Monthly Archives: March 2017

The Role of Managing General Agents

Managing General Agents (MGAs) are leaders of the wholesale insurance market place and function as an intermediary managing the relationships among policy holders, retail producers and the insurance carriers. These agents provide underwriting and administrative services and have the authority to accept and appoint placement from retail agents on behalf of the insurers they represent. Generally, MGAs market more unusual coverage, such as professional liability, for which a particular expertise is required. Insurers benefit from MGAs where such expertise is not available within the company and would be costly to develop.

The purpose of MGAs hired by insurance companies is to supervise their business in a particular territory and they are often referred to as wholesalers, but in no way do they compete with brokers and do not deal with customers directly. MGAs have a unique relationship with their carriers. Depending on the relationship, a MGA may perform tasks normally performed by an insurer; which include, handling claims, issuing policies, sub-contracting with independent agents, collecting premiums and negotiating commissions to name a few. As agents of the insurer, they perform the basic insurance functions for the carrier of underwriting and policy issuance.

According to the American Association of Managing General Agents, an MGA can be used in any line of insurance and includes insurers who are “admitted or not, direct or otherwise, broker or agent system, contract/appoint or open-broker sub-production, or any combination of these.” Typically, MGAs are utilized most in the excess and surplus lines insurance market, but are also found in the commercial and personal insurance market.

When thinking about how MGAs work, it’s best to consider traditional insurance market access where it flows from the insurance company to the retail agent and finally to the insurance buyer. Now consider how the surplus lines market access flows. It works in much the same fashion with one major difference. The MGA acts as the intermediate between the insurer and the agent. In this way, market access flows from the insurance company, to the intermediary, the retail/out of state agent and finally to the buyer.

MGAs are generally entitled to a contingency commission on all business written within their territory. They take a percentage of the commission that would usually go to the producing insurance agent. Being an MGA means personal accountability as well as responsibility for producers. MGAs take on the significant costs involved in being a wholesaler and the investment needed to succeed.

Know When Your Business Needs IT Consulting Services

Businesses must ensure that only the latest technologies and software are deployed at the workplace, in order to provide quality solutions to their clients, and to be ahead of the competition. With the ever-changing technological trends in the industry, businesses find it cumbersome to adopt these technologies. Instead they can hand the entire function over to a sound IT consulting services company – who in turn will tap into their global pool of highly skilled IT professionals, who have the advantage of working in various IT environments, and have extensive experience across sectors. By providing assistance to business, IT consulting services providers free up existing resources; ensure IT transitions are smooth and problem-free; optimise key business processes; identify areas that benefit with further cost saving; build competitive advantage through IT; reduce IT complexities; provide IT strategy consultancy services, IT project management services and provide specialised programme management solutions – all of which, help the organisation achieve significant business efficiencies and cost benefits.

Choosing to work with an IT firm definitely boosts a company’s overall efficiency, which in turn decreases costs. Firms tend to look for a flexible and bespoke solution to address the client’s IT needs, thereby delivering solutions that are in tandem with the client’s goals.

The advantages listed above necessitate hiring an IT company. But how will a business know that it needs IT consultancy services?

A business may function with its existing IT architecture without knowing the benefits of such services. In order to discern the need for IT consulting services, businesses must first understand the details of their services. According to Wikipedia, ‘IT consulting is a field that focuses on advising businesses on how best to use IT to meet their business objectives. In addition to providing advice, IT consultancies often estimate, manage, implement, deploy, and administer IT systems on businesses’ behalf, known as Outsourcing’. IT consulting services firms thereby help businesses strategise and evaluate their IT functions as a whole and take the necessary steps to implement and/or deploy and then administer effective and robust IT systems in place. Businesses can seek the services of an IT firm when:

  1. IT investments regularly overshoot the set budget. Fast-paced technologies and trends warrant proper planning. When making strategic use of the allocated budget seems difficult, seeking the advice of IT consultancy services providers is imperative.
  2. A business decides to relocate or reduce staff.
  3. Projects regularly miss deadlines. Lack of specialists, complex projects and shoestring budgets lead to inefficient project management. A sound IT consulting services company designs bespoke, safe and cost-effective solutions, either full time or part time.
  4. Challenges of globalization, technical and regulatory changes arise. Business and technology management when integrated help the business survive, and therefore IT strategy consultancy is important.
  5. Programmes and projects eat into the budget. A business needs specialised programme management solutions to achieve significant cost savings. A robust IT services company provides either the co-sourcing or the outsourcing model to help businesses remain ahead of the competition, by providing tailored solutions.
  6. There is a need to change networks or when the need to shift to a new IT architecture arises.
  7. The company is in need of a robust disaster recovery plan.
  8. There are no data storage systems in place.

