Georgia Does Well at IIABA Legislative Conference

The state of Georgia was well represented in the awards handed out at the recently completed Independent Insurance Agents and Brokers Association’s annual Legislative Conference.  The old reliable when it comes to awards, Georgia’s Young Agents Committee, walked away with the first ever InsurPac Catalyst Award.   This is a new award that recognizes a state Young Agents Committee that shows great progress in InsurPac innovation and participation.  

Georgia’s YAC won the award due to its efforts that resulted in increased contributions from prior donors, a significant increase in new donors, and most notably, its introduction of the concept of making a monthly recurring contribution to InsurPac, instead of a one time donation.  My local public radio station, which just completed its Spring fund drive, introduced this concept a few years ago and it has allowed the station to significantly shorten the length of its fund drives.  This approach allows for the splitting up of a contribution amount that may be too large to make at one time into smaller monthly increments, which will continue to be paid using the donor’s credit card until the donor takes action to stop them.  Thus, there is no need to expend time and resources on soliciting contributions from such a donor year after year.  That time and those resources can be devoted to finding new donors.  I don’t know who came up with the idea of applying this concept to donations to InsurPac, but the co-chairs of Georgia YAC’s InsurPac committee, Sean Stewart and Will Argo, are to be congratulated on a job well done.

A Georgia insurance agency walked off with the prestigious Dan Fulwider Award for Community Involvement.  This award is sponsored by Trusted Choice and annually recognizes an independent insurance agency for outstanding community involvement. This year’s award went to Snellings Walters Insurance Agency in Dunwoody, Georgia for its work with the Cystic Fibrosis Foundation’s Great Strides fundraiser event.  It is a 5K walk held each year in which teams raise money for their participants.  Snellings Walters has been the corporate sponsor for the Great Strides event in the Atlanta area for several years and through its efforts has made that event the largest such event in the nation, raising over $1.8 million last year.  This year’s goal is over $2 million.  The $2,500 that comes with the Dan Fulwider Award will go toward achieving that goal.  

Within the larger event, Snellings Walters has created an insurance industry focused group, known as Insure the Cure, which since 2011 has raised over $800,000 for the Cystic Fibrosis Foundation.  In accepting the award for Snellings Walters, Michael Iverson noted that all insurance agencies have people with passions who are looking for permission to release them.   In this case, it happened to be one of the agency’s owners whose daughter has cystic fibrosis.  He asked those in the audience to “Help your people release their passions. We have a great industry. We can make a big difference in so many ways, and I encourage you to do so.”        

 

Can An Agent Collect a Fee For Assisting With the Purchase of Health Insurance?

In the past couple of months, the above question has been asked by more than one caller to the Free Legal Service program that I run for the Independent Insurance Agents of Georgia.  Some insurance companies have stopped paying commissions on health insurance policies, while others have drastically reduced the amount of commissions paid. These changes have been made, at least in part, in response to the provision in the Affordable Care Act that requires an insurance company to spend at least 80% (for individual and small groups) or 85% (for large groups) of the premiums they collect on claims payments and “health care quality improvement.”  If they don’t meet those targets, the company has to issue rebates to its insureds.

The problem for insurance agents is that commissions have been deemed to be included in the 20% and 15% of premiums collected that can be spent on administrative expenses. This problem was the subject of a breakfast briefing at last week’s IIABA Legislative Conference given by South Carolina Senator Tim Scott.  Senator Scott urged those in attendance to speak to their elected representatives about two bipartisan bills currently pending in Congress that would specifically exempt commissions paid to agents from the above limitations on administrative expenses.  Unfortunately, those bills like many other bipartisan efforts have been caught up in the general gridlock that now exists.

In the meantime, Georgia agents have called me to find out if they can charge a fee to the insured for assisting them with obtaining a health insurance policy.  The short answer is Yes, if certain conditions are met, but there is a large exception to that answer.  With respect to personal lines health insurance, an agent must have a life, accident, and sickness counselor’s license and cannot also receive a commission from the insurance company.  Thus, the policy in question must be one that either can only be issued without the payment of a commission or the issuance of which without the payment of a commission has been approved by the Insurance Commissioner in a rate filing, rating plan, or rating system.  If certain disclosure and consent requirements are met, an agent can receive both a fee from the insured and a commission from the insurance company for the placement of a group health insurance policy. (Click here for an article I have written on this subject.)

The Georgia Insurance Commissioner’s Office is trying to make it easier for agents to get the necessary counselor’s license.  It has proposed a regulation that will create a new type of counselor’s license to be known as a Limited Health Counselor License, because it covers only accident and sickness insurance.  This license will take the place of the Limited Group Health Counselor license and will cover counseling services provided in connection with the purchase of both individual and group health insurance policies.  Any agent who has held an accident and sickness license for five or more years or who has any of the following designations will not have to take an examination to get this new counselor license: CIC, CLU, FLMI, REBC or RHU.

The large exception to my above Yes answer concerns individual health insurance policies obtained through the insurance marketplace exchanges created under the Affordable Care Act.  Although they are not crystal clear, the regulations that govern the operation of those exchanges prohibit charging the potential insured for assisting them in obtaining a policy on the exchange. Those regulations specifically prohibit Navigators from charging a fee to the potential insured for providing help with the marketplace exchange and state that any “non-navigators” who give such assistance are subject to the same prohibition.  The regulations contemplate that any compensation received by agents and brokers for such services will be paid in the form of a commission by the insurance company that issues the policy obtained through the marketplace exchange.

