questions answered in a vision statement
1. what target are we aiming for?
2. what does the future look like for our brokerage?
3. what's special about our future vision of our brokerage?
2. what does the future look like for our brokerage?
3. what's special about our future vision of our brokerage?
questions answered by a value statement
1. what words define our values?
2. are all our values fixed and long-term?
3. what values have we used as the foundation of our business?
2. are all our values fixed and long-term?
3. what values have we used as the foundation of our business?
questions answered by a mission statement
1. what is the organization's purpose of existence?
2. what is the organization's long-term direction and point of reference for all employees of the brokerage?
2. what is the organization's long-term direction and point of reference for all employees of the brokerage?
explain the bottom-up approach
management provides the mission and broad strategies, but leaves the development of goals, objectives and activities to the individual business units
the 3 keys to successful implementation
1. controlling implementation
2. linking budgets to strategies, objectives and goals
3. motivating for implementation
2. linking budgets to strategies, objectives and goals
3. motivating for implementation
explain the top-down approach
management decides on the mission, strategies and objectives for the brokerage and instructs the individual business units to achieve set objectives
the 3 basic forms of organizational structure
Line Organization
Functional Organization
Line and Staff Organization
Functional Organization
Line and Staff Organization
why define employee relationships?
in order to avoid confusion, the flow of authority and responsibility must be clearly defined
the 3 elements to organizing staff effectively
creating an organizational structure
defining employee relationships
establishing position descriptions
defining employee relationships
establishing position descriptions
examples of operating affiliations
1. Loosely Knit Affiliations
2. General purpose groups
3. clusters
4. common identity groups
2. General purpose groups
3. clusters
4. common identity groups
factors to consider when joining an operating affiliation
1. services and support
2. exclusivity
3. fees
4. contractual agreement
5. Financial Strength
2. exclusivity
3. fees
4. contractual agreement
5. Financial Strength
the 6 activities associated with human resources management
planning, selecting, orienting, training, developing and rewarding, managing employee performance
the 4 advantages to recruiting from within the brokerage
less expensive
less time the position is vacant
less training
improves morale, reduces turnover
less time the position is vacant
less training
improves morale, reduces turnover
the 4 kinds of ongoing training programs recommended for a brokerage
quality service
sales training
product & service knowledge
leadership training
sales training
product & service knowledge
leadership training
the 4 elements of a training plan
what are we training and how?
what is the subject of training?
why are we training?
how will the training be evaluated?
what is the subject of training?
why are we training?
how will the training be evaluated?
explain active listening
asking reiterating questions, clarify intent and content of what is being said. Ensuring what is said is the same as what is being understood
the 5 components of the coaching process
assessing performance
setting goals
self evaluation
rewarding
monitoring
setting goals
self evaluation
rewarding
monitoring
the 6 components of leadership
delegating
motivating
communication
managing conflict
managing change
coaching
motivating
communication
managing conflict
managing change
coaching
4 reasons employee's cite to avoid change
tradition
past failures
lack of time/too busy
unpredictability of the future
past failures
lack of time/too busy
unpredictability of the future
three benefits of coaching
increases productivity
more effective communication
leaders can delegate more
more effective communication
leaders can delegate more
4 successful strategies for conflict resolution
communication skills
mutual respect
interactive problem solving
win-win solutions
mutual respect
interactive problem solving
win-win solutions
the 9 topics contained in a brokerage agreement
1. authority 2. billing 3. ownership of expirations 4. commission 5. termination 6. hold harmless 7. privacy act 8. EDI provisions 9. other provisions
advantages of a brokerage agreement
-stability, long-term relationship
-ability to bind coverages - negotiate level of authority
-take part in profit sharing
-ability to bind coverages - negotiate level of authority
-take part in profit sharing
direct bill disadvantages
-loss of personal client contact
-lack of contract over sending out policies
-loss of use of premiums normally permitted by agency bill
-no access to insurance companies records
-lack of contract over sending out policies
-loss of use of premiums normally permitted by agency bill
-no access to insurance companies records
financial information that a company requires when considering an appointment
-consistent history of profitability
-ability to properly handle premiums
-accounts receivables, aged receivables
-ability to properly handle premiums
-accounts receivables, aged receivables
the factors affecting suitability of the brokerage
Premises, Financial Information, Type and Mix of business, other insurers represented, loss experience, human resources, business plan, error & omission claim record
the areas to consider when examining an insurance company's underwriting procedures
location of underwriting decisions
underwriting guidelines
rate levels
competence & continuity of staff
underwriting guidelines
rate levels
competence & continuity of staff
the 6 key factors in selecting an insurance company
1. marketing philosophy and practices
2. claim services
3. policyholder services
4. financial stability
5. underwriting procedures
6. how many insurance companies?
