Boost Agency Value with Help from Your Bank

The goal of all independent insurance agencies should be to build and enhance agency value—period. However, the prolonged economic recovery continues to make this a difficult task for agency owners.

The revenue side of every independent insurance agency’s income statement faces constraints as two of an agency’s revenue sources follow the economic trend. First, although insurance premiums have drifted upward in recent months, the soft market is expected to continue in the near future. And second, the low-rate environment on savings and investment accounts is projected to remain as well.

Smart agency owners recognize that there are other opportunities that exist that are within their control to maximize productivity and minimize costs. Taking advantage of available technology to streamline processes is at the top of the list. Automated processes allow agencies to free up staff to concentrate on bringing in new business and servicing current clients.

However, creating a paperless environment with automated processes and streamlined work flows is not limited to agency systems.

The same efficiencies can be found in your banking relationship as well.

Have you asked your bank lately for help in improving efficiencies and adding to the bottom line?

If you haven’t, you should. A financial institution familiar with the independent agency business should provide tools to gain efficiencies through use of state-of-the-art online banking.

Any electronic transfer of funds to or from your agency offers an opportunity for efficiency. Any time an agency can eliminate a paper check (whether for a deposit or a payment), it becomes more efficient with time and money. And any automated billing or collection process adds to your productivity.

Some features of online banking are standard. Remote deposit allows an agency to electronically process checks 24/7 right from the office using a desktop scanner. The process saves valuable time and improves cash flow by making funds available faster. Electronic bill pay eliminates paper checks and sends funds electronically.

However, as agencies continue to implement and fully utilize the agency management systems, business online banking systems can take on an expanded role. The need for a compatible interface with online banking to accommodate agency information software becomes critical.

A well-versed banker familiar with how an insurance agency operates can assist in developing custom programs to create an efficient process to move funds. With the right combination of technology and deposit products and services, an agency can streamline collection of payments, disburse funds to employee accounts for payroll, expense reimbursement or commissions, and more. The system may provide reports to feed back into the agency management system.

For instance, most online banking systems provide the ability for the agency to import data from a spreadsheet (a list of clients, policies, payment amounts and due dates, for example) to create a transaction file to collect premiums.

The benefits of using electronic billing to collect premium payments from clients include easier control and management of risk. Plus, it reduces or eliminates the cost and time of processing paper checks. When you collect payments electronically, you save mail time, labor and bank charges for deposits. You get more immediate access to deposited items compared with depositing paper checks via mail or in person.

Usually agencies start by implementing electronic payment for their own bills. Once they gain administration efficiencies, they typically grow comfortable with the process—and then begin to offer online billing tools and payment options to their clients.

And, don’t let your agency funds sit idle. Professionally managed agencies are also optimizing cash flow to get the best return on their investments. Today’s investment rate environment can lull agency owners into thinking that cash management doesn’t make a difference. But agencies that pay attention to where and how funds are allocated strengthen their financial performance.

The key is to create a banking package with the right balance of investment options for funds (within the agency’s liquidity needs) and operating accounts for day-to-day transactions with balances needed to offset monthly service charges. These packages should be as unique as each agency.

Using your bank to become more efficient is a “must-do” strategy for agency principals to enhance agency value.

Mary Grazen is executive vice president and chief operations officer of InsurBanc, a federal thrift institution that specializes in serving independent agencies.