, we can do this through education, advocacy, and networking opportunities. I thought it would best if I traveled around the country speaking directly to the chapters, and created a session called Ten Factors Affecting Insurance Agency Valuations.
“My goal was to understand what everyone is facing on a regional basis, and then show them how they can use technology to meet their challenges. What I found is amazing. In traveling throughout the country, I learned how differently the economy and changes in our industry are affecting agencies and their valuations depending on the state. For example, in the Carolinas, the construction industry was really hit hard, but when you make your way up to the Midwest, you learn that they’ve already gone through this challenge and are facing other issues. Agencies I met on the coast are looking at homeowner premiums that are sometimes 10 times higher than those inland and that may be within the same state. How agencies handle this depends on where they are. When you have this type of price differential, you have one agency making quite a bit of revenue per account, whereas another is generating one-tenth of the revenue. This agency has to be a lot more efficient, and gain more accounts to get the same type of revenue to move through.
“The good news is that due to these economic times and the soft-hard market cycle, agency principals now want to see what their automation can do for them.”
AG: Let’s go through the top ten factors and what recommendations you discussed in terms of using their agency management system and technology to address each factor for greater efficiency, growth, and profitability.
BB: “The biggest indicator in terms of stability for an agency is retention. In the session, we discuss how to measure retention and what tools they have available to them to increase retention levels. A good CRM system is key. Knowing more about the customer, keeping in better contact, and understanding their coverage needs is essential to retaining clients. This goes beyond the renewal. I show them ways of maintaining contact, and conducting an automatic review of policies much like other industries do when they have access to data. We review what retention can do for the bottom line as far as revenue, and when agencies see they can add $10,000, $20,000 of revenue just by increasing their retention efforts, it’s something they want to focus on.
“What’s more, many of the issues that go into retention also help to build profitability, account development, and public image.
“The second top factor affecting agency valuation is profit margin. Here we discuss expense factors and the different ways in which to increase profitability, in addition to some of the technologies and tools that are available today to reduce the amount of work involved. For example, we have Business Process Management tools built into agency management systems that allow us to synchronize and build consistent workflows. But agencies are not taking advantage of this to increase efficiencies and their profit margins. As I traveled around, it didn’t matter what automation system they were using, what you see is employees doing things 10 different ways, which is quite unique to our industry. We don’t put a lot of emphasis on consistency, whereas in any other business there’s absolutely no way that employees at companies would do things in a number of different ways to try and get the same results.
“Here we talk about building service standards and being able to measure them, and obviously to deliver consistent service you need consistent workflow, which adds to profitability.”
AG: Does this workflow inconsistency exist in any size agency?
BB: “Yes, we can have an agency with three employees or one with 300 employees, and you’ll see workflow inconsistency. And sometimes the bigger the agency, the less efficient. When you look at Best Practice numbers, you’ll see the larger agencies generating higher amounts of revenue but they’re not necessarily more efficient. The smaller agencies are handling more accounts per person so they need to be more efficient.”
The next factor, according to Brian, is the quality of personnel. This is not easy to measure but it’s critical to an agency. “Agencies need to get people more technically involved. That doesn’t necessarily mean you need to hire someone who has experience with the same agency management system in your office,” explained Brian. “Look for those with ethical background and capabilities and then train them on your system. Share information so they can focus on productivity.”
Having a good public image in the community is the next most important factor. This is affected by and interrelated with many of the other factors on the Top 10 list, including service standards and being able to meet them. “We need to extend ourselves through the Internet,” said Brian. “Give clients access to their information 24/7. Incorporate Live Chat on your website so that clients can talk with an agent or CSR. Feed your agency management systems with available tools from the Internet so that you can be more responsive.”
AG: What’s the next factor?
BB: “Quality client service is the next critical factor. It’s hard to rank service against your peers as we don’t have a measurement for this. I discuss ways of measuring client service internally with surveys – everything from using the Internet to QR codes. Review the five moments of truth that a client has with your insurance agency – those five opportunities you have to shine – from the original prospecting and quoting experience to the new customer experience after you write the policy to a premium change and how your agency handles that, a loss or claim experience, and the policy renewal experience.
“What follows then is employee productivity. During our session, we discuss what it means to be busy vs. productive. Busy involves doing a lot of activities, and not having enough time. But it’s not looking at whether individuals are being productive at doing their tasks. We talk about operational improvements, building work methods, and automating some of the processes for the agency. We go over the average spread of what it costs in CSR payroll, benefits, etc., and the amount of revenue your CSRs actually generate. This spread is what we use to pay our producers, overhead, and profit. But not all CSRs validate themselves, so the spread between what they work on and what they get paid ends up causing someone else to make up the difference, or it causes long-term issues for an agency. It’s a real eye-opener to look at the average number of clients per CSR, and the average amount of revenue for commercial and personal lines. It serves to get the agents to get people to reduce the time they spent on redundant tasks, and to have more direct contact with clients.”
The seventh factor involves growth in new business, which is as important as profitability. “If you aren’t growing profitably, it affects the agency value, especially for those looking for an operation that doesn’t need fixing – one that can generate growth and revenue to immediately begin paying down the debt spent on purchasing the agency,” said Brian. “Here we revisit retention – what kind of business growth we want to see, and set a goal that not only covers the growth but also what we’ve lost in business. From a technology standpoint, we look at the type of policies clients have to proactively cross-market – from the moment you write a policy, ad infinitum. This goes for referrals – it’s not something you do once a year or once in a while. It’s something you continually work on.”
Brian then discusses the eighth factor impacting agency valuation, which involves company markets. “I let the agents know that they can pull information off their own systems and go to the carriers with reports on which markets they want to go after. This enables a two-way relationship, changes the dynamic from the carrier coming to the agency with market reports. An agency can use its management system to do market analysis, illustrating the reasons why they wrote a specific line of business, and work on a comprehensive marketing plan for the future.
“We then discuss commission rates, and how you can use technology to track different events and opportunities to negotiate bonus commissions, and obtain marketing money that is available.
“And lastly, we cover account development. Here we discuss goal-setting, making sure an agency understands its closing ratio, average account size, successes – using these metrics to increase the size of accounts, the number of policies per account. We discuss different opportunities throughout the year that an agency can capitalize on to establish ongoing, good communication with the client. It’s not just asking about buying more, but about sharing what the agency is doing. You can do this by maintaining a good amount of data and knowing how to use it.”
The emphasis throughout Brian’s sessions is that agencies can get a lot more out of their automation by utilizing it. The data in their systems has so much value that goes unused.
At the end of Brian’s tour, plans are set to put together an overview of what was learned and the observations made to help the members of ASCnet.
When I asked Brian who is running the agency while he’s been on the road, his answer was befitting: “I’ve been running it remotely. We moved our system into the cloud so I can work remotely and have full access to everything I need. I can tell you how many sales were made, how many producer appointments were made, what claims came in…everything is at my fingertips. I’m in constant touch.”
About Brian Bartosh
Brian is president of Top O’Michigan Insurance, which has eight locations in Northern Michigan and 30 employees. He serves as Chair of ASCnet and is on the board of the Northern Michigan Catholic Foundation. Brian attended Alpena Community College and studied Business Management. He also participated in the Michigan State University Insurance Program and attended Saginaw Valley University and studied Business Management. His core expertise includes Marketing and Workflow and Change Management.