Hybrid Employees, High Returns

Allison Howington is the quintessential dual-role employee. The personal lines account manager at Hall& Clark Insurance Agency in Prestonsburg, Ky., has been cross-selling personal lines to walk-in commercial customers for about three years. But now that walk-ins are dropping off due to online bill pay, Howington is gearing up to sell by phone.

She’s excited, and not only at the prospect of more income. “You’ve got to look at it as a convenience to the customers,” she says. “It’s easier for them to have all their insurance business in one place. And that way, we know what’s going on with them all the time.”

This small agency nestled in the Appalachian Mountains has created a strategy that achieves a triple win. By cross-selling, employees like Howington provide customers with full service. At the same time, these salaried workers augment their incomes with commissions and help the agency grow. Says Phil Hunt, agency vice president, “We think it’s the most effective way to use our people.”

Amid a soft market, rocky economy and one of the poorest regions of the United States, Hall & Clark grew in 2007, and hybrid employees deserve part of the credit. Employees who both service and sell are emerging as one of the simplest and least expensive means of achieving organic growth, especially in personal lines.

The Right Person
With continuing pressure from carriers to increase volume, more agency owners are asking their CSRs to sell—and rewarding them for doing so. But converting service workers to part-time producers can be tricky, because some CSRs are uncomfortable with selling. Fred Loffer, president of Wycoff Insurance in Mount Vernon, Wash., says it takes a special person to handle both jobs well. “I can’t emphasize enough that you should structure your organization to the people you have, instead of the other way around,” he says. If you have no one who wants to play a dual role, instruct your service people to concentrate on retention. Then consider bringing on a new employee who is interested in doing both kinds of work. At this 12-person agency, four of five service employees cross-sell, and one, Pauline Black, also sells externally.

While working at another agency, Black asked for more challenge and added selling to her personal lines responsibilities. When she hired on at Wycoff four years ago, Loffer suggested she work with the agency’s VIP commercial clients to develop their personal lines coverage. Now Black devotes between 60 and 70% of her time to service work, with the remaining hours spent prospecting for and quoting new business. She attends community and networking events and also is a member of the board for the Independent Insurance Agents & Brokers of Washington.

“For me, there’s a real benefit [to doing both],” says Black. “You need to know what your customers are doing, and by servicing them, it keeps you in line with them. You know they went to Hawaii, you know they have kids…they’re more apt to see that you really care.”

Would she prefer to spend half of her time selling? Maybe. But as she observes, the idea is unrealistic. “You can’t just split the time during the week, because you might have a snow storm,” she says. “Then you’d spend the next two weeks just handling claims.”

Compensation Questions
Hall & Clark’s Hunt says his agency’s service representatives can add up to 25% to their salaries by selling, even though these employees pool their commissions. Why this arrangement? It results in even better customer service. “If one person has gone to lunch, another CSR can step up to help,” he explains. “It encourages our people not to say, ‘She’ll have to call you back.’”

Loffer knows this; that’s why he’s considering changing his compensation structure from salary plus commission to full salary plus a possible bonus. “If we have people who are absent on the service end, Pauline’s service time can increase to 80%,” he explains. With a higher salary, Black could earn the wage she desires while Loffer could more easily plan and budget. “She would still have production responsibilities and a certain production quota,” Loffer says, “but if she exceeded that, she could earn more at the end. It might be better for us both.”

Another option is making your employees agency owners. Wycoff is an S corporation with four lead employees who each bought 5% of Loffer’s stock in January 2007.Says Loffer, “It’s an added incentive for them to earn money on the back end. I think it’s a win-win situation, and it’s also part of our perpetuation plan.”

Heightened Efficiency
Steve Kinkade, vice president of the five-person Kinkade-Cornell Insurance in Leitchfield, Ky., suspects that small agencies depend on hybrid employees to the greatest extent. “In these situations, people tend to be jacks of all trades,” he says. “If someone comes in or calls and needs their account serviced, you do it, no matter who you are.”

Kentucky requires all insurance agency employees to be licensed, and Kinkade sees this as an advantage, since it enables every worker to sell as well as service. Would he recommend hybridization to other agencies? “I think so,” he says. “We’re growing in the high single digits, and in this day and age, we’re proud of that.”

Will Burke, president of Burke Insurance Group in Las Cruces, N.M., structures his agency differently. This eight-person boutique firm specializes in insuring commercial contractors, but requires that customers place all of their business with Burke. “Previously we sold personal lines as an accommodation,” he says. “Now we have to write the whole business or we walk from it.”

At one point, the agency employed a part-time person to sell personal lines. But pressure from personal lines carriers to grow the business moved Burke to rethink the arrangement. Now producers provide personal lines leads to one full-time CSR, who is expected to convert the lead to a sale and then service that portion of the account. The goal: to write one personal lines policy a day. This approach seems to work; the agency has between 200 and 300 commercial clients and per-employee revenues of more than$200,000 annually.

