THE INSURANCE WARS
An Agent’s View from the Trenches
Chuck Tompkins, CEO
Western Agency, Inc.
Published by Tompkins Publishing at Smashwords
Copyright 2012 Chuck Tompkins. All rights reserved. No part of this book may be used or reproduced in any manner whatsoever without written permission except in the case of brief quotations embodied in critical articles and reviews.
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• DEDICATION •
This book is dedicated to my parents, Lonnie and June Tompkins. When I was a kid, Lonnie was a tough disciplinarian who made me tough enough to make it in the world. He taught me how to take orders and instilled in me the feeling that I would rather die than fail. I damn near did both. June always listened, always believed in me, and constantly assured me I would win. One of my proudest accomplishments is that I finally did.
To my wife Linda’s parents, Don and Darlene Ballantyne. If they had not loaned Linda and me $10,000 at a critical time years ago, we would have had to sell the agency. We repaid that loan plus interest in 39 days. It is what kept us afloat through some pretty tough times.
To my clients. Although they are too numerous to mention, they believed in me in the very beginning of my career. If not for them, Western Agency, Inc., never would have survived. It is a sacred trust to me that we continue to serve them well, and I shall be forever grateful for their business.
To my staff. They are the glue that holds Western Agency, Inc., together and the engine that powers it. They are one of the best staffs anywhere in the Independent Agency system. As I said so many years ago, if there were an Olympics for Independent Agencies, my staff would take the gold.
And finally, to my wife Linda. She is my partner; she learned from scratch how to be the comptroller of Western Agency, Inc. She had to listen to my frustrations when times were not good and knew just when to tell me to shut up and get things fixed. She watched me grow into a person who could run an agency. But more than anything, she made it all work. I love her more than words can tell, and this is not my story; it is our story.
• FORWARD •
For insurance agents or anyone who works in the insurance industry, a regulator’s perspective is not always asked for, nor welcomed. This is especially true when the Insurance Commissioner is considered the ‘cop on the beat’ to make sure that agents and companies are following ethical business practices and staying true to the state law. I consider the role as Commissioner also to be one of providing leadership that fosters a competitive marketplace. This leadership ensures that consumers have choices with whom they choose to do their business.
In this case the author of this book, Chuck Tompkins, has always had a good history with regulators, and I value his opinion as a business person, a colleague and a friend. I am honored that he has asked me to contribute to his book, and encourage readers to take his comments and suggestions to heart. The Western Agency has proved to be a premier service provider in North Dakota and has provided a very valuable service in the market place in our rural state. I have read his book, and his advice is important, practical, and true to his good business form.
I offer my own personal perspectives on the insurance marketplace and how it affects an insurance Agent, specifically, one that works in an independent agency, or owns their own independent agency. My time as North Dakota Insurance Commissioner has allowed me to interact with all types of agents, varying by personality, business ethics, aggressiveness, and type of business they write.
Times are changing in the insurance industry. Technological advances, company consolidation, and product advances are making the industry more competitive for companies and agents. These factors can also make it more difficult for consumers to wade through the choices, decipher the differences, and make the important decisions about how to protect their financial futures.
Independent insurance agents have had to react to these changes. Company decisions certainly can change the way an independent agent does business. If a company decides to exit the marketplace, change their policies, or adjust their marketing practices, the independent agent is left to scramble to keep up and make sure their customers are represented and aware of the decisions they need to make.
Some independent agents have chosen not to get ahead of the marketplace. They have refused to become more technologically advanced. Some have refused to create relationships with companies that would allow them to better market a product, potentially keep a market that they have lost, or negotiate a better contract for them that would have secured their agency into the future by better serving their customers with good choices.
Survival in the insurance business is going to get tougher and tougher. From a regulators standpoint, the agents that contact our office complaining about another agent tend to be the agents that have not prepared themselves for the changing environment of the business. They also tend to be the ones that have not had to work for the business, and now are having to play defense. In my opinion, those that lose in this game are clearly the consumers, whose agent has not kept up with those changing times.
As one of North Dakota’s most successful independent insurance agents, Chuck Tompkins has made the necessary changes. He has adapted to the changing marketplace, has been innovative, and most of all he has been conscious of the consumers needs. His advice and counsel in this book are on the mark. He addresses, from a businessperson’s point of view, the ups and downs of creating a successful agency.
As the Insurance Commissioner, I have the opportunity to travel the country representing North Dakota consumers and the nation’s Insurance Commissioners. I always love to talk about the brand of agent in North Dakota. By and large, they are honest, hard working, and share the same goals as the regulators. The goal of making sure the consumer has a good product at a fair price from a solvent company that will be able to pay the necessary claims. Chuck Tompkins is one of those agents, and I am pleased he has shared his insights for the benefit of others in a very important industry.
Jim Poolman, Commissioner of Insurance, North Dakota
• CONTENTS •
OFF TO THE ROUNDUP: Getting into the Insurance Business
GIDDY UP: An Agency is Born
WESTY HITS THE TRAIL: Cranking up the New Agency
THE FIRST ROUND UP: Getting Some Good Field Reps and Good Companies
CHEAP HELP AND SNOWMOBILE RACING DON’T MIX
NEW LOCATION, NEWLY SINGLE AND SINGING “CRACKLIN’ ROSIE”
THE PHANTOM AGENCY: Buying Midwest Insurance
NIGHTMARES AND FALLING IN LOVE
KERMIT, THE WIZARD OF OZ, AND THE ROYAL HANGOVER
IF YOU REMEMBER NOTHING ELSE, REMEMBER THIS: Losing and Gaining Markets.