Apparently, the people who wrote the above regulations were not the same as those who decided that commissions paid to agents are administrative expenses.  Not the first time that one government hand did not know or consider what the other was doing.

Is Your Agency a Top Workplace?

Last week’s post asked if your agency met the benchmarks established by the Best Practices Study for financial well-being.  This week I will discuss what it takes to be a top workplace in the eyes of your employees, at least according to the Atlanta Journal Constitution.  It recently published its annual list of the best places to work in the metro Atlanta region.   Congratulations are again in order for J. Smith Lanier & Co.  They have continued their string of being in the top 50 mid-sized workplaces and this year moved up seven places to number 6.  Unfortunately, as has been the case since I began following this subject in my blog, no other insurance agencies or companies made the top 150 workplaces or this year, even the 15 workplaces that received honorable mention.

So what did the top workplaces as designated by the AJC have in common?  Two of the top three qualities from last year were again cited the most by employees in the top workplaces, only this year the most often cited quality was a belief that the company was going in the right direction followed closely by last year’s top quality of feeling genuinely appreciated by their employer.  The next two most cited qualities were confidence in the leader of their employer and a feeling that the employee is part of something meaningful.  The two lowest rated qualities were again the feeling that the employee’s pay was fair for the work they did (cited by only 46% down from 51% last year) and the feeling that their benefits package was good compared to similar companies (cited by only 34% down from 37% last year).

I thought it interesting that a week or so later, there was an article in the IA Newsletter titled. “How to Make Your Employees Love Where They Work.”  It discusses five things that the author’s clients have consistently mentioned to her as being important for creating a place that employees want to come to work.  The first one, supporting the good health and well-being of employees and their families, correlates well with the AJC quality of feeling genuinely appreciated by the employer.  Examples of this are flexible work schedules, complimentary healthy food in the break room, and company picnics, holiday parties, and other activities that involve the employee’s family members, as well as the employee.

Providing an employee a sense of commitment to a cause also correlates well with the AJC quality of being part of something that is meaningful.  This sense of meaning can be created by the work itself (e.g., insurance agencies help families and businesses protect against risks that could destroy them financially) or by having the employer sponsor or allow employees to engage in community involvement activities on and off company time, or preferably both.

The employer providing opportunities for learning job skills and advancing the employee’s career was also one of the qualities cited by over half of the employees in the AJC’s top workplaces.   Finally, the IA article author suggested something that was not in the AJC’s list of qualities.  Providing opportunities for employees to have fun while at work.  Some examples cited are posting a giant crossword puzzle on the wall or having a jigsaw puzzle on a table that can be worked on by employees during their break times.  The author suggests asking your employees for ideas, as allowing them a voice in what is done both here and in other areas will help create a sense that you genuinely care about them.

Does Your Agency Measure Up?

Last week, I listened to a very informative webinar on the “Best Practices” study done by Reagan Consulting.  It was the first in a series of five 15 minute webinars that will be put on by IIABA and Reagan Consulting throughout the rest of this year (click here to view a list of all the webinars).  Each webinar focuses on a topic that should be of interest to all agency owners.  The first webinar discussed the key metrics that Reagan Consulting has identified as being most important for an agency to measure, if it wants to be successful in the long-term (click here for a recording of the webinar and to download the presentation slides).  Later webinars will discuss mergers and acquisitions, perpetuation planning, and producer recruitment and development, among other topics.

Reagan Consulting’s research on successful agencies over the past 20 plus years has led it to conclude that the two most important drivers of an agency’s value are its organic growth rate and its profitability, as measured by its EBITDA margin.  Based on that research, it has created the Rule of 20 to determine if an agency is doing well.  If the sum of the organic growth rate and one-half the EBITDA margin for an agency is 20 or greater, the agency is in good shape from a growth and profitability perspective.

To determine the productivity of an agency, Reagan Consulting has found the best measure to be its revenue per employee.  For this and all the other metrics, the “Best Practices” study breaks down the results by agency size, as measured by annual net commission and related revenue.   There are six categories of agencies, ranging from those with less than $1.25 million to those with more than $25 million in net annual revenues.  The average revenue per employee for the agencies studied in 2015 ranges from $131,714 for the smallest category to $207,660 for the largest category of agency.

To determine how ready an agency is for perpetuation, Reagan Consulting looks at the Weighted Average Shareholder Age (“WASA”) and the Weighted Average Producer Age (“WAPA”).  An explanation of these concepts is beyond the scope of this post, but you can click here to see the 2015 study, which contains such an explanation.  The important points about these concepts are the higher the WASA, the greater the need for a perpetuation plan, and the closer the ages for WASA and WAPA, the more likely there will be problems in creating and implementing a successful perpetuation plan.

The key metric developed by Reagan Consulting for determining if an agency is making an effective investment in its new producers is Net Unvalidated Producer Payroll (“NUPP”).  This metric is a percentage of the annual revenues of an agency that are spent on payments to producers over and above what their books of business would entitle them to receive.  The average  agency’s NUPP is between 1% and 1.5% and the more successful agencies have a NUPP of greater than 1.5%.

Reviewing the 2015 Best Practices study for the category of agency that fits your agency is a good way to determine how it compares to the agencies that were studied, which on average have doubled their pro forma profitability and revenue per employee in the 20 plus years that the study has been conducted.