RIPPED FROM THE HEADLINES

An article included in many insurance industry trade journals over the last few days cited a recent study by Vertafore, in which nearly 2,000 insurance professionals identified the following key issues facing their agencies today:

• The state of the independent insurance agency
• Market conditions are taking a toll on agency staff
• Powering up on technology in the hard market
• The hiring challenges agencies face
• Technology is essential to agency employee retention
• Insurance professionals are working longer

While we have not read the entire study, the headline caught our attention as being validation of many of the issues we have raised in our consulting work, our classes and programs, and our recent Rough Notes columns, including this one, which was already in the works.

The state of the independent agency. Coming up on five decades in the insurance industry, it seems that nearly everything has changed while some things never have, to wit, the prediction of the imminent demise of the independent insurance agent.

We’re not sure if this is just wishful thinking on the part of people who embrace a different distribution system or something based on actual data, but our belief then and now is that the state of our independent agency system is strong and will continue to be so if progressive agencies continue to make changes to adapt and respond to a changing business environment.

We have been constantly reminded over the years that we are but one misstep short of going the way of travel agencies, stockbrokers, and buggy whip manufacturers. But here we are, still over 40,000 strong, and, according to recent reports from the Independent Insurance Agents & Brokers of America (IIABA), still placing over 62% of all property and casualty premiums through our distribution channel.

Apparently, to paraphrase Mark Twain, the reports of our death have been greatly exaggerated. Despite massive amounts of mergers and acquisitions, the number of independent agencies stays fairly constant, which speaks to the fact that it is still a desirable business to be in.

Market conditions are taking a toll on agency staff. We could not agree more. Especially in the harder-hit states such as California and Florida, account managers and producers have the heart-wrenching task of telling their clients—people with whom they’ve had a relationship for years—that they simply have no answers for them and that it’s probably best they look elsewhere for coverage.

The stress that goes along with a hard market will surely manifest itself in several ways: more resignations, time off for stress-related disorders, and a loss of productivity as staff members’ morale hits rock bottom. Management should remain vigilant in assessing people’s mental and physical well-being during this tumultuous time, which does not seem to have an end in sight.

Powering up on technology in the hard market. It’s a shame that it takes a marketplace disruption for agents and brokers to make additional investments in technology, but that seems to be happening. With staff members stretched to the max trying to find a home for both new business and existing clients, technology, including artificial intelligence (AI), can be harnessed to automate some tasks that have been traditionally performed manually.

Technology will never replace people as it’s not capable of having a relationship, but it can and should be used to streamline agency operations and help maintain lines of communication at this time.

The insurance-buying public, particularly in personal lines and small commercial, simply don’t understand the many factors that have conspired to create the current market. It’s up to agents and brokers to don their educator hats and advise people what is causing the current increase in prices, what’s in store for them in the near term, and how to maintain their insurability in the future.

Many agencies struggle with formal communication, but this is where AI comes to the rescue. Quick, clear messages sent on a regular basis will go a long way toward managing expectations.

The hiring challenges agencies face. In a previous article, we discussed in some depth what agencies should do to attract talent now and in the future. This challenge will not be resolved quickly or easily.

Since COVID, employers have faced The Great Resignation, Quiet Quitting and The Great Resignation 2.0. Demand for labor has greatly exceeded employees’ desire to provide it and the pendulum has swung to the point where talent can seek the best opportunity for itself, pretty much on terms they dictate.

While disconcerting to many agency owners, wages are no longer dictated by geography, since remote work can be performed by qualified people from any location. The job is worth what the marketplace dictates and people with the skills, knowledge, and attitude to perform at a high level will be paid accordingly.

Experienced people have more employment options than ever before, so the insurance industry will have to lean in on identifying those individuals with the “right stuff” to do the job, and then training and developing them into high performers—something that has not always been a strength of the independent agency system.

Technology is essential to employee retention. Use of technology has long been the Achilles heel of the insurance industry. We are constantly bombarded with comments from younger people on the state of technology in the independent agencies in which they work. They can’t be fooled any longer by the practice of putting lipstick on a pig—they recognize swine when they see it!

Think how ridiculous it seems to a Millennial or Generation Z employee to have to wait until the next day for a download when they are accustomed to real-time transactions.

We were recently questioned by a group of account managers who wanted to know why the insurance carriers seem to “push” download when they see it as a complete waste of time, especially in commercial lines where it has never been perfected. The only answer we could give is that its continued use seems to serve the insurance companies’ interest, as it avoids a major expense and works reasonably well from their perspective.

Insurance professionals are working longer. Without having read the entire study, it’s unclear whether this means they are working longer hours or they are staying in the profession until a later age, but both are likely to be true.

Most people thought that during COVID people who were remote were working fewer hours. In our experience, the opposite was the case. People weren’t working from home so much as they were “living at work.” At least when they left the office, most people felt the workday was over and it was time to have a life.

While the ability to work from home has certainly come to be an important consideration for many employees, it comes at a cost. Account managers, in particular, admit to answering email and performing work-related tasks while “off the clock.” This is problematic on several levels, not the least of which is the fact they are not being paid to do it.

We know employees are suffering from “burn out” in this current hard market and that it’s taking a psychological toll on them (see point number two above). Now, more than ever, people need to be able to disengage and separate work from their personal life. In fact, this is a key component in evaluating a prospective employer to most people in the younger generations.

If insurance professionals are working later in life, there are several things to consider. First, perhaps it’s because they are enjoying what they do so much there’s no reason to retire. Second, what would they do? Retirement is overrated to people who are fulfilled and pursuing their calling and who are still able to perform at a high level.

If the reason people are “hanging on” is because they haven’t done a good job of identifying their replacements, that’s another matter and something that should be addressed in every agency.

Think how ridiculous it seems to a Millennial or Generation Z employee to have

to wait until the next day for a download when they are accustomed to real-time transactions.

Certainly, the number of agencies that have been sold to others is indicative of the fact that succession planning has not been addressed as it should have been. Especially in family-owned agencies, many owners thought they would pass the agency on to their children, only to find out, perhaps when it was too late to make another plan, that the next generation wasn’t interested in taking over those agencies.

We encourage you to read the study, which is available for no charge, at www.vertafore.com/sites/default/files/documents/Vertafore-2024-Insurance-Agency-Workforce-Report.pdf. Since we have yet to read the entire study, any thoughts included in this article that duplicate those of Vertafore are merely a coincidence rather than plagiarism—or perhaps just that great minds think alike.

The authors

Cheryl Koch is the owner of Agency Management Resource Group, a California firm providing training, education and consulting to producers, account managers and owners of independent agencies. She has a BA in Economics from UCLA and an MBA from Sacramento State University. She has also earned several insurance professional designations: CPCU, CIC, ARM, AAI, AAI-M, API, AIS, AAM, AIM, ARP, AINS, ACSR, AFIS, and MLIS.

Mary M. Belka is owner and CEO of Eisenhart Consulting Group, Inc., providing management and operations consulting to the insurance industry. She also is an endorsed agency E&O auditor for Swiss Re/Westport. A graduate of the University of Nebraska, Mary holds the CPCU, ARM, ARe, RPLU, CIC, and CPIW designations.