Hybrid Employees for Everyone?
Despite the theory that small agencies are the ones that require hybrid employees, many larger agencies also charge their CSRs with a certain amount of selling. Marilyn Norman is senior vice president of IT and operations at Rutherfoord, a 295-employee,eight-branch agency based in Roanoke, Va. She says the firm’s roughly 40 CSRs contribute to agency growth by cross selling both personal and commercial lines. Personal lines CSRs are “more comfortable ”cross-selling personal lines products, and commercial lines CSRs find it easiest to cross-sell commercial, but there’s no rule against selling either type of coverage.

“Account-rounding in this way is fairly new here,” says Norman. But already the agency is working to enhance its hybrid structure by creating dashboards that will identify by client all existing coverage, additional business that has been proposed and additional products yet to be proposed. Since CSRs will likely be asked to do this cross-selling, Norman says Rutherfoord is identifying non-production, value added tasks in an effort to move them off the desks of CSRs. Who will do this work instead? “Assistant CSRs,” says Norman.(See sidebar)

Rutherfoord is organized into three person teams consisting of one external producer, one CSR and one ACSR. External producers are charged with all new business selling, but other employees who bring in new business are paid a one-time finder’s fee. CSRs are responsible for rounding out the account, whether it involves umbrella, D&O or employment practices liability, and the ACSR, who is typically more comfortable with technical work than with selling, supports the CSR.

Even so, upward transitions are possible and looked on favorably. Norman says several employees who began as ACSRs have become CSRs and then gone on to account executive (responsible for sales of less than $5,000) or producer positions. Concludes Norman, “CSRs are definitely responsible for part of our growth, and we’re changing [to take greater advantage of the fact].”

The upshot: Delineation between agency functions is necessary for myriad reasons, such as HR management, accounting and operations. Yet, agencies that cross-train and thus, create hybrid employees, swear by the practice and plan only to do more of it.

Susan Hodges (hodgeswrites@aol.com) is an IA senior writer.

The Growing Role of Assistant CSRs
IIABA’s 2007 Best Practices Study shows that a portion of BP agencies in all size categories now have assistant CSRs (ASCRs). Nearly 28% of the smallest agencies(those with revenues up to $1.25 million) employ these professionals, as do 50% of firms in the $5- to $10-million range. In the $10-million to $25-millioncategory, fully 70% of agencies employ ASCRs.

What is it that these professionals do? Shirley Lukens, vice president of Reagan Consulting and director of the BP Study, says ACSRs generally have less contact with customers than do CSRs and spend their time performing daily processing tasks.

Among their responsibilities:
• Generating IDs and binders
• Processing of daily carrier downloads
• Reviewing endorsements, renewals and new policies
• Requesting corrections when necessary
• Handling non-client questions, such as calls from mortgage companies

CSRs, on the other hand, are usually charged with generating a certain amount of new business, and assume the front-end work of gathering the application information, quoting, presenting the proposal, obtaining signatures and deposits, binding the coverage and sending the application to the carrier. Once the client is set up in the agency management system, processing is turned over to the assistant CSR.

—S.H.

E&O Pitfalls for Hybrid Employees
Dual-role or “hybrid” employees can bea huge asset to an agency—especially amidst a softening market and mounting pressure to increase volume—but mixing CSRs with selling can create potential for some E&O issues.

Typically producers are involved in the highest frequency of E&O claims, followed by CSRs, because they interact most with customers. So when a CSR begins cross-selling, it could create a lot more E&O exposure for an agency, according to Dave Hulcher, director of agency E&O risk management for IIABA.

“My main concern would be to make sure you have a trained CSR doing this cross selling,” Hulcher says. “Of the leading causes of E&O claims you see, half of them come from knowledge-based errors, where people just don’t understand coverages, and the second is process-related errors. I would have concern putting a CSR that is fresh to the industry out there to do this cross-selling.”

Hulcher says to avoid E&O exposure, all CSRs who are cross-selling should be properly licensed, use risk analysis exposure checklists and understand the agency’s procedures and practices, especially in the area of client file documentation.

“Agencies should use CSR’s that understand the risk analysis process to assist clients avoid possible gaps in coverage,” he says. “From a best practices standpoint, they also need to know what’s important to document when talking to clients…you need to make sure you are offering your clients increased limits, cross-sell coverage, etc.”

While dual-role employees can increase E&O exposure, a properly trained “hybrid” has the potential to decrease E&O claims since producers usually transition accounts to CSRs for servicing of them. It is a good opportunity for the CSR to be an E&O backstop, checking to make sure coverage requested was provided and to identify any future cross-selling opportunities.

“When a CSR has an obligation to produce new business it comes back to making sure there’s proper risk exposure analysis,” Hulcher says. “If you have an experienced CSR who understands coverage, who understands risk analysis, it’s a great opportunity. On renewal accounts, it’s an opportunity for the CSR to close gaps from when the producer leaves off.”

Michelle Payne (michelle.payne@iiaba.net) is IA’s managing editor.

Hybrid Employees, High Returns

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Hybrid Employees, High Returns

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