WIN Magazine - Spring 2013 - (Page 25)

FEATURE HOW TO SUCCEED IN PROGRAM BUSINESS BY LOIS MASSA W HETHER YOU ARE an experienced program administrator or perhaps newly venturing into program business, there are many critical success factors to consider. After learning the fundamentals for developing a program, what can you do to improve your chances of succeeding? Specifically, today’s challenge for the Program Administrator is how to remain vital and profitable in a volatile marketplace over the longterm. This article will address several important principles to consider. I am suggesting that successful Program Administrators possess the organizational discipline and commitment to: 1. CREATE A COMPELLING AND REALISTIC BUSINESS PLAN. The key words here are “compelling” and “realistic.” Successful program administrators develop a business plan specific for each program they launch. They understand that before investing significant resources to develop a new program, there needs to be a strong, empirically based reason for moving forward. The plan consists of (a) identifying or creating a need (filling a void), (b) assessing the competition, (c) evaluating the market size (opportunity), (d) developing a product (solution) and (e) developing a financial pro forma. This process entails asking questions, such as, what is driving the perceived need for a new program? Have we assessed competitor strengths and weaknesses? How will we differentiate our product? Does our organization have the infrastructure and expertise needed, and if not, are we willing to hire new talent? Will our current agents support the new program? Based on the premium universe, what is our projected market share, assumptions and timeframes for achieving? Will the program generate the returns needed for both the carrier and program administrator? The business plan should be a static document, with a formal review of the assumptions on an annual basis, (quarterly is recommended). In addition to formal reviews, any changes that challenge the assumptions should be considered on a real-time basis, such as a new competitor, newly identified exposures, etc. 2. DEVELOP PERFORMANCE METRICS, AND THEN MEASURE, MONITOR AND ADJUST WHERE AND WHEN NEEDED. To achieve long-term success, it is critical for a program administrator to have a formal process in place to assess program performance on a monthly basis. All programs should have specific measurable performance metrics, such as: premium goals, targeted renewal retention and new business hit ratios, price monitoring/rate change data, and targeted loss ratio. Each measureable performance metric should have a benchmark, which if exceeded, triggers a reaction. In the event that a performance metric is not met, it doesn’t necessarily mean that the program is trending negatively. It may mean that the program experienced an unanticipated, but not critical event, or that the measurement needs to be recalibrated as the initial assumptions may be incorrect. For example, a program experiencing a drop off in new business may be experiencing the effect of a new competitor who is creating market disruption. Likewise, a loss ratio spike may not be reflective of the book overall, but could be the result of an unanticipated severity claim. W I N | S p r i n g 2 0 13 | 2 5

Table of Contents for the Digital Edition of WIN Magazine - Spring 2013

Cover Story: Eliminating the "Fear Factor;" VoIP Communications for Disaster Recovery & Security
How Did We Underwrite Before the Internet?
Have You Ever Felt Like You're in the Software Business Instead of the Insurance Business?
The MGA Community at the Crossroads
When Sandy Became a Superstorm but not a Hurricane: The Effects on Deductibles
Howto Succeed in Program Business
Your Hidden Sales Force: 5 Steps to Developing "Super" Production Underwriters
Blessings in Disguise: Why Vintage Workers are Creating a New Economic Solution for the Wholesale Insurance Industry
In the WIN-ners Circle: An Interview with Todd Bateson
Index to Advertisers/

WIN Magazine - Spring 2013