MOVING MY CHEESE: Getting into Multi-Peril Crop Insurance
MANAGEMENT 101: Learning the Ropes
YOU WILL WIN NO WARS WITH WEAK SOLDIERS: Developing New Staff
SEPARATING THE WHEAT FROM THE STAFF
PAYING THE PIPER: Getting Claims Paid
DON’T BANK ON IT: Moving Ahead When Your Banker Won’t
CREATIVE HOME BUYING 101 IRS vs SBA
YOU THOUGHT I WAS EFFICIENT BEFORE: Cutting More Expenses
DEATH GROUND
THE HUNT FOR A “GREEN” OCTOBER: Finding New Financing
BANKER “BUCK” RIDES INTO TOWN
EPILOGUE FOR THE BAD BANKER
LOANS AND CARE PACKAGES
SOLVENCY AND WOODEN DUCKS
CASEY’S BACK AT BAT
GOING COMMERCIAL: Getting Into the Commercial Markets
CAN SOMEBODY TELL ME WHY THE AGENT SHOULD’T BE INVOLVED IN THE CLAIM?
BIG DEDUCTIBLES, ANYONE?
LESS IS MORE: Learning to Delegate
RETENTION: The Cinderella of Management
DON’T WAIT, AUTOMATE
HOLDING ONTO MY YOUTH
LET’S GO SHOPPING: Buying More Stores
HAIL STORMS, LOST CONTINGENCIES
AND JUAN VALDEZ
HOUSTON, WE HAVE LIFT-OFF: Crop Prices Rise and Things Take Off
CANCER AND REMOTE CONTROL: Learning to Run the Store from 500 Miles Away
BUMPER CROP: CRC Means New Products and More Growth
I HATE LONG GOODBYES
WHEN IT RAINS IT POURS: Wet Weather, Big Losses, Great Opportunities
LEAVE NO MAN BEHIND: Finding Out What Was Wrong with Marlen
SOME PAIN, MORE GAIN: Income Numbers Start to Rise
NO GOOD DEED GOES UNPUNISHED: Inexperienced Company People and Bad Auditors
MOVING TO HIGHER GROUND: Moving Our Entire Crop Insurance Book
THE PINK PANTHER, PRINCE FARQUART, AND THE KEYSTONE COPS
GROWING PAINS: More Stores, More Staff, Commission Cuts
E & OH, OH: The E & O Crises
ICE ON THE WING, THE ANGELS MAY SING
“BABY, BABY, YOU KNOW YOU LOVE ME, BABY”
NEVER TRY TO TEACH A PIG TO SING: Chasing More Agencies
“WE CAN’T HEAR YOU, WE’RE TOO BUSY”
SOME DON’T GET IT AND SOME REALLY DON’T GET IT: Developing Small Agencies and Selling Businesses in Small Towns
I STILL HATE LONG GOODBYES
SAYING NO TO A GOOD DEAL
WHAT’S TOO MUCH? Is Two times Earnings Too Much to Pay?
A CRYSTAL BALL FOR SMALL AGENCIES
SOME PEOPLE NEVER KNOW WHEN TO SHUT UP
• INTRODUCTION •
HOW DO YOU KNOW IF YOU SHOULD READ THIS BOOK?
• If you are in business for yourself or are thinking of going into business for yourself, you should read this book.
• If you have ever been in debt up to your eyeballs with nowhere to go, you should read this book.
• If you have ever made a major purchase on a credit card and had to haggle with the credit card company to raise your credit amount to pay for it, you should read this book.
• If you want to hear a story about a little business that made it, you should read this book.
• If you have ever purchased insurance of any kind, you should read this book.
• And finally, if you own or operate an Independent Insurance Agency, you should, FOR SURE, read this book.
Right from the start, when I first outlined my ideas for this book on an airplane flight, May 3, 1999, I never set out to write another SALES book. There are already hundreds of them on the market, most of them written by people who probably have sales ability far superior to mine. I have never considered myself a super salesman. Of course, all through this book are ideas I have used to help my company grow to the size it is now, but again, this is not a SALES book. I do have a tremendous feel for situations and people: how they feel and what they want. In other words, good instincts have helped me put together an absolutely excellent agency. I do not, however, consider myself a great sales guru. Furthermore, I did not sit down and write this book to make a big amount of money or because I needed another job. I wrote this book because it is a good story; I wrote it because I felt many people in the Independent Agency business could use this information. I hope it helps you.
What I do consider myself is an absolute expert on running and managing a midsize Independent Insurance Agency. In this regard, I feel I can offer you insights and techniques that can help you expand, grow, increase your profitability, and possibly, if your store is in trouble, help save your agency. It is for these reasons I believe I have something important to say. That is why this book came to be written.
