How I almost became a Fat Cat Agent

I remember the phone call well.

"Asher, this is Warren Adams. Do you know who I am?"

"WARREN! I've been waiting for your call!", I responded, feigning confidence.

My mind raced. "Warren Adams?? He's BIGTIME!" I knew the name well. During my first year in business, I'd actually been in to his real estate office on more than one occasion to give presentations, but we'd never spoken personally. Every time I'd gone in to the office, I'd see Warren and his team working away buying and selling places left and right. And here he was on the phone, ... calling ME! I was psyched.

Long story short, Warren needed some help insuring a distressed property in Sacramento. I helped him out ... and somewhere along the line, took a look at his own personal insurance package. Although most of the policies were in good order, there was one gaping hole in his package that left him exposed in a major way. At that time, he didn't have an Umbrella Policy, a must for somebody at his level of success. When I pointed it out to Warren, he was upset. And justifiably really. Turns out, he had been with the same insurance agent for the last ten years. Warren had trusted the guy to look out for him and give him good advice, and I brought the bad news that he had been left exposed. Wether it was out of laziness or ignorance, ... the insurance agent had failed to do his job. He had become a Fat Cat Agent and was caught.

Old guy out, Asher in.

Fast forward nine years.

An email from Warren comes in asking the status of his Umbrella Policy. Another long story short, ... his Umbrella Policy had lapsed. YIKES! I had needed to remember the renewal date and take note in my calendar, but I failed to do so, and the policy went out of force. It was completely my fault. The very thing that brought him to my agency, I had now screwed up on. And now the choice. Will I take care of business, address the mistake, and fix it? Or will I take the 'Fat Cat Agent' I'm-too-successful-to-care attitude?

I wrote Warren that evening from my house:


Warren,

Years ago, you and I started our business relationship after I reviewed your insurance and found the advice from your prior agent lacking. Specifically, it was amazing to me that somebody of your assets and exposure didn’t carry a Personal Umbrella Policy … in fact, you hadn’t even been offered one. You were justifiably angry at the old agent, and moved all of your business to my agency and have trusted me to be your insurance agent ever since.

I spend a lot of my efforts to make sure I have a good staff on board, and I know that Jenny and other members of my staff have done a great job servicing your account as you’ve purchased and sold properties. They’ve kept me in the loop on every transaction along the way. I can’t blame them one bit for this.

I’ve met with you several times to review your insurance over the years, been invited to your home, and think about you, your family, and your account often. But, I absolutely screwed up here. It is a 100% a failure on my part, … a failure to followup and review an important area of your insurance. I should have put a reminder in my calendar to review, and despite my late night remembrances, I never followed up with you. I am genuinely sorry for that failure.

There was one time that I had to point out to my tax guy that he was missing a break that I was entitled to. It wasn’t more than a couple hundred bucks … but I told him it angered and frustrated me, and told him that it diminished my perceived value of his services. The second time that he made the same mistake, I fired him and found another, more competent tax person.

As you’ve pointed out, I can’t fix this mistake of mine. But I want you to know that it won’t happen again.

Please accept my apologies.

Asher


Warren was gracious with me. I quickly fixed the problem that my mistake had created, and got him back on track.

Had I become a Fat Cat Agent?! Was I becoming too distant from my clients' needs? Was this mistake a result of laziness? ... No. No. And No.

And how do I know that this whole snafu wasn't the result of a Fat Cat Agent at work?

Because I cared.

Because I felt that knot in my stomach when you've done something stupid, and then I took responsibility for it.

Because I fixed the problem.

And because I've vowed to never make a mistake like this again.

Our next president ...

Its all but decided now. Our country will be bailed out.

There's not much sense denying that some level of government intervention is needed at this point. The voices of opposition of a large-scale bailout form a very short list.

Every time I turn on check the news to get a feel for how our next president is going to lead our country through these difficult times, I'm dissapointed in what I hear. It often seems that neither Obama nor McCain are doing anything other than pointing fingers of blame at the opposition's failures.

