Part of agency’s new commitment to life

Physical fitness promotion: Part of agency’s new commitment to life

McCoy, Thomas A

The Reis Group, a $20 million P-C firm in Kingston, New York, decided two years ago to form an employee benefits department. The agency had enjoyed tremendous growth since it had been started from scratch by Frank H. Reis in 1966. With approximately 10,000 customers, 45 employees and two branch offices, why did they want to become involved in a whole different side of the business?

“We needed to generate more bottom line dollars,” explains agency president Frank H. Reis. Like many agencies, they were faced with soft market pressures. The drop in commercial lines premiums had shifted their business over the last several years from 60% commercial lines — 40% personal to a mix that is now about 48% commercial and 52% personal.

The soft market pressures were aggravated by a recessionary economy in the mid-Hudson Valley. Their three offices are located about an hour south of Albany in an area which has been hit hard by layoffs at IBM. So the decision to pursue life business was logical.

That decision was also made easier, Reis says, because “CNA, our lead carrier, has life insurance requirements we need to meet in order to fulfill their HPA (high performance agency) requirements.”

Up to that time the life-health business they had produced had been written more or less as a convenience for their P-C customers who asked for it — which meant their life production was minimal. Before starting their benefits division, life and employee benefits business accounted for less than half of one percent of their revenues. Since establishing their employee benefits department in February of 1992, this business has soared to where it now accounts for 8% of the agency’s income.

“We’d eventually like to get our life and employee benefits business up to 15% to 20% of our income,” says Reis.

Reis decided against trying to generate life business through the agency’s six P-C producers. “Property-casualty producers are reluctant to ask for life business because they don’t feel they understand it well enough to serve their clients’ needs,” Reis says.

So he hired Ernest Guerriero, CLU, ChFC, to head up the department. Guerriero had worked for another P-C agency and was therefore familiar with the differences in the sales approaches of a P-C agent and a life agent. “The property-casualty mentality doesn’t always meld well with the employee benefits mentality,” Guerriero admits.

Guerriero brought with him another life producer from his previous employer, and they began calling on The Reis Group’s P-C clients.

“What makes it work,” Guerriero says, “is the strong commitment made by the agency’s management to support the employee benefits division. The P-C producers introduce the life producers to the key people at their accounts.” This obviously benefits the life producer, but Guerriero says it also benefits the P-C producer, whose clients see the agency’s services as more complete.

The agency has worked both the individual life and business life markets. “They go hand in hand,” Guerriero notes, “because when someone sets up a plan to transfer a business, it usually involves getting assets into the hands of his or her children.”

Another reason for the success of the employee benefits division, Guerriero says, is that Frank Reis, “has the vision to explore new ideas and techniques.” Not long after the establishment of the benefits division the agency had an opportunity to test a new marketing idea that many life marketers might have rejected.

The owner of a physical fitness center asked the agency to co-sponsor the production of a cassette tape dealing with physical fitness. The 16-minute. Professionally produced tape provides information about the benefits of diet, and regular exercise, particularly aerobic exercise. “The marketing concept we embarked upon with Fitness Unlimited proved that some companies that appear to be in different markets do have commonalties,” Guerriero says.

“A tape on physical fitness made sense for us because, as marketers of life and health insurance, workers compensation and disability, we realize that in the long run there are significant benefits when a person enters into a properly structured fitness program.”

The agency distributed approximately 1,000 copies of the tape to clients. Tapes also were distributed through the fitness center, whose customers tend to be higher income people. “We didn’t expect to get any immediate sales results from it, but it served its purpose by showing our commitment to people’s health and well being,” Guerriero says.

Also because a life agent doesn’t have the service opportunities that a P-C agent has, the tapes provided a rare opportunity for the benefits producers to build rapport with customers. “The tapes gave us something tangible we could give to customers without asking for money,” Guerriero notes.

The total cost of the producing the tapes was about $3,000, and the agency’s share of the cost was between $900 and $1,000.

Despite hiring someone with a strong life background to run its benefits department, the agency also relies on the marketing support provided by the life companies affiliated with its P-C carriers, particularly CNA.

“CNA has hired proven life people to support their P-C agencies. And if a case is particularly complex, they’ll even bring in attorneys from New York to back up the sale,” says Reis.

Since becoming involved in the employee benefits side of the business, Reis has followed the debate on national health care with great interest. He admits it is a concern. “Under the initial unveiling of the administration’s health care program proposal, it appears the role of the independent agent is pretty much eliminated,” Reis notes.

However, he adds, “I think some legislation will be passed this year, but that it will be a watered down version of the initial proposal. We’re still optimistic about the benefits side of our business.” With its strong property-casualty customer base, and two solid years of growth in benefits business under its belt, The Reis Group is confident that its employee benefits division will continue to prove to be a wise diversification move.

THE AUTHOR

Tom McCoy is editor-in-chief of Rough Notes magazine.

Copyright Rough Notes Co., Inc. May 1994

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