If you own or operate a small or midsize Independent Insurance Agency, this book should be a good read for you. It is the story of an Independent Insurance Agency, Western Agency, Inc., that I started from scratch on December 15, 1976, in the little town of Minot, North Dakota. As you may know, North Dakota is a state where the entire population is only 650,000. North Dakota’s economy is primarily dependent on the income of our farmers; and as you may have read, the 1980s were the worst farm income years the state had seen since the Great Depression of the 1930s. If you read anything about North Dakota in those years, you probably think I was living in an economic opportunity desert. However, nothing could have been further from the truth. It was in those years that I grew Western Agency, Inc., from nothing to $11,700,000 in premium. When you keep in mind that we do not write workmen’s compensation insurance in North Dakota, that is pretty fair production. Western Agency, Inc., has an average commission of 15.8%, has a staff of 16, and is totally paid for. Along the way I have had lots of ups and downs. I have been within a few dollars of being broke; I have bought several small agencies: some buys good, some bad. I have been upside-down on expenses; I have run out of credit at the bank and borrowed from relatives to stay in business. I have been nominated for United States Professional Insurance Agents Association (PIA) Agent of the Year in 1997, was PIA agent of the year for North Dakota in 1996, and am past president of the North Dakota PIA. To say the least, it has been an interesting ride.
There are essentially three types of insurance agents available to the insurance buying public; the Telemarketing Agent, the Direct Writer/Captive Agent, and the Independent Agent. I started my career as a Direct Writer/Captive Agent for Nodak Mutual/Farm Bureau, and after a few years started my own agency becoming an Independent Agent. Being an Independent Insurance Agent has been a rewarding and exciting career. I consider my clients my friends, and many times the policies my staff and I sold them have saved them from economic ruin. When I look back over the years and the positive impact my staff and I have had on literally thousands of lives, it makes me happy and proud to have been lucky enough to make this exciting and important industry my career. There are very few jobs on this earth in which you can have such a huge impact on people’s lives and still make an outstanding income.
Probably the reason I am writing this book is I believe the word is stronger than the sword and I cannot go out and personally cut the heads off all the GEICOs of this world. I would like nothing better than to see this book help Independent Agents stay in business and prosper. This book is about the inner workings of an Independent Insurance Agency: its ups, downs, challenges, opportunities, and growth over the past 27 years. Along the way I imagine I have made virtually every mistake that can be made in the operation of an Independent Insurance Agency, but it seems to me that surviving these mistakes was what finally propelled the store to where it is today. Even in these crazy times for the insurance industry, it is still very possible to have an extremely profitable store. I firmly believe that you and your employees can make an excellent living. In the process you can take care of the insurance needs of your customers far better than any other insurance delivery system on the planet.
In my heart of hearts I am convinced that there is no better way to look after the insurance needs of John Q. Public than the Independent Agency system. I can see no way that the insurance product can effectively be delivered over the phone or Internet. Someone must take the time to sit down with clients and take care of their insurance needs and questions. Clients need to talk to someone who knows them, someone who understands what it is that needs to be insured and understands the marketplace. This someone can then choose the correct company to market the risk to and correctly draw up a contract to cover the risk adequately. Please remember, insurance is essentially a contract, one between the client and the company. This contract had better be drawn up correctly; or when the claim comes, the company will not, they cannot pay the loss. It is up to the agent to be sure this does not happen.
Some half-insurance-educated telemarketer thousands of miles away, talking to the client on a phone line, simply is incapable of properly caring for the needs of the client. Furthermore, when the losses come in, a local Independent Agent is able to be continually involved in the claim process, from reporting the loss to the successful settlement of the claim. If there are problems in getting the loss settled, the local agent can help to keep the claim process moving smoothly along. Telemarketers in faraway cities have no idea of how to help get a claim settled. Even if they did, they would not be allowed to become involved in the claim process. That is somebody else’s job, right? Wrong.
Furthermore, the direct-writing agent, like the telemarketer-agent, is saddled by a culture that also strictly forbids their being involved in the settlement of losses. If they happen to be additionally shackled with a poor adjustor on a given loss, by and large they can do nothing but sit helplessly by while their clients get the short end of the stick. In our Independent Agency world, if we are having adjusting problems, we are able to move faster to see to it that our client is correctly served. We simply do not have to sit by and watch a poor adjustor do our client harm. Good adjustors are worth their weight in gold: to the client, to us, and to the company. A bad adjustor is one of the banes of our business. As Independent Agents we can do something about this that most other agents simply cannot.
In addition, as Independent Agents we have far more flexibility in how we advertise, sell our products, and how we pick companies to insure our clients. Having these types of tools and flexibility has enabled me to compete successfully with direct writers and insurance telemarketers for years. However, this very freedom to do what we wish is the pitfall of many an Independent Agent. We are entirely on our own; for better or worse, it is up to each agency to decide how to solve their sales problems and run their stores. Herein lies a massive opportunity to become either rich or broke. I have hopefully written this book to help more of you achieve the former.