To be sure, there is plenty of blame to go around. But am I the only one who wishes a little more blame was being spread my way? Yes, ... OUR WAY. Isn't it us ... we, the people ... that have borrowed and spent and lived so far outside of our budgets? Isn't it us that flushed the equities of our homes down the toilet when we refinanced away all our cares and troubles and brand new cars and credit card debts and fancy clothes? Isn't it us that lived as though we earned twice what we do? Isn't it us who spent as though our homes were neverending sources of free money?

And don't get me wrong here. I'm plenty educated to understand the failings of both our government and our corporations. But how about facing the cold hard facts that the American people have been just as greedy, selfish, and short sighted in our financial affairs as the larger power players? The reality is that we all have created this problem. Through apathy, overspending, and arrogance we've put our country at its highest level of dependence on other nations than ever before. We have historically low levels of savings, and historically high levels of debt. 'They' didn't really force us to spend all that money away ... did they?

Its time for our next leader to step up to the plate and deliver something that rises above the obnoxioius sound of desperate politicians.

Give me something compelling like JFK's "Ask not what your country can do for you...". Something confrontational and clear like Reagan's "A time for choosing...".

Give me something that relates the economic and international failures of the country to the failures of my family's heart and home.

Give me something more than blame.

Note to Lenders: New estimates please!

Anybody who's purchased a home will tell you that its a frustrating thing to have to come up with more money than expected when its time to close escrow. Although there are many causes for a closing cost estimate to be incorrect, one common issue is an inaccurate estimate for homeowners insurance.

When you get a loan, the lender will typically take the loan amount and multiply by a factor (what I'll now refer to as the 'guestimated insurance factor') ... to give you an estimated insurance cost. It has nothing to do with the house itself. No accounting for the twenty year old wood shake roof, the trampoline in the back, or the custom kitchen you are installing. Just a simple, cookie-cutter mathematical formula.

Lets look at how that might work on a basic deal. Lets say your house needs to be insured for $400,000. It might have a loan on it for $450,000 (your house price) X .002 (the 'guestimated insurance factor' used by the lender) = $900 (the estimate on your homeowners that is calculated in to your closing cost estimate). Let's say for our example's sake that the $900 estimate is spot on.

So here is the thing. From 2000 - 2007, we've seen the loan amounts on California real estate skyrocket ... before now dropping. During the first year of that spike in real estate prices, new clients would be happily surprised to find that their actual insurance costs were significantly less than the estimate. Let's use the same example above with an inflated home price / loan value. The same house would now have a loan for $650,000 X .002 = $1300 as an estimate for insurance, a difference of $400 from the original example. The client would be thrilled to hear that our policy was only $900!

However, lenders soon realized that the figures they were using didn't account for the inflated purchase prices / loan amounts. They want their figures accurate to qualify the borrower for the best / largest loan possible. Leaving $400 on the table annually didn't allow them to do that. SO, they dropped their 'guestimated insurance factor' to get their numbers more accurate. So now, instead of using .002, they changed their calculations to use .00138. The same house above with the same inflated loan amount of $650,000, with just a slight change to the 'guestimated insurance factor' would yield a more accurate rate of $900. $650,000 X .00138 = $900! Viola!

Problem is ... now the values have dropped on homes, resulting in lower loan amounts than before. Now our house that needs to be insured for $400,000 is only selling for $400,000. The mortgage folks are using the same 'guestimated insurance factor' (.00138 in my example), ... and the result? Our client is unpleasantly surprised to discover that his estimate is off. The lender calculated $400,000 (lower loan value here in Q3, 2008) X .00138 = $554. Thats $350 lower than the actual $900 premium ... which makes an unhappy borrower at escrow closing time.

All that to say ... "Lenders, its time to update your insurance estimates."

I thought unemployment was up!

I put a job ad up on Craigslist nearly a week ago. I figured with unemployment on the rise, we'd have a line of candidates waiting out the door. Number of interviews I've ran so far? ONE.

What gives?

In the posting, I put some very simple instructions to obtain an interview. The procedure I've used in the past when hiring is to collect resumes, review them, and call those that seem qualified. This time, I did things a little differently. The instructions are to send in the resume ... and followup with a phone call. I wanted to have the applicants demonstrate some genuine interest and the ability to follow directions.

So far, fifteen resumes have come in, only one called to followup.

