Do you think that your producers should have a minimum account value before it can go into their book of business? I do. I was in a heated argument on the internet this weekend about this exact topic. The fact is, I believe they should. You don’t agree with me? Let me try and convince you otherwise.
I got into a knockdown drag-out. Well, not really, it was a pretty civil argument this weekend in the back channels of the internet in an insurance agent’s forum talking about minimum revenue for accounts that get brought into the agency. There are very different schools of thought on this. I think mine is right, and it is for my business. But it doesn’t mean that it’s right for everybody. At Florida Risk Partners, we don’t work with accounts that are less than $5,000 in agency revenue for our outside producers.
The key words there are outside producers. We have a small business unit for everything less, but that’s not stuff that we’re actively targeting. That’s where we place it. If we have a referral or a call-in or a web lead from one of our quote forms on the internet, that’s not the business that we target. Our value proposition does not play to the small business stuff. It doesn’t mean I don’t want to write it, but it has to get written in a way that it can be profitable for the agency. That is having one single person who sells and services all small businesses. The reason I want the minimum threshold for my producers is I want to incent them not to produce those accounts. The truth be told, we want to focus on accounts that are 25 to $50,000 in agency revenue.
But I get it. As a producer is starting, we need to let them drop down to a little bit smaller premium volume so that they can bring some of those accounts in as well. And I get it, they grow. But the arguments that I was hearing don’t make sense. People talking about writing a $50 renter’s policy in hopes of getting homeowners and auto and umbrella and all of these other things out of it, and that does not translate to what we do. I will never waste time going after an account that is small now in the hopes and the dreams that it might grow to what we want, maybe down the road when I could focus all of our efforts and energy on prospecting precisely the size of accounts we want right now. That’s the whole thing. Those $25,000 accounts also grow.
So for me, it makes all the sense in the world to set a minimum revenue threshold for our agency. My producers don’t complain about it. I get that they want to write smaller stuff, but it has to be punitive for them to do so, and we won’t pay them if it’s less than $5,000 in agency revenue. It just doesn’t work because you can’t split that pie into enough pieces to where everybody wins. See, here’s the thing. This thought is what always runs through my head. I was listening to people who say, “I’m a scratch agent, and I won’t turn anything down,” or “I’ll never turn anything down because it could grow into the biggest account in our agency and all of these things.” But here’s the deal. If you’re a scratch agency, and you’re writing anything under the sun, but you’re writing small stuff that loses money, you’re just perpetuating a problem. You’re writing more and more unprofitable business.
That’s one reason why agencies struggle to gain traction. So your revenue goal doesn’t necessarily have to be 5,000, but it also shouldn’t be $50 policies to get people in the door. Now, if you’re flush with cash, and you want to use that as a loss leader for marketing to round accounts, make an educated decision about that. But don’t just write it, thinking that eventually, it’s going to lead to something more because guess what? It probably isn’t going to. And that doesn’t mean you’re not a good salesperson, that you can’t round an account. What it means is you’re not dealing with people who are buying on value, and you cannot create enough value on those small pieces of business to make them stick.
It’s just a big bucket churning and churning and churning. And the only thing that’s festering is your problem, your problem of writing unprofitable business. More of it doesn’t make it better. It makes it worse. Focus on what works for your agency. Focus on what minimum premium threshold makes sense for you. And when you get that dialed in, you’re going to kill it in commercial insurance, and you’re also going to write profitable business.
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