I have kept notes and thoughts about this industry for years in a diary of sorts. Throughout the book I shall put them in whenever I think they make sense. One thought I had which I feel is so appropriate for being in business for yourself, which I wrote down years ago, is this: Please understand: the very instant, the second you finally decide to go into business for yourself, you are committed to playing the Business Game. This game has the highest stakes of virtually any game in the world except the War Game. The potential for profits, excitement, terror, and prestige are all there for you in this game. It will profoundly affect you for the rest of your life. It will change you and your family, your friends, and the families and friends of your employees. It can kill you. It can also be the best and greatest thing that ever happened to you. Enjoy; the stakes are high.
In North Dakota we have many small struggling Independent Agencies. As chairman of the North Dakota PIA Education Committee, I was involved in putting on several seminars and schools titled “Survival of the Small Agent.” This book has grown out of those schools. Others seem to think these ideas have helped them; I hope they will help you, too. For that matter, if you are in any business, there should be many ideas here that you can use. After 27 years as an Independent Agent, growing Western Agency, Inc., from nothing to $11,700,000 in premium, I think I have learned a huge amount about survival economics. As I said before, I’ve been broke in this business, and I’ve become a multimillionaire in this business. Of the two I like having money better. Here are the ways I did it:
• CHAPTER ONE •
OFF TO THE ROUNDUP: Getting Into the Insurance Business
I started in the insurance business at age 23 in 1973, when I was hired to sell insurance for Nodak Mutual, a small captive company in North Dakota. Before that I had worked construction in the summer and attended college in the winter. I went into the insurance business because someone asked me. I had never actually been asked to go to work for anyone before; when I was offered the job, I was so flattered that I took it without hesitation. I did not know at the time that many people go into this business but few stick around to learn and understand it. I was just a 23-year-old guy with a new wife, and it seemed like the thing to do at the time. Not really an auspicious start, was it? Nodak Mutual is a small company owned by the North Dakota Farm Bureau. As a result of this, we sold mostly homeowners, auto, and farm insurance. Nodak was a very new company at the time I started working for them; I was one of the first nine full-time agents they hired. Also, at this time Nodak was so low in price that if you could get people to let you give them a quote, the sale was almost automatic. In retrospect it was a salesman’s dream! However, I was new at the business and did not realize this for many years. I actually thought my sales effectiveness was due to my super salesmanship. This thought would get me into trouble later.
I was hired to work for Nodak by the then-division head, Tom Wold. Tom was a family friend, and I did not realize until years latter just how excellent a salesman and what a wonderful teacher he was. To this day many of the techniques and sales skills I teach my staff are a result of his mentoring. In addition, the head adjustor for our territory at that time was Bill Cresap, who had an incredible knowledge of insurance and was another tremendous teacher. Tom showed me the mechanics and basics of selling; Bill set me firmly on the path of always trying to sell customers policies that would take care of them when the claims came. Bill told me over and over to read my rate books. He was right: they are a wealth of information about how a company wants to rate and write a particular risk, along with the various coverages available to insure your client adequately. It is tragic how few agents sit down and really read them. Bill’s teaching regarding always trying to sell the customer the best possible policy (coverage always trumps price), gave me a solid business practice that continues to this day.
At this time North Dakota Farm Bureau, the owner of Nodak Mutual, was having Iowa Farm Bureau do their training for them. This meant that we new agents traveled to Des Moines, Iowa, for training, several times a year. One of our instructors was Chuck Underwood, and I can still hear his big, booming voice as he told us the story about the $10,000 refrigerator. Chuck was an old life insurance salesman whose primary responsibility was to persuade us to sell life insurance. The $10,000 refrigerator story was about a client he supposedly had whose wife persuaded him to purchase a new refrigerator rather than buying a $10,000 life insurance policy. As Chuck told the story he sounded as if he was going to break down and cry; I can still hear the emotion in his voice as he related how, after the husband had died unexpectedly and Chuck was in the widow’s home explaining there was not much life insurance in force, “The widow looked at me, and with tears in her eyes she pointed to a new refrigerator and in a shaking voice said, ‘Mr. Underwood, I want you to see my new $10,000 refrigerator!’ ” I never found out whether or not the story was true, but its drama did give us new agents a sense of urgency to get out there and be sure we never had to leave our clients poorly covered.
It seemed at that time in the early 1970s that alcohol and being an insurance agent kind of went hand-in-hand. Most of our meetings, conventions, and training schools ended the day with a trip to the bar. Some people had a few drinks and then stopped, but not me. Several of us would always end up closing up the place, and the next day there we would sit in Underwood’s class, massively hung over. Although I don’t know if it was an accident or not, invariably we would be put in the front row so we could be asked questions and could better hear Chuck’s booming voice. I would always have Alka-Seltzers with me and every few hours drop one into my glass of water. Not only did they really help my hangovers; I also think they were instrumental in keeping me in the insurance business.
I had the usual call reluctance--not making enough calls, not selling the whole package, not asking for enough referred leads, not asking for enough life sales--problems that most young agents have. In addition, like most new salespeople, I was having a hard time handling all of the free time. It is so easy to do nothing and say you are busy when you are an outside salesperson, is it not? Drinking coffee with your usual coffee group and telling each other how hard you are all working is a poor substitute for a good, hard selling interview. Yet how many times and how many days have we all wasted shooting the breeze over a cup of coffee, while telling ourselves we are hard at work? Since I had very little idea of what I was doing, I thought I was really hitting it. Nothing, however, could have been further from the truth. My saving grace was that I was, even then, trying to learn this trade. Though I was spending way too much time in the coffee shop, I was having plenty of sales interviews.
