In the multibillion-dollar insurance agency and brokerage industry, firms rise and fall on the ability of their top producers to sell commercial property and casualty policies and maintain strong relationships with customers.
Across the industry, the common assumption is that older, more experienced salespeople are more likely to succeed in building a book of business and retaining clients.
Consequently, firms typically pass over younger applicants and make little effort to recruit them. When young people do find their way into the industry, it is often by accident.
Reagan Consulting, with support from the Council of Insurance Agents & Brokers, set out to test the dominant assumption about new-hire productivity and discovered that it is largely unfounded. A detailed study confirmed that firms have neglected to hire younger producers despite the value proposition they represent.
“They have neglected this strategy for a couple of reasons, including primarily that most agents don’t have the proven experience or capabilities to recruit, train and manage young people,” says Robert Reagan, president of Reagan Consulting, based in Atlanta. “In addition, there has been a perception that the strategy of hiring young people is a long-term strategy in that it takes many years for the young person to be successful.”
The 2010 Reagan Consulting study investigates the productivity of producers under age 30 and includes the results of a survey on hiring activity at more than 200 agencies across the country. The agencies hired 2,727 producers within the past five years, but only 37.6 percent of these were young producers.
The study also draws from in-depth interviews with young producers to document the skills and characteristics that generate success on the job. Using several productivity measures, the study found that high-performing young employees compare favorably with experienced producers.
Time to validate
The study uses a key metric—time to validate—to gauge the success of the young producers. Time to validate is based on the month in which the newly hired producer’s new and renewal production supports the compensation paid to the producer.
The analysis found that young producers represent a low initial payroll cost but may actually have an edge in their ability to validate. The average successful young producer in the study validated in 22 months. The total first-year payroll cost of the average successful young producer is less than $44,000, well below the $77,500 average first-year cost for all new hires in the industry.
The study also examined the book size of the young producers. By year five, the average successful young producer generated a book of business worth nearly $650,000, which compares favorably with older producers. After investigating the potential returns for an agency’s investment, the study found that there is no reason to expect lower returns from younger producers.
The study also found that half of all agencies and brokerages face unhealthy metrics in average shareholder age and average producer age. Some leading agencies have responded by designing recruiting programs to bring in more young producers. But the industry as a whole has not developed methods for attracting, developing and retaining younger employees.
The study notes that the negative connotations of insurance sales make it difficult to attract young candidates. Leading firms have been able to overcome these connotations and successfully market their job opportunities.
“The wonderful opportunities within insurance sales are some of the best-kept secrets around,” Reagan says. “The good news is that the talented young people who come into the industry get a pleasant surprise when they discover how well they can do.”
Among the firms surveyed, the study found considerable variety in sourcing and recruiting young producers. Thirty-four percent of the young producers were hired from another industry, a little more than a fourth came from another agency, a little less than a fourth came from college, and 15 percent came from an insurance company.
The approach to recruiting is decisively different at firms that have a record of success in hiring young producers. The study identified 54 agencies spanning all sizes with a demonstrated ability to recruit, hire, train and develop younger employees, and conducted an in-depth analysis of 91 successful young producers at these firms. On average, these firms hire 20 percent more young producers than the industry as a whole.
The 54 agencies recruit more than half of their successful young producers directly from a university, more than double the average for firms in the broader survey. Forty-one percent of the leading firms participate in on-campus recruiting and almost half offer internships for college students. In the broader survey, only about a fourth of firms have internship programs.
The assignment of recruiting responsibilities also reflects the significance that the leading firms place on recruiting and developing young producers. At almost 40 percent of the leading firms, the executive team is responsible for sourcing and hiring young talent. At an additional 31 percent, the agencies assign that responsibility to the firm’s sales leader.
All of the leading firms provide training, and almost all provide some form of mentoring, ranging from structured multiyear programs to informal arrangements. At 40 percent of the firms, the executive team manages the young producers.
The study also found that hiring young producers is often best done in groups or classes. This is facilitated by the low payroll investment required to hire younger producers. The class approach spreads the risk of an agency’s unvalidated producers. It also allows for more efficient training programs and it creates camaraderie and competition among the young producers, aiding in their development.
The study’s detailed analysis of the characteristics of the successful young producers found that the average age at time of hire was 25 and almost half had some prior sales experience. Seventy-five percent of the successful young producers were business majors in college, and most were involved in at least one nonacademic college activity.
While the young producers scored solidly above average in their college entrance exams, they did not rank among the highest scorers on these standardized tests. Their academic performance in college followed the same pattern, with a mean grade point average of 3.3 on a 4.0 scale reported by the successful young producers.
The picture that emerges is of a well-rounded individual with a capacity for academic achievement, the desire to be involved in the community and the ability to take on leadership roles and responsibilities. Personality and attributes testing found that the successful young producers can be described as moderately high energy, assertive and social people who make timely decisions and enjoy working independently.
The lessons learned from this study indicate that recruiters in other industries may benefit from looking at actual evidence about hiring results, employee productivity and the relative costs and returns for different types of new hires.
“I would think that there are many other industries that may be wrestling with the same poor assumptions and missed opportunities,” Reagan notes.
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