A Critique: How I Built A $37 Million Insurance Agency In Less Than 7 Years
Concordia University- Chicago
Leadership Theories and Professional Practice
Dr. Mixon Ware
Title: How I Built A $37 Million Insurance Agency In Less Than 7 Years
Author: Darren Sugiyama
Readers and Publisher Reviews
The impressively titled book has 31 five-star ratings on Amazon.com compared to 2 three-star ratings and 2 two-star ratings, out of a total of 35 ratings. Other book review and rating services provided either no rating at all or very high rating.
The book discusses issues that surrounded the creation of a multimillion, 37 million, dollar insurance agency in 7 years by the author, who says that he was financially broke in the beginning. Most of the reviews recommend this book for people in the insurance business, or people who own/ lead an insurance agency. One reader describes the book as “a very insightful and useful motivational piece for the entrepreneurial soul. For anyone looking to read about the real life struggles, thoughts, and lessons learned of a walking success in the Insurance Industry, this is your book.” (Customers Reviews, n.d.)
Other readers think that the book was “just an advertisement for his consulting business.” A third reader says that he “had a hard time reading about [the author’s] struggles and living off of his friends couches and such, and being broke, when at the end of the book, it talks about how he came from another high paying position at another company. A fourth reviewer says that there is “Lot's of swagger in [the author’s] style”. (Customers Reviews, n.d.)
The title of the book drew my attention, as it has been little over 7 years since I personally established my property and casualty insurance agency. However, my agency has not reached the $37 million dollars in the 7 years time despite the fact that other people are impressed with its accomplishments. I hope that reading this book will allow me to compare our positions, where I will also use its critique to fulfill the partial requirement for this course at Concordia University. I, furthermore, hope that my reading will give me the opportunity to pick some ideas here and there that I can use to improve my business. For those reasons, I purchased an electronic copy of the book from its publisher and decided to read the 124 page ebook.
Reading the reviews and comments of readers has aroused my curiosity and interests. There are many leadership books available but not ones related to my field of professional specialty (insurance agencies). Before I started reading the ebook, I had several questions based on the initial readings of the web reviews:
- Questions related to the nature of agency operations: What kind of insurance agency does the author speaks about? A multi line agency with property, casualty, life and health? Or a strictly property and casualty agency? Or a life and health insurance agency? The number $37 million referred to what? Premiums? Commission? Fees? A combination of fees and commission?
- Questions related to the management style and leadership of the agency. Is the entrepreneur creative in developing a leadership style? How does he manage to hire and maintain the most challenging task of the insurance agency (the sales force)?
- To what extent the online reviews are accurate in describing the usefulness and the value of the material presented in the book?
Like many of the readers who acknowledge that the title was of great interest, I was intrigued and decided to pursue the book and read it.
The book speaks of the author successful efforts to establish an insurance agency, offering health insurance and employee benefits products. After a hard, unsuccessful, start in 2003, the owner decided to change the ways of hiring and managing the agency and in 2010 premium dollars reached $37 million after 7 years in business. The author discusses his big vision, unique recruiting strategies, system-driven management style, effective operations strategy, building culture of success, as well as other issues related to managing the particulars of insurance agencies.
The author argues that “A great leader doesn’t try to motivate people,” but rather one who does clarify the goals. (p.4). While this is an odd statement, the fact that he is relying on independent contractors to produce his premiums may explain why he will say something like that. Independent contractors need to be led by example as he argues that “One thing I’ve learned about effective leadership is that you cannot expect your people to do something that you’re not modeling yourself.” (p. 94). Also, on the subject of effective leadership the author argues that “A great leader must be relatable to the common man. You must reinforce the fact that you are all-powerful while at the same time reminding your people that you started out just like t hem.” (p. 102).
Employee motivation is a key and central issue in the field of effective leadership. Valencia (2005) argues that “Unmotivated employees are likely to spend little or no effort in their jobs, avoid the workplace as much as possible, exit the organization if given the opportunity and produce low quality work. On the other hand, employees who feel motivated to work are likely to be persistent, creative and productive, turning out high quality work that they willingly undertake.”
