PATHWAY TO PERPETUATION

New PIA program helps agency owners value their businesses and plan for succession

By Elisabeth Boone, CPCU

“Does anybody really know what time it is? Does anybody really care?”

Those lines, made famous in the 1969 debut album of the iconic rock group Chicago, are engraved in the brain of anyone who grew up in the era of Woodstock and the hippie culture.

Among independent agency owners, I think it’s fair to say that a good number may not really know what time it is when it comes to planning for perpetuation. Some may assume their kids will want to take over the business while others dream of a fat payday when a mega-broker comes to call. Still others may have started to make a plan but abandoned the process when more pressing issues arose. And what about the owners who haven’t even thought about retirement or what lies beyond—let alone what would happen if they suddenly fell ill or died?

That’s the not-so-good news. The good news is that the National Association of Professional Insurance Agents (PIA) and its carrier council, The PIA Partnership, have launched a new agency perpetuation planning program for PIA members and agents who are appointed by carriers that belong to the Partnership.

Members of The PIA Partnership are Central Insurance Companies, Encompass Insurance, Erie Insurance, Liberty Mutual, MetLife Auto & Home, National General Insurance, Progressive Insurance, Selective Insurance Group, State Auto Insurance Companies, and The Hanover Insurance Group.

The Agency Journey Mapping program guides agency owners through the process of determining agency valuation based on cash flow potential and future earning potential. Participants then learn how to create a personalized plan for internal or external perpetuation to achieve the goals of the perpetuator, the successor, and agency employees and clients.

Awareness and action

How aware are agency owners of the need to perpetuate, and to what extent have they undertaken the planning process?

We put these questions to Alexi Papandon, PIA’s senior vice president of products and services, who spearheaded the creation of the Agency Journey Mapping program.

“PIA has conducted research with The National Underwriter over the last few years in which we have asked agents specifically about perpetuation,” Papandon responds. “While I’m happy to see that a number of agents have prepared perpetuation plans, we’re finding that quite a few agents don’t have plans in place.

“I’m concerned that many agents are seeing other agencies being bought for good prices and thinking they don’t have to worry so much about perpetuation. A lot of transactions are taking place now, but that trend may not last and that option may not be available to every agency,” Papandon remarks. “Furthermore, that doesn’t help if an emergency occurs and no plan is in place to keep the agency afloat and prepare for the possibility that a purchase offer will be made. We’re committed to making sure that agents prepare in advance for both the expected and the unexpected.”

That commitment extends back 10 years when PIA introduced Perpetuation Central. “It was a do-it-yourself perpetuation planning program,” Papandon explains. “For many years it was the most popular program launched by The PIA Partnership because this topic is so important to our members.

“A couple of years ago, we decided to refurbish that program to incorporate new technology and content and make it more accessible to agents,” Papandon continues. “We decided at that point to rebuild the program around a live seminar that’s hosted by Al Diamond of the Agency Consulting Group. He’s conducted seminars in a number of states around the country for PIA affiliates and also for PIA Partnership carriers.”

Agency Journey Mapping began as a series of live seminars held across the country. A recorded version of the program is available on demand, along with an extensive resource library.

Agents who prefer a live seminar can indicate that choice on the Agency Journey Mapping website (www.agencyjourneymapping.com). Live seminars usually qualify for four hours of continuing education credit and include a 30-minute private session with Diamond.

“After a seminar, agents have access to a rich body of resources, all of which are referenced during the seminar so agents can understand them and put them in the context of their own perpetuation plans,” Papandon says. “We think that presenting this body of knowledge up front is key to the process because there’s so much agents need to understand about perpetuation. The strictly do-it-yourself approach assumes the agent will spend a lot of time educating him- or herself before trying to create a plan. The reality is that agents want to step right into the process, so this background information serves as the building blocks for perpetuation planning. We then give agents the resources they need to create their own perpetuation plan, including access to an expert who can answer questions and provide guidance throughout the planning process.”

High fives from an agent

One agency owner who has a lot on his plate is Tim Baxley, MBA, CIC, AAI, president, chief executive officer, and sole owner of Statewide Insurance Group, Inc., in South Carolina. The agency has offices in Beaufort, Chapin, Charleston, Myrtle Beach, and Pawleys Island.

“We’ve been seriously thinking about perpetuation for the past five years,” Baxley says. “My children are grown; my son is an underwriter and seems to like the company side better than the agency side. My daughter is an attorney in the Northeast, so she has no interest in the agency. I’m not a spring chicken anymore, so preparing for perpetuation is top of mind for me.”

What are Baxley’s plans for retirement?

“I’m not sure I have ever met an agency owner who has fully retired from the business,” he comments. “Even when they say they’re retired, they still have some pet accounts that they enjoy talking to at renewal every year. I don’t foresee myself ever getting out of the insurance business entirely. I love our great industry, and a lot of our clients throughout the state are people I’m pleased to call friends.”

What options is Baxley considering as he undertakes the perpetuation planning process?

“Over the years we’ve been approached many times about being acquired by large national brokers,” Baxley says. “A key concern is having an acquiring firm keep me and our team on for at least five years, with the option of producing on a limited basis if I still want to do that. This is the most attractive option to me. We’re not ready to make the change yet, but this approach is part of our planning process.”

As an agency owner, Baxley observes, “You have to be flexible. Your health may change. Your family situation may change, and your perspective may change.”

Should one of those events occur, he says, “We have a number of executive officers who have been with us for many years and can step in and pick up the slack here at our headquarters in Myrtle Beach.”

Baxley first became aware of PIA’s Agency Journey Mapping program in 2018 and signed on last September, choosing the live seminar option.

“Participating in the program opened our eyes to many issues we had not yet considered,” Baxley says. “We thought we were very good at what we did in perpetuation planning. Apparently we knew just enough to be dangerous,” he says with a laugh. “The seminar provided broader strokes and also addressed the specific items that we needed to consider in developing an agency valuation. I think all agency owners should attend a seminar like the one we went to with Al Diamond. The seminar significantly exceeded our expectations.”

Does anybody really know what time it is? Whatever your age or circumstances, it’s time to think seriously about how you want to perpetuate your agency and who will guide it in the event of an emergency.

For more information:

Agency Journey Mapping

www.agencyjourneymapping.com