TECHNOLOGY’S ROLE IN YOUR AGENCY’S VALUE

Making use of insurtech offerings that drive value and efficiency

By Chris Paradiso

Technology is changing the insurance industry. In 2021, insurtech firms raised in excess of $15 billion in funding; over 560 deals were completed. Those are staggering numbers and we’ve seen no signs of a slow down until the second half of 2022.

We have seen many new companies enter the insurance marketplace; while a number are focused on disruption, there are more looking to build on the infrastructure that exists in the industry today. This year, we have watched and experienced the impact of companies that have merged, evolved, and failed.

As agency owners, we are faced with an incredible number of technology options. Deciding what path or paths to follow can be difficult and very confusing, leaving many of us overwhelmed. Owners and other agency leaders of tomorrow know that adoption of technology is more than just a series of purchases; it is a necessary cultural change that will allow the agency to thrive in the coming years.

Our technology journey requires that we have an open mind, vision, and buy-in; all are required if we want to have a successful future in the independent agency channel.

Positive change

Technology’s impact becomes exponential when we pair the right technology with the proper execution. Many agency owners look at technology as an expense, but we cannot have a mindset like that. We must keep an open mind and do our research before we pull the trigger on the technology we would like to implement inside of our agency.

I’ve seen many agency owners avoid jumping into a technology culture change because of fear and/or unwillingness to change within the agency. The biggest driver of failure I hear about from fellow agency owners is that staff members are not willing to change and they refuse to embrace the technology.

Of course, change can be very scary, but staying stagnant or, as many people say, “doing things as we’ve always done them,” will not lead to a successful future. The very real gap in technology adoption is causing many agency owners to remain stagnant and experience very little growth. Agencies that have adapted technology and embraced the changes are in position to acquire, while those who have not are being acquired.

Data and technology will shape my agency’s future and the future of our industry.

Our technology journey requires that we have an open mind, vision, and buy-in; all are required
if we want to have a successful future in the independent agency channel.

Valuation impact

I have learned from independent agency consultant Carey Wallace, founder of Agency Focus, that most agency values are based on growth, profitability, volume, and retention. The adoption of data and technology has been and continues to significantly impact all of these areas.

The biggest risk an agency has for its book performance to be negatively impacted is when a transition of ownership occurs. This is usually caused by a strong dependence on a specific person in an agency, raving fan/key influencers, specialized expertise in a specific area, or access to a program that may be exclusive.

Knowing an agency’s areas of weakness and strength can help define what strategies and technology you as an agency owner need to focus on.

Reputation and retention

In my agency, our biggest focus is on improving our retention strategy, because this has