Three Keys To Getting Into Brokerage

From an internal perspective, if an insurer takes a shotgun approach to distribution with direct contracting, company regional and/or brokerage general agency or marketing organization models, this may be a recipe for failure. It will put each distribution center in competition with one another.

Example: Even though a brokerage general agent may hold a contract with this company, if he senses competition from the local regional providing the same product, why compete against the regional? This question would be especially critical if he sees no difference in compensation or value proposition.

From an external integrity perspective, here are a few problems to look for.

One is companies that are willing to give top contracts to anyone or to "aggregate" production to provide agencies with higher compensation. Many insurers are now closely scrutinizing the whole aggregation model. After all, is the writing company better off if a brokerage general agency's sales are up 10%, but only because it folded in more agencies rather than growing organically?

Another problem is the use of published payout rates and "special deals" negotiated on a national level about which the company's regional offices aren't even aware. That effectively puts the regional sales officers at a competitive disadvantage. Brokerage agency compensation shouldn't be based on negotiating power but on defined metrics and true partnership potential.

Process. The important question here is, how easy is it to do business with the company? For example, does the carrier have a seemingly endless application? Is its technology an afterthought? Does it take 3 months to get something out of underwriting? Is there any relationship between the producer/brokerage/marketing organization and the home office?

For certain companies, the relationship is so deep with some brokerage general agencies that there are dedicated and exclusive teams processing the business. They focus on constant improvement to get the business on the books and get the broker paid in a timely manner. In addition, some corporate resources, such as a company's marketing team, provide such tremendous support that the resources seem completely dedicated.

The above are competitive advantages that separate the successful brokerage companies from the brokerage wannabes.

Michael S. Pinkans, CFA, CFP, CLU, ChFC is the products and markets director for Brokerage Resources of America, based in Barre, Vt., and a registered representative and investment adviser representative for ING Financial Partners, Inc.. Reach him at [email protected]