Maybe Craigslist doesn't get as much exposure? Maybe people are intimidated to call in?

Strange.

Chapter 2 - The Real Estate Boom!

As I mentioned in my previous post, there have been three major insurance industry phases that have occured over the past ten years that have influenced the bulding of my agency. Today I'll explore the first of those phases ... The Real Estate Boom!

As a new insurance agent, old school sales techniques like cold-calling were taught to me as the sure fire way to be successful. But that marketing method never jived well with my business philosophies. I didn't like getting phone calls at my home during dinner time, regardless of the product being offered. So I wasn't about to do that to other people.

So how was I, a brand new insurance agent, going to meet new customers and sell insurance?

Simple: I marketed my agency to professionals in the real estate industry .... folks like Realtors, Mortgage Brokers, and Title Company Reps. On all real estate deals with conventional financing involved, proof of fire insurance (aka homeowners insurance) is required before the ownership of a property can change hands. My first goal as a new agent was to establish myself as the 'go-to-guy' among local Sacramento real estate professional working on escrow closings. Their clients needed the insurance product. They were going to buy it from somebody. I wanted it to be me.

Back in 1999, the insurance industry was really hurting. Several large carriers had stopped writing homeowners insurance in California. And the companies that stuck around had implement really strict underwriting rules: no wood shake roofs, no prior claims, no houses built over fifty years ago. Lots of people had a tough time finding a carrier that would write them, let alone give them individual attention and a fair price.

Looking back now, I see how the state of affairs in the insurance industry really helped a new agency like mine get started. Here I was, a young and hungry agent, marketing the heck out of local real estate professionals ... just at the time they really needed my services. Combine that with the fact that Sacramento real estate was about to go through one of its largest growth spurts, ... and you have the recipe for success.

My marketing efforts were pretty unsophisticated. I made excel spreadsheets of local offices, visited each office twice per month, traded business cards with the professionals I'd meet, and followed up with phone calls, emails, and hand-written notes asking for the opportunity to show them what I could do for their clients. I marketed myself as the guy who could insurance anything. As a matter of fact, the first marketing piece I ever did was a flyer with a picture of the parthenon, with a slogan "WE INSURE FIXERS." right smack dab in the middle. It was a great conversation starter with the people I was marketing, and clearly communicated what I could offer for them and their clients. Oooh... a quick look in the Styrsky Insurance archives finds me this ... not the original, this was a redone version, but you get the idea.

I hadn't planned it this way, but a trend developed. A Realtor would call me for help on some horrible deal they had going, something that required my immediate attention, took a lot of my time, and made me practically zero money, ... and I would take the time to help them. I'd fix the problem at hand. The Realtors were so grateful and impressed that they soon started to send me the good, clean, profitable deals too! Within six months, I wasn't just working on the place that had three prior claims built in 1920 ... I also had calls from clients who were moving in from San Francisco, buying a beautiful home in midtown and wanted a local agent to help. Over the course of the next three years, the core of my agency was grown by referrals from some of Sacramento's most succesful Realtors, Mortgage Brokers, and Title Reps.

I have to say that I am very proud of the way I grew my business back in the early stages of my career. Since the client came in as a referral from somebody they already trusted, ... I had instant credibility. I avoided being put in the position of the pushy, arm-twisting salesman who had to kick down the door to make a sale. Instead, a professional relationship was established right from the get go that allowed me to ditch that old school sales junk, and just get right down to the business of providing proper insurance for the clients I met with. Truly a win-win. I avoided the slimy underbelly of sales, and my clients got the very best advice around without having to worry about if I was taking them for a ride.

Chapter 1 - Getting Started

All the paperwork went through in January, 1999. "Congratulations," they told me, "You are now a Farmers Insurance Agent!"

I started from scratch. The agent I had worked for before was kind enough to allow me to take a few of my family's policies out of his agency and in to mine, ... maybe fifteen policies or so. But the transfer would take some time to go through. On Day 1, I had zero policies in force. I was young and ambitious. And very naive about how difficult a road was in front of me.

