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Where Will You Be in 2015?
Friday, 16 October 2009 00:00

Where would you like your brokerage to be five years from now? Do you have a clear, concise vision and plan to get there? If not, you have a significant opportunity to define your business objectives, create a plan, align your staff to enforce a shared vision and reap the rewards. Above all, ensure your technology works within this plan.

According to The Insurance Institute of Canada, the number of brokerages and employees combined is more than 58,000. We are fortunate to see many brokers across this great country. Although they are all different in size and operational jurisdictions, they share common values, goals and business challenges. Basically, four pillars carry a successful brokerage: human resources; sales and marketing; technology; and finance and administration. Without an equivalent amount of attention, time, and energy devoted to each area, a brokerage cannot prosper in the long term.

HUMAN RESOURCES

Having a strong team to grow the business and service clients is paramount. Theoretically, the more experienced the team, the greater its strength. However, with more experience comes increased resistance to change the way "we've always done it." Gord Stanton, controller at McDougall Insurance Brokers, explains further: "We are always looking for ways to reduce costs, especially the areas in which we have more control," he says. "We can become somewhat complacent in our job processes and routines and as such are required to occasionally stop and review what we do, why we do it, and how we can do it better."

Identifying opportunities to evolve, work smarter and manage change within the team is essential, but very difficult. Brokers can do this independently or seek the guidance of specialists/ consultants. It is important that this gets done.

Experience shows that successful brokers do the following:

  • redefine job descriptions to fit today's competitive landscape and alignment to the brokerage's business plan;
  • consistently measure daily, weekly and monthly outputs;
  • invest in training to ensure their teams are equipped to support the brokerage's quest for success; and
  • have a quality assurance program to ensure clients and prospects are serviced as intended. (Working backwards from this intention helps to define training objectives.)

SALES AND MARKETING

Although often regarded as an expense -- one that typically gets slashed first, without solid marketing initiatives to drive sales efforts -- a brokerage cannot achieve the ultimate long-term goal of profitable survival.

Central to the selling strategy is the plan behind the strategy. Brokerages must define what their ideal client looks like. Every level of the broker- age should be aware of and involved in this process in order to reap the benefits. To illustrate further, a brokerage must know who its A, B or C clients are. Each level of the brokerage must then strategize and follow-through on its service plans for these clients.

Marketing strategies and initiatives are equally important to a brokerage's unique value proposition and sales strategy. Brokerages need to market and package their uniqueness constantly in an effort to build top-of-mind awareness and grow business.

A cocktail consisting of several elements of the marketing mix should be explored. These elements include: print and electronic advertising; direct mail; radio; television; billboard; public relations; and highlighting commitment to the community using corporate literature -- including a Web site -- client testimonials and so on.

Whatever medium you select, your strategies and initiatives should be proactively planned, executed and measured to gauge return on investment.

Technology plays a critical role to track and measure marketing campaigns. A secure, integrated tracking tool within a broker management system (BMS) is essential, and should offer the ability to:

  • import and export prospects and/or customers from one database;
  • create target lists based on user-defined criteria and track the activity and the results of working that list;
  • generate automatic, fully customizable letters that contain client and policy specific information, as well create mailing labels and/or address envelopes directly;
  • run campaigns that automatically generate recurring suspense actions to designated users and provide reporting capabilities to analyze opportunities; and
  • track marketing costs by campaign.

TECHNOLOGY

Technology has to be adapted to the realities of the Canadian marketplace. Brokers in Canada are heavily involved in servicing their clients, whether it is taking client enquiries, change requests, filing claims for their insured's or simply collecting premiums. Operating in a paperless environment is one important factor responsible for bringing efficiency, cost reduction and improved quality of service to property and casualty lines.

Gartner Inc. research indicates that up to 90% of corporate memory is on paper, and 10.5% of these documents get lost or misfiled. Augmenting this observation, the average company will spend $20 in labour to locate one document, $120 to find one misplaced document and even up to $220 to recreate one lost document (if even possible). A paper-free environment is a solution that a brokerage cannot afford to overlook.

According to a ComputerWorld Canada article, printing and print-related processes like document handling, storage (physical space) and processing costs approximately 6% of a company's income. This sobering figure does not take into account business continuity in the case of a natural disaster or E&O exposure for misplaced, lost or damaged documents. Recall the tornadoes recently in southern Ontario: if your brokerage was unexpectedly destroyed, could you survive without access to your filing cabinets? Unless you have faced these kinds of situations before, it's easy not to think about the worst-case scenario and, as a result, get caught off guard.

To operate in a paperless environment, brokers simply scan and then shred necessary documents via integrated document scanning and management systems, and then store the digital version in their BMS. Better still, brokers can eliminate paper from even coming in the office.

Using technology to operate efficiently means freeing time for employees to focus on sales. To achieve this, the BMS must be a fully integrated solution, encompass the entire business and powerful enough to support unlimited growth. In addition, it should offer single- entry, multiple-insurer, real-time uploads and downloads. Further support ing the various needs of each Canadian broker, the system should be secure, but written with open architecture to allow for easy integrations with third-party vendors like VoIP telephony solutions and other applications operating within the brokerage. Of course, daily, tested data back-ups are equally essential.

FINANCE AND ADMINISTRATION

Healthy margins are necessary for long-term survival. Quite simply, this is the return on investment for the broker. Without adequate returns, brokerages will be sold and owners will be better off investing somewhere else. We see successful brokers' net income before taxes, interest and amortization (NIBITA) operate with a minimum 20% margin of re-occurring revenues or commissions. Non re-occurring revenues usually come in at an average of 7% in addition to the above. Berris Mangan Chartered Accountants conducts annual surveys on broker profitability. In a recent April 2008 article, Mike Berris, co-founder of Berris Mangan, reported that less than 10% of brokers actually achieve these margins. The study also notes the most profitable firms enjoyed 30% margins when proper systems were in place that allowed staff to focus on sales.

In order to arrive at the above, brokers have to limit their percentage of employees' salaries to 50-55% of the commission dollar. This includes benefits and bonuses. Owner's salaries have to be normalized. Operating expenses should be limited to 20-25%.

Budgeting is an essential piece of the company's business plan. It needs to be followed in a disciplined manner. Brokers have access to qualified consultants like Cookson Walker and Berris Mangan to help assist with and support them through this vital process.

Numerous opportunities exist for brokers to increase revenues. One example is to establish a premium finance department or company, or even venture in financial services (an option the banks presently offer).

 

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