You see, I had one big advantage over most people in my situation: I could follow orders. I had a father who taught me well that you did what you were told, no questions asked. Since I was told to have at least three evening calls per week and have at least one life insurance sale per week, I made a major effort to do this. It did give me a track to run on, and to this day I constantly monitor the sales activity of my staff as well as myself to be sure enough sales interviews are being conducted. If you are in this business and you do not have a prospect list you are working effectively, ultimately your sales effort will fail. Furthermore, do not expect your star sales staff to work their lists, either, if you are not keeping track of them. I have copies of the main prospects of all my salespeople, including the managers, and we review them once a week. It is necessary and keeps the sales process moving.
Nodak Mutual in those years was way ahead of their competitors in many ways. First of all, they demanded that the agent make every attempt to write the entire account: the auto, the home, the farm, the crop hail insurance, the life insurance, the disability insurance, and the health insurance. Even now, after all these years, how many times do we as Independent Agents not get all of a person’s coverage? And then what happens? We leave the door open to another agent. It is essential that we try to cover more of these bases by writing the entire account. I was talking to one of my agents the other day about his lagging sales and told him that whenever he finds himself in a rut for new sales, he should go over his existing client list and do some account development. Remember, these existing clients have already bought from you once; they will buy from you again.
Another thing Nodak Mutual had going for them was niche marketing. It wasn’t called that at the time, but that is what it was. Maybe it happened because Nodak was owned by the Farm Bureau, which focused exclusively on farms. For whatever reason, they were primarily interested in farm and homeowner business and, of course, the life and health products that went along with them. As a result, we agents were not bogged down with having to know too many of the other commercial and brokerage products. I have tried in my Independent Agency to make sure that each person who works for me specializes in one area of insurance. I want everyone to be well versed in the insurance business as a whole, but I want each to be especially comfortable in one or two lines.
Probably the greatest thing Nodak had going for them, though, was the head of the company, Harold Gromesh. I am not really sure what background Harold had in the insurance business before he became the President of Nodak Mutual; whatever it was, he totally understood how to get the insurance product sold. He would tell us over and over again, “You go out to the client’s home, you sit down with the husband and the wife at their kitchen table over a cup of coffee, and you take care of their insurance needs and questions.” He was right: if you are selling farm insurance, it is now, as it was then, the only way to do it. Furthermore, whatever it is--whether it is homeowners or business insurance--meet the clients where they are comfortable, at a time when they can be relaxed, and take the time to go over their coverage and accounts thoroughly. It is the way the business ought to be done, and it is the only way a good, complete, and accurate application can be prepared. I wrote up a 17,000-acre grain farm many years ago. It took me three separate meetings and many hours sitting down with these people to get a complete package put together on all of their various farms, homes, and operations. I did sell the account, and after we finally got done, the client said, “Chuck, you know, in over 30 years of paying insurance premiums, this is the first time I realize what we are spending all the money for.” It was a nice compliment, and we still have their insurance after all of these years. What Harold had told us about how to sell the product is just as valid today as it was 30 years ago; in spite of all the computers, polished proposals, and bells and whistles, someone still has to sit down with clients and go over their insurance needs and questions. It is the way the insurance product should be sold.
When I was first hired by Nodak Mutual, they gave me 15 active files to service and a territory to work. This territory was the eastern half of Ward County and the western half of adjoining McHenry County. I worked for two years in the area. Then, just when I was starting to get the territory built up and beginning to make some money, they told me they were cutting my area in half and giving part of it to another agent. I was still a new agent; and when you are a new agent, it seems that your renewals never seem to build up fast enough anyway. Financially, new agents are always living hand-to-mouth. This is one of the big drawbacks of commission sales: more on that later. However, at the time I was really incensed at their cutting my territory in half and not giving me anything for the renewals and new policies I had written. Also, it was about this time that I was taken off the salary draw system and put on straight commission. This would have been no big deal except that a mistake had been made on my draw account. Instead of having a cushion of a few thousand dollars of commission ahead, I ended up owing Nodak a few thousand commission dollars. This seems like a small deal now when I think about it, but back then Nodak did not cut me any slack and stretch the payments out to help me. They simply quit sending me any paychecks until all of the money due on the draw was paid back. As you can imagine, this created a really tough time for me and my family financially. I had a new wife and a young daughter, and getting the bills paid was a nightmare for awhile. I really hated Nodak Mutual for leaving me out there twisting in the wind. This, plus cutting my territory in half, really started me thinking that maybe I was in the wrong career.
So there I was in 1976, not liking the insurance business very much. Since I had worked for a contractor driving a truck for a few years before I was employed by Nodak Mutual, and it occurred to me that it would be great to go back to a business in which you didn’t have to keep persuading people to buy insurance from you. I was remembering only the good times about truck driving--having a cup of coffee whenever I wanted to, no sales quotas, no schools to attend--a nice simple life, right? I was feeling sorry for myself for having to meet sales goals, get more new prospects, work my prospect list, and have a company dump on me whenever they pleased. In addition, I had not had enough claims happen yet and hadn’t seen what a wonderful thing a well-written insurance policy can be. Therefore, in early 1976, like so many new agents before me, I started looking for a way to get out of the insurance business. Luckily, I did not. It would have been the worst mistake of my life.