The author is in favor of “System-Driven Business” as opposed to “People-Driven Business” when it comes to managing the agency. According to the author, “People-Driven businesses tend to hold the business owner hostage, especially in an insurance agency. If your people start feeling like they don’t need you or the agency infrastructure anymore, they’ll eventually leave you.” (p. 40). Being system-driven is something I always thought to be great. However, I am not sure why the author believes that an insurance agency (or any other business) cannot be both system-driven and people-driven! Bolman and Deal (2008) quoted several leadership authorities including Kotter, Lynn, Luthans, Yodgetts, and Rosenkrantz emphasizing the importance of human resource frames (people driven) in the organizations. (p. 323). The fact that an organization is system-oriented (with substantial structure frames) does not mean that human resource frame (people driven) is not in the picture or is less important (Bolman and Deal, 2008, p. 395.) Actually being in the insurance business for many years I think an insurance agency management that is not geared towards human resource frames is going to fail!
Answers to My Inquiries
My first set of questions was addressed shortly after the introduction of the book. “We just did $37 million in premiums last year, which was our seventh year in business.” (Sugiyama, 2010, p. 21). The author speaks of increase in production, from $596.73 in commission in 2003 to $1.3 million in commission in 2005, to $37 million in premiums in 2010. These numbers comparison is not consistent (comparing commission versus premium)! Normally in the health and benefit insurance, commission is around 10 percent of the premiums, more or less. This means his commission in 2010 was around $3.7 million. The process of the comparison is dramatic, perhaps misleading, not objective at all.
The agency of the author is a health insurance and group benefit agency, products that sell at high premiums, as opposed to property and casualty with relatively lower premiums. After-sale services in health insurance agencies are not as complicated or costly as those in property and casualty agencies.
There was no where in the book any information about the manpower or overhead expenses associated with this production level. The author acknowledges that he is using “independent contractors,” each with his own clients. In that case, the actual client accounts are not “owned” by the agency, but owned by the independent contractors who worked “with” the agency, not for it. Since we do not have any information about the number of the contractors or the arrangements it will be rather impossible to measure the effectiveness of the agency. The gross premiums of $37 million become an invalid indicator of the profitability or the effectiveness of the agency.
The second set of questions came from the challenges we, the insurance agency owners, face in managing the hiring process and employee retention in our business. The employee turnover ratio in the insurance business is as high as 90 percent of new employees in the first year of employment, especially in agencies that pay only or mostly commission. The author lists some hiring strategies that are based on initially meeting interviewees in groups, rather than one on one. This method is not the convention although there are many insurance agencies that use the same hiring strategy, especially those looking to do mass hiring.
Finally, I think that the online readers’ reviews are manipulated. To have 31 five (full) star reviews out of total of 35 reviews is not an objective indicator, considering the controversially biased statements in the book, material redundancy, and the lack of material uniqueness. One of the 2 star reviews is consistent with what was clear in the book, that the author is running a consultation business for insurance agencies, and the book is full of “swaggering” and “dramatic presentation” exaggerating the accomplishments of the author in order to sell his consulting services.
The book, nonetheless, contains several useful ideas for entrepreneurs who are venturing in to the insurance agency business but with little or no experience. It is not easy to lead an insurance agency, and very hard to hire and retain employees and agents.
Bolman L. G. and Deal T. E. (2008). Reframing Organizations: Artistry, choice, and leadership. San Francisco, CA: Jossey-Bass.
Customers Reviews (n.d). How I built a $37 million insurance agency in less than 7 years. Amazon.com. Retrieved on 5/11/2014 from http://www.amazon.com/Built-Million-Insurance-Agency-Years/product-reviews/0557948819/ref=dpx_acr_txt?showViewpoints=1
Sugiyama, D. (2010). How I built a $37 million insurance agency in less than 7 years. Darren Sugiyama
Valencia, C. (2005). Motivation and productivity in the workplace. Westminster College. Retrieved on 5/12/2014 from https://www.westminstercollege.edu/myriad/?parent=2514&detail=4475&content=4798