You have to understand a little bit about the insurance industry to appreciate how difficult it is to start an agency from the ground up. Unlike high dollar sales like real estate, cars, or mortgages, ... insurance guys get paid very little up front. A new home policy might cost the client $650 or so. First year commission for me? $97.50. ... And then, I had expenses to pay. Phone bills, business cards, E&O Insurance, ... all that good stuff. Take a look at this. My first paycheck in all its glory. A full month of marketing and sales resulted in this.

At one point, I was connected with a really old school, hard core sales manager. This guy was such a character ... straight out of a comic book ... he was the type of guy who had three martinis at lunch, smoked like a chimney, and cussed like a sailor. He used a no holds barred method to tear us up emotionally trying to get us motivated to sell. My wife met him once after hearing some horror stories from me. She commented, "Thats so weird. He seems like the nicest guy. Like my grandpa or something." The thing was, he WAS a nice guy. As long as it wasn't during business hours. He genuinely wanted success for all of us new agents. Its just that he was from an older era. He had been trained under an iron fist, and he had succeeded training others that way in the past, and so thats how he continued training right up until the day he died.

My manager's over the top angry sales manager antics never really worked too well with me. We butted heads on more than one occasion over everything from marketing to sales methods to dress code. He ultimately won the dress code battle with me by giving me free rent in exchange for a promise to wear a tie and shave my goatee. A free place to hang my hat and build a business? Deal. But we couldn't agree on marketing and sales methods. He wanted me in early in the morning and late at night hammering the area with cold calls. And in my free time, knocking on doors. That just wasn't (and still isn't!) my style. He wanted me to bring out the big guns of Fear and Guilt to sell insurance policies. I didn't (and still don't!) feel comfortable doing that.

And so, I was left to find my own way for the most part. Various trainers helped me here and there, but the way I wanted to build my business was so different than what they envisioned, they really didn't have a whole lot of input or advice to share with me. They were all trained in the tried and true old school marketing method of 'cold calls and X-dating', which I had already decided were not going to be the building blocks of my business.

Somehow, ... I made it. And more than that, I built an agency that even my old sales manager would be impressed with.

In my next entry, I'll highlight the first of three major insurance industry phases that have occured over the past ten years that have influenced the bulding of my agency.

Introduction - Pre-Insurance Days

My sales career had an illustrious start at RadioShack, Arden Fair Mall ... this was back in the early days of the free mobile phone giveaway programs (an outrageous, Purple Cow concept at the time). My sales manager told me to grab a clipboard and stand at the front of the store, right next to door, so that I could greet every person that walked in with an offer for a free mobile phone. We sold some phones, that's for sure. Led the nation at one point. I was pretty happy, feeling like I was makin' Big Bucks at $2,000 per month as a recently married full-time college student, but I didn't like the work on nights and weekends. I moved over to The Sharper Image (going bankrupt now), where the schedule was great, but the pay was horrible. Retail sales, with its pay based on evening, weekend, and holiday sales was not a good fit for me.

I figured that following the footsteps of my successful Real Estate Agent father would be a good way to go, so I asked him about it (little did I know that Realtors work plenty of evenings and weekends too!). "Son, nobody is going to buy a house from a twenty-year old rookie. It's a huge financial decision and people want to feel confident with their Realtor." Ah. He had a point. And so, I took my naive self down another path. Surely I can sell cars! (As if car salespeople don't work nights and weekends!) "They will hire just about anybody on a car lot, right? At least they'll give me a chance," I thought. Three interviews later, no job. Sheesh.

Back to Dad for some advice. "My boy ... have you thought about the insurance business? I have a guy that I refer to every time I sell a house and he seems to do pretty well. Let me see if he might have a position for you, ok?" The next week, I was working in the back office of a local Farmers Insurance agent's office where I experienced my walking-in-the-snow-uphill-both-ways introduction to the industry. My first task as an employee? Filing and mailing paperwork eight hours a day. I'm talking strenuous work here folks. Sore legs from filing-cabinet-crouches, paper cuts on my hands every day, ... TOUGH WORK.

My wife, Janice, dug out this photo of me from back in my days as an employee. Look at that cheesy smile! Just over a year after I had been hired, I had obtained my insurance licenses, been promoted out from the back room, and become armed with some experience and insight in to how the insurance industry operated. In December of 1998, I decided to strike out on my own.