In those few months, however, I was casually looking around for another job. My family had a small irrigated farm; and since my father was also in the real estate business, I asked him if there was some way I could take over the farm. He answered that the farm was too small for a person to make a living on that amount of acreage, so that option was out. As luck would have it, the second thing that happened in 1976 has left me totally committed to the insurance business ever since.
Throughout the late 1960s and 1970s, North Dakota had lots of snow. Since the town of Minot where I lived is located in the Souris (French for mouse) River Valley and no flood control work had up to then been done, Minot was faced with several devastating floods in those years when the snow melted in the spring. Finally, in the spring of 1976, the mother of all floods came roaring down what had come to be known as the Mighty Mouse River. Having been a construction worker while I was going to college and having driven dump truck a good part of that time, I was asked by my former employer if I wanted to help out during the flood, driving truck on the night shift. Desperately in need of additional cash, I thought why not and started driving truck from six p.m. to six a.m. seven days a week. Twenty-eight exhausting days later, the flood threat was over, the town had been saved, and I got out of the truck that last day having decided that if I never saw another dump truck in my life, it would be way too soon for me.
In my short career in the insurance business, I had forgotten that truck drivers have problems, too. I had forgotten about old folks who pull out in front of you when you are loaded at 70,000 pounds gross. I had forgotten about the difficulty of backing up a narrow dirt dike in the middle of the night, in slippery mud with poor lights. I had forgotten about the guy who drives your truck on the day shift and leaves your truck box half full of dirt and mud. My hat is off to you truck drivers!
It was the spring of 1976. I was beginning to realize that I could make it in the insurance business and after driving truck in the 1976 flood, I was no longer looking to find a new career. I have been irrevocably committed to the insurance business ever since.
• Coverage always trumps price.
• Good mentors help make good agents.
• Follow orders: they will tell you how to succeed; listen to them.
• Too much freedom kills lots of agents; don’t spend all day drinking coffee, telling everyone how hard you are working.
• Most of all, sit down and talk with your clients about their insurance needs and questions; do not just pitch them.
• Selling insurance sure beats driving a dump truck.
• CHAPTER TWO •
GIDDY UP: An Agency is Born
Shortly after going back for those few days to drive truck in the flood of 1976, I found another way to move on in this wonderful business. By this time I had been working for Nodak Mutual for about three years as a captive agent. I was just starting to realize that there was such a thing as an Independent Agent out there who did not have to sell for just one company, but could sell insurance for many companies. The way I found out about this was that Nodak Mutual had such a narrow list of things they would write that many deals came our way that we could not put together. Therefore, necessity being the mother of invention, Tom Wold, my boss at the time, started a little Independent Agency in his desk drawer to write up these orphan deals. He called his little pocket operation Tom Wold and Associates. He had a contract with a little company called Sunshine Mutual and an even smaller little mutual called, of all things, Walle Mutual. To round out his stable of carriers he got lined up with a broker called Blackburn Nickels and Smith for our truck insureds and another broker called Insurance Facilities for our mobile homes and other contracts.
If a piece of business came along that Nodak Mutual did not want to write, we would simply write it with Tom Wold and Associates. This worked fine--lo and behold, by late 1976 we had quite a bit of premium in the little “desk-drawer” agency! There was trouble in paradise, however, as we had been putting so much premium into Sunshine Mutual that occasionally Tom Wold and Associates was listed in the top 10 producer list that little Sunshine Mutual published every month. Although we were writing things that Nodak didn’t even want, they started asking some very pointed questions of Tom. Knowing I was not overly happy with Nodak anyway, he came to me with the proposition that I buy into Tom Wold and Associates and run it full-time. I would quit Nodak Mutual; we could rent an office, commit ourselves completely to our new agency, and go into business for real. This seemed like the best idea in the world to me, so away we went.
Neither of us knew much of anything about being an Independent Agent. Nevertheless, we headed out on the project. We had no clue that we were about to make a few errors that years later would cost the agency a huge amount of money and almost put me out of business. But in the meantime we rented an office and proceeded on. Tom decided he would sell me one-half interest in the business we already had in place for $10,000. In retrospect I realize I could have probably called up both of the little companies we represented and just gotten my own contract, but I was reluctant to do that since I knew absolutely nothing at all about being in business and figured Tom knew everything there was to know. In fact, it seemed like a heck of a deal to me. I went down to my bank and talked to my banker, Eldon Seelig, an old friend of the family. Eldon and his financial institution loaned me the $10,000 to get going. The next thing Tom and I did was to see a lawyer who set us up a sub S corporation. This was the event that precipitated the future problems. We had no idea at the time that this would happen, however, so we spent the $1,000 to get incorporated, made an attorney happy, and went into business together.
