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Soft market strains brokers

Insurance people say they are in a soft market when prices
are dropping. For brokers, though, there is nothing soft about it. They are
paid on commission, so their profits fall right along with your premiums.

Insurance people say they are in a soft market when prices
are dropping. For brokers, though, there is nothing soft about it. They are
paid on commission, so their profits fall right along with your premiums.

“I’ll sum it up pretty quickly,” said Jeff Brown, vice
president and sales manager at Keller-Brown Insurance Services in Shrewsbury, York
County. “Our motto is ‘We
work for less.'”

The property-and-casualty insurance industry is notoriously
cyclical.

“This is certainly nothing new,” said Jane Koppenheffer,
president of The Insurance Alliance of Central PA Inc., a network of
brokerages.

And so, brokers know what to do. They are lacing up their
boots and looking for new customers.

“If you’re not hustling, you know, you’re going backwards,”
Brown said.

He’s not the only one scrambling.

“The main goal … is to go out and attract new customers,”
said Bob Creason, president of Christian-Baker Co. in Lemoyne.

Salespeople have an incentive to drum up new business
because they also are paid on commission, he said.

“They and we share that same pain,” Creason said.

All that scrambling, in turn, makes it harder to keep
existing clients. Brown said his agency tries to maintain good relationships
with clients so that they will trust it to shop around for them.

Brokers do better in soft markets if they have a diversified
business, said Dave Evans, a senior vice president at the Independent Insurance
Agents and Brokers of America, a trade group based in Alexandria, Va.
Property and casualty insurance goes up and down, but life and health insurance
commissions are steadier, he said.

“If you sell all commercial, then you really feel the heat,”
Creason said.

There is some hope that this soft market will not last as
long as previous ones, Koppenheffer said. She cited two reasons. First, the
Sarbanes-Oxley corporate reform law has tightened reporting standards, so
insurance carriers will be caught more quickly if they take bad risks, she
said.

“Deteriorating results will become obvious sooner, I think,
and there will probably be a quick response,” she said.

Second, carriers face growing pressure from investors to
match the profitability of other industries, she said. That means they must
keep a tighter balance between expenses and payouts on the one hand and
incoming premium dollars on the other hand.

Whether the soft market is long or short, brokers are
keeping a perspective on it.

Koppenheffer cautioned that customers may not be well served
by chasing low prices.

“Lowest price is not always the best price,” she said.

Ruth Simons is expanding her agency. Simons runs Simons
& Company Inc. in Harrisburg.
The agency has grown from three people to six in the last two years while
adding two independent contractors.

“It’s just a question of nose to the grindstone and taking
the risk,” she said. “If not now, when? I just decided … to grow more.”

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