Availing the services of the right IT consulting services company may be a challenge. A business must choose a provider before the problems stated above get worse – and must choose a provider who is able to set in place a sound IT system in place. Therefore, a business must choose a provider who provides flexible solutions. Businesses must also remember that though they think they are able to fix small issues, the reality is that these issues must be treated at the root, and they can be properly tackled only with strategic IT solutions – only provided by an effective IT consulting services company.

How to Evaluate Your Finance Department

Nobody knows your business better than you do. After all, you are the CEO. You know what the engineers do; you know what the production managers do; and nobody understands the sales process better than you. You know who is carrying their weight and who isn’t. That is, unless we’re talking about the finance and accounting managers.

Most CEO’s, especially in small and mid-size enterprises, come from operational or sales backgrounds. They have often gained some knowledge of finance and accounting through their careers, but only to the extent necessary. But as the CEO, they must make judgments about the performance and competence of the accountants as well as the operations and sales managers.

So, how does the diligent CEO evaluate the finance and accounting functions in his company? All too often, the CEO assigns a qualitative value based on the quantitative message. In other words, if the Controller delivers a positive, upbeat financial report, the CEO will have positive feelings toward the Controller. And if the Controller delivers a bleak message, the CEO will have a negative reaction to the person. Unfortunately, “shooting the messenger” is not at all uncommon.

The dangers inherent in this approach should be obvious. The Controller (or CFO, bookkeeper, whoever) may realize that in order to protect their career, they need to make the numbers look better than they really are, or they need to draw attention away from negative matters and focus on positive matters. This raises the probability that important issues won’t get the attention they deserve. It also raises the probability that good people will be lost for the wrong reasons.

The CEO’s of large public companies have a big advantage when it comes to evaluating the performance of the finance department. They have the audit committee of the board of directors, the auditors, the SEC, Wall Street analyst and public shareholders giving them feedback. In smaller businesses, however, CEO’s need to develop their own methods and processes for evaluating the performance of their financial managers.

Here are a few suggestions for the small business CEO:

Timely and Accurate Financial Reports

Chances are that at some point in your career, you have been advised that you should insist on “timely and accurate” financial reports from your accounting group. Unfortunately, you are probably a very good judge of what is timely, but you may not be nearly as good a judge of what is accurate. Certainly, you don’t have the time to test the recording of transactions and to verify the accuracy of reports, but there are some things that you can and should do.

  • Insist that financial reports include comparisons over a number of periods. This will allow you to judge the consistency of recording and reporting transactions.
  • Make sure that all anomalies are explained.
  • Recurring expenses such as rents and utilities should be reported in the appropriate period. An explanation that – “there are two rents in April because we paid May early” – is unacceptable. The May rent should be reported as a May expense.
  • Occasionally, ask to be reminded about the company’s policies for recording revenues, capitalizing costs, etc.

Beyond Monthly Financial Reports

You should expect to get information from your accounting and finance groups on a daily basis, not just when monthly financial reports are due. Some good examples are:

  • Daily cash balance reports.
  • Accounts receivable collection updates.
  • Cash flow forecasts (cash requirements)
  • Significant or unusual transactions.

Consistent Work Habits

We’ve all known people who took it easy for weeks, then pulled an all-nighter to meet a deadline. Such inconsistent work habits are strong indicators that the individual is not attentive to processes. It also sharply raises the probability of errors in the frantic last-minute activities.

Willingness to Be Controversial

As the CEO, you need to make it very clear to the finance/accounting managers that you expect frank and honest information and that they will not be victims of “shoot the messenger” thinking. Once that assurance is given, your financial managers should be an integral part of your company’s management team. They should not be reluctant to express their opinions and concerns to you or to other department leaders.