On the day we were supposed to have the incorporation put together, we still had not come up with a catchy name for our new company. Consequently, when the attorney asked us what we wanted to call it, we had no answer. After a few moments of silence, he said, “Why not call it Western Agency, Inc.?” The name sounded good to us. We gave it the nickname “Westy,” and here we are today, $11,700,000 of premium later. Lots of water has gone over the dam and the name remains. The name works fine, but looking back with 20-20 hindsight, it is beyond me as to why we felt we needed to be incorporated in the first place. Being a sub S corporation turned out to trigger a financial catastrophe for me far ahead in 1990. Back then, though, we were incorporated, up and running and off into the wild world of business we went.
Next on our agenda was a trip to an office supply store to purchase $2,000 of office equipment. I picked out my own desk and chair, one four-drawer file, and a couple of customer’s chairs. I still have the desk and a couple of the original chairs; maybe someday Westy should have a museum. Years down the line, after I found out how much premium it really takes to make a net dollar of profit, I began to buy my office equipment at Air Force surplus auctions, garage sales, or used furniture stores: wherever I could pick it up cheaply. You may not believe it, but years ago I liberated from a garbage dumpster an old coffee table we used for years--no kidding! In those early days, though, I assumed that when you needed office supplies, you just went to an office supply store for them. Was I brain-dead or what? At least we didn’t waste money on an opulent office suite. Our first place of business, a 12X15 single room, was in the back of the old City Plumbing and Heating Building.
The third thing we did was hire a CPA to do our books. He asked us a very critical question, “When do you want your financial year to end?” Again, not knowing what to say, we asked him what he suggested. He said, “Well, I’m not very busy in the fall--what about 10/31?” Since this seemed fine, that was the year-end we chose. Picking this date was to be another huge error. Having a 10/31 year-end became one of the biggest mistakes of my life.
• You do not have to be incorporated to be in business.
• What is in a name?
• You do not have to buy office equipment new.
• Get a CPA, a good one, one that will TALK with you.
WESTY HITS THE TRAIL: Cranking up the New Agency
Well, there it was: 12/15/76. I had a new desk and chair in my own office--now what? Making my prospect list was easy. I was still mad at Nodak Mutual for cutting my territory in half and leaving me twisting in the wind after their commission screw-up. Since I had no non-compete clause in my contract with them to keep me from writing up my old Nodak Mutual clients in our new agency, I started writing up my former clients into my new store. I guess I was something of a good talker after all, because there I was taking my clients from Nodak Mutual, a well-established North Dakota company, and writing them up with a couple of companies called--don’t laugh--Walle Mutual and Sunshine Mutual: crazy. I always had to explain that Walle Mutual got their name from Walle County. It seems that they had started out as Township Mutual, located in--you guessed it--Walle County, North Dakota: hence the name. I cannot for the life of me figure out how I explained Sunshine Mutual. Who came up with that company name I shall never know. What were the A.M. Best Ratings on these two companies, you may ask? I believe Sunshine held a C- rating, and Walle didn’t even have one. In those years, however, I did not even know what a company rating was. Sometimes ignorance is bliss.
One lucky break that did not occur to me until years later was that like Nodak Mutual a few years before them, neither Walle Mutual nor Sunshine Mutual had taken a rate hike in over five years. Therefore, they were offering rates that were downright excellent. I became a super salesman once again because I had super rates about which I was oblivious at the time; I’m sure I must have figured I was a sales genius. Whatever the reason, my faithful clients believed in me and signed up en masse with the fledgling Western Agency, Inc. In those days you could insure a new car for less than a $100 a year, and in my first year I wrote up over $150,000 in premium for the new agency. Also, in those years I had no secretary, so I was selling, billing, sending out the policies, filing the claims, and doing all the paperwork myself. I became a very busy fellow, I had never worked harder in my life, I was having fun, and, without even noticing it, I was not sitting in the coffee shop telling everyone how busy I was anymore.
I seem to have good instincts most of the time for what works in business. Two things I did right from the start with Western Agency, Inc., were publishing a newsletter and taking aerial photos of clients’ farms and businesses. The newsletter was supposed to look something like the Kiplinger Letter, and I have been putting one out now for almost 30 years. The clients apparently love it. Over the years it has been one of the main ways we stay in touch with our people. We constantly receive feedback on it, so I have to say it has been a huge part of our success.
In one issue of the newsletter I ran a little contest promising a $50 prize to the person who found the most grammatical and spelling errors in it. My God--this was before we had computers with Spell Correct and Grammar Correct! Little did I know that I had insured almost every current and retired English teacher in the state. The morning after the newsletter went out, our switchboard was jammed, and in the next three days 145 people called in mistakes. Evidently there were 32 grammar, punctuation, and spelling errors in the thing. Stupid me, I thought there were only two; I felt as if I were back in high school. Some of the clients took the time to send in copies of the newsletter with the errors corrected in red ink, the whole nine yards. Actually, I was elated. If that many people took the time to read the newsletter that carefully, we absolutely had to keep writing it. Yet a review of past copies reveals that many of our messages in each issue are largely the same. We continually stress the importance of calling our agents with problems and coverage questions. We constantly offer to come out and see clients in person to explain the various policies. We emphasize higher deductibles to keep premiums in line, and we usually try to highlight a coverage that needs further elaboration.