2. claim services
3. policyholder services
4. financial stability
5. underwriting procedures
6. how many insurance companies?
the effect of representing too many insurance companies
not enough diversity to suit needs
leaves the brokerage very vulnerable if something happens to the company
leaves the brokerage very vulnerable if something happens to the company
what is the product component of the brokerage's marketing mix?
-the insurance policy itself
-the coverages
-the services that are offered with the policy
-the coverages
-the services that are offered with the policy
explain positioning advantage
how the brokerage is being perceived by clients in relation to competitors. "Image" of the brokerage
The 4 strategies used to develop the marketing mix for a selected target market
1. undifferentiated
2. differentiated
3. niche marketing
4. customized marketing
2. differentiated
3. niche marketing
4. customized marketing
the 5 important characteristics which the individual broker should possess
Attitude
Appearance
Knowledge
Motivation
Commitment
Appearance
Knowledge
Motivation
Commitment
3 unique features of a marketing action plan
1. Financial Schedules
2. Timetable
3. Evaluation Procedures
2. Timetable
3. Evaluation Procedures
Brokerage distribution issues
-where the office should be
-hours of business
-how convenient to clients it is
-how to deliver products and services to clients
-internet presence
-call center-24 hours
-hours of business
-how convenient to clients it is
-how to deliver products and services to clients
-internet presence
-call center-24 hours
explain differential advantage
any feature, product or service offered by the brokerage which sets it apart from others and provides an advantage as clients deem it important to them
the 3 unique features of a marketing action plan
1. financial schedules
2. timetable
3. evaluation procedures
2. timetable
3. evaluation procedures
the product component of the brokerage's marketing mix
-the policy itself
-the coverages
-service offered with the policy
-the manner in which the products are bundled together
-the coverages
-service offered with the policy
-the manner in which the products are bundled together
what is included in the price component?
-basic cost
-credit terms and fees
-discounts
-rates as per the manual
-financing plans/credit terms
-reduction in soft markets
-no increase in hard markets
-credit terms and fees
-discounts
-rates as per the manual
-financing plans/credit terms
-reduction in soft markets
-no increase in hard markets
explain market segmentation
involves taking the market as a whole and dividing it into market segments, based on common characteristics
the categories used to define client segments
demographics
geographic information
psychographics
behavior variables
relationship variables
geographic information
psychographics
behavior variables
relationship variables
the 3 fundamental aspects of a strategic approach to marketing
1. marketing segmentation
2. differentiation
3. market positioning
2. differentiation
3. market positioning
the most often used demographic categories
age, gender, life cycle, education, occupation & ethnic origin
what is a differentiated marketing strategy?
one is which there is a different marketing mix for each of the recognized target markets
the 7 steps of the selling process
1. prospect & Qualify
2. Set objectives
3. make the initial contact
4. probe for needs
5. present the proposal
6. overcome the objectives and close
7. follow up
2. Set objectives
3. make the initial contact
4. probe for needs
5. present the proposal
6. overcome the objectives and close
7. follow up
the 6 steps of the buying process
1. problem recognition
2. identify and analyze solutions
3. identify sources
4. compare and decide
5. make the purchase
6. evaluate
2. identify and analyze solutions
3. identify sources
4. compare and decide
5. make the purchase
6. evaluate
3 benefits of researching from the perspective of the client
-brokers can focus on those activities that matter most to clients
-clients will appreciate a brokerage that cares about their opinion
-training can be tailored to the identified deficiencies
-clients will appreciate a brokerage that cares about their opinion
-training can be tailored to the identified deficiencies
signs a relationship may be at risk
-lapsing on renewal
-decreasing coverage
-purchasing coverage for a new acquisition at a different brokerage
-decreasing coverage
-purchasing coverage for a new acquisition at a different brokerage
areas to focus attention to succeed in development of a client relationship management strategy
1. client activity 2. Employee Activity
3. Process Effectiveness 4. Loyalty Recognition
5. Consultative Selling 6. Financial Management
7. commitment
3. Process Effectiveness 4. Loyalty Recognition
5. Consultative Selling 6. Financial Management
7. commitment
how employee satisfaction affects customer satisfaction
employees who feel empowered to make decisions and deal with client requests have a greater feeling of control over their jobs, this leads to increased employee satisfaction
factors that make a customer profitable over time
stream of earnings overtime
less price sensitive over time
needs increase over time
referrals
less price sensitive over time
needs increase over time
referrals
factors which influence process effectiveness
-employee mix
-tasks and division of duties
-client needs and perception
-office design
-telephone system and protocol
-tasks and division of duties
-client needs and perception
-office design
-telephone system and protocol
advantages of single-entry interface
lower communication costs done off peak hours
less training, work is done by brokerage system
less training, work is done by brokerage system
disadvantages of single-entry interface
delayed response to correcting errors
initial cost
increased change of errors
initial cost
increased change of errors
information to be contained in a client file database
-past quotes
-closed files
-current activities
-client contact activity
-renewal dates
-claims info
-accounting info
-closed files
-current activities
-client contact activity
-renewal dates
-claims info
-accounting info
the objectives of utilizing technology
-enhance profitability
-build client relationships
-improve effectiveness
-build client relationships
-improve effectiveness
what is meant by brokerage/insurance company interface?