In addition, we try to feature individual clients or have various contests. One competition we have carried on for years is the Wear Your Westy Hat Contest. Over the years we have given thousands, of hats away. We put together a newsletter roughly every three months, and we select one client per newsletter we have seen wearing a Western Agency, Inc., hat for a prize. The reward normally consists of a $50 gift certificate to Perkins Restaurant in Minot, a new hat, and a new Western Agency, Inc., jackknife. Whoever chooses the winners is referred to as “The Unknown, All-Seeing, and Unnamed Judge.” You cannot believe how hard some folks work to be chosen. We have pictures of people wearing our hats all over the world. It is a ton of fun.
In the beginning I typed the newsletter, got a bunch of copies made, and hand-addressed each one. It took forever. Now that we are sending out several thousand, that way would take too much time. So I simply type the newsletter in a Word document and e-mail it to the printer, who sets it up, sends me a proof to read, and then uses our mailing list to send it out. The cost to do this is very minimal, not to mention a major savings in time to us. I am probably getting ahead of myself here; my point is that the newsletter has been a very worthwhile part of our advertising program.
The second thing I did that turned out very well was taking aerial photos of my clients’ farms and places of business. This is not as expensive as you may think. I figure the pictures cost me less than $5 each, including plane rental, developing, and postage. I take them, have two copies made, and send one copy plus the negative to the client. The other copy we put on a bulletin board in the office. People absolutely love it. Isn’t it only natural that they would far rather have a picture of their farm, home, or business than a nice photo of my office? If you want to do this yourself, just hire a small plane and pilot and give it a go. Tell the pilot you want to be 350 to 400 feet in the air and a quarter of a mile or a little farther from the farmstead. Any closer, and all you get are pictures of the roof. Use a 35mm camera and a 75mm to 200mm zoom lens with 100 speed film. Set the F stop at 8, or use your light meter, and always remember to take the picture up the client’s driveway. When I first started doing this, I took a few shots from the backsides of the farmsteads, and often the farmers could not recognize their own properties. People orient themselves the way they drive up to their home or business. Try to take the pictures on a clear day at about noon to minimize shadows. Finally, don’t worry about opening the window of the plane. It just gets too windy, and taking the picture through the Plexiglas gives you a fine photo.
My clients have many pictures of their farms taken by us over the years, and they really appreciate our doing it. We also use these photos for prospecting. We print the picture, frame and mat it, and put a copy on the front page of a proposal for the sale. In addition, we frequently enlarge photos to 11X14 and have them framed and matted for our larger clients and prospects. As I said before, it seems that clients love the pictures and they would far rather have a picture of their places than ours.
But back to the beginnings: that first year was a madhouse. I was learning about: paying monthly statements; getting bills typed up and sent out; keeping an accounts-receivable log; taking claim forms, change forms, phone calls, and all of the day-to-day things that are done every day in an agency, the only problem being I was a staff of one. Tom was still working for Nodak Mutual. It soon became apparent to both of us that he was getting paid too much money there for him to leave and come to work full-time at Western Agency, Inc. So I started thinking about owning the business all by myself. In late 1977 I asked Tom if he would sell the rest of the company to me.
Tom said I could have his half of the agency for $14,000. I had no idea where I was going to get the money, but without hesitation I agreed to do it. Once more, I am aware in retrospect that I was buying something I already owned and could have simply gotten my own contracts for free. Tom and I were friends, though; it was still a good deal at the time; and it was the right way to do it. Since the company is now worth around five million dollars, I suppose this could qualify as one of those good deals a person makes in life. I financed the purchase by taking out a second mortgage on our house. I used the $25,000 this came up with to pay Tom off and keep myself afloat financially for the next year. The best news was that I was learning how to run an agency and the renewals were starting to build up. That second year I was again able to put $150,000 of new premium on the books. The fledgling agency was starting to take off, and the angle of my learning curve was increasing.
• You do not have to deal with only A++ rated national carriers to be successful.
• Good clients stick with good agents.
• Regarding aerial photos, remember that your clients would rather have pictures of their places than yours.
• Newsletters can be fun and keep you close to your clients.
THE FIRST ROUND UP: Getting Some Good Field Reps and Good Companies
As the owner of an Independent Agency, I got to meet my field representatives. Each company had a field rep that came out to see their agents from time to time. These folks helped me enormously in getting integrated into the Independent Agency business, and I shall always be grateful to them for it. Field reps then and now perform a valuable service. Furthermore, I don’t think we Independent Agents give these people enough respect. It is so easy to say that all they are good for is stopping by, drinking your coffee, and wasting your time. Yet over the years, when I look back, field reps have been absolutely essential to my success. Sure, some of them probably drink too much coffee and waste my time. But who taught them to do that? The agents who drink a great deal of coffee and waste too much time themselves, right? Remember, if someone is wasting your time, you are the one allowing it. I have found that if you tell field reps you are on short time, they will keep their talk with you brief. Also, I have found that if you want information about the business, a field rep is a very good source for it. Some of my best agency acquisitions have come from tips from a field rep telling me so-and-so was thinking about selling their store. Good field reps are like spices in food. You sometimes do not really know exactly what they are doing, but you sure miss them when they are gone. I know the current trend is for companies to get rid of the field reps. Possibly that will happen, but I believe it would be a mistake.