electronic communication and the two-way transfer of information between the brokerage and the insurance company
advantages to interactive interface
-quick policy issuance
-immediately aware of any potential E&O errors
-broker has access to company info
-company can correct errors
-immediately aware of any potential E&O errors
-broker has access to company info
-company can correct errors
disadvantages to interactive interface
-more training involved
-needing to know each specific system
-duplication of data entry
-privacy issues
-needing to know each specific system
-duplication of data entry
-privacy issues
two common methods to determining the price of a brokerage
-multiple of commissions
-multiple of earnings
-multiple of earnings
financial information includes..
1. Balance Sheets Items
2. Income Statement Items
3. Other Financial Items
2. Income Statement Items
3. Other Financial Items
other financial items include...
1. cash flow
2. billings (aged receivables)
3. tax impact (deductions)
2. billings (aged receivables)
3. tax impact (deductions)
common employee incentive plans
-bonus plans
-stock option plans
-performance plans (stock, profit sharing)
-deferred compensation
-pension plans
-stock option plans
-performance plans (stock, profit sharing)
-deferred compensation
-pension plans
the price of a brokerage is enhanced the most by good organization and operation. What other important factors are there?
-quality of employees
-new business potential
-loss ratio
-E&O claims
-market conditions
-new business potential
-loss ratio
-E&O claims
-market conditions
3 specific components to the financial management cycle
-budgeting
-classifying financial information
-making comparisons
-classifying financial information
-making comparisons
4 production variables used in calculating premium (RUNC) "what affects premium"
-retention
-changing insurance rates
-up selling & cross selling
-new clients obtained
-changing insurance rates
-up selling & cross selling
-new clients obtained
how revenue on an income statement impacts the value of the brokerage
shows the sources and quality of income, commission, interest earned on past investments, other income
how expenses on an income statement impacts the value of the brokerage
shows where money is going, salaries and operational costs
*buyer has no control over*
*buyer has no control over*
how liabilities affect the balance sheet
can reduce the value of the brokerage, they reduce the value of assets
how assets affect the balance sheet
increase the value as long as receivables are up to date
cash and liquid assets are important-as no depreciation
cash and liquid assets are important-as no depreciation
how shareholding equity affect the balance sheet
-this is the balance left once assets are applied to liabilities
-a low shareholder equity could reflect high liabilities or low assets
-a low shareholder equity could reflect high liabilities or low assets
why is classifying financial information valuable?
it identifies patterns and allows for easy comparisons. Without classifying you don't know how much you're really growing
the components of income management
1. trust fund regulations
2. commission reserve accounts
3. internal cash controls
4. accounts receivable
2. commission reserve accounts
3. internal cash controls
4. accounts receivable
factors that contribute to the cost of accounts receivable
1. surrendered opportunity costs of funds
2. increased costs of collection activities
3. cost of borrowing
4. reduced bad debt expense
5. comm. losses from failure to extend credit
2. increased costs of collection activities
3. cost of borrowing
4. reduced bad debt expense
5. comm. losses from failure to extend credit
topics to be included in the accounts receivable policy (CPRR)
1. payment arrangements
2. credit checks
3. payment methods
4. responsibility for follow up
2. credit checks
3. payment methods
4. responsibility for follow up
ways to finance premiums
1. brokerage financing
2. financial institution financing
3. insurance company financing
4. premium finance companies
5. captive finance companies
6. cash only financing
2. financial institution financing
3. insurance company financing
4. premium finance companies
5. captive finance companies
6. cash only financing
means of controlling expenses
-communicating
-identifying areas for cost control
-classifying costs
-analyzing expenses
-identifying areas for cost control
-classifying costs
-analyzing expenses
two indirect methods which employees may maximize income or managers
employee incentive plans
lease arrangements
lease arrangements
how lease agreements are advantageous
-conserve cash & working capital
-reduce obsolete equipment
-tax benefits
-does not add debt on the balance sheet
-payments more flexible
-can finance 100% of value
-reduce obsolete equipment
-tax benefits
-does not add debt on the balance sheet
-payments more flexible
-can finance 100% of value
tests of efficiency
-cost per account
-revenue per employee
-lapse ratio (policy count ratio)
-expense ratio
-close ratio
-revenue per employee
-lapse ratio (policy count ratio)
-expense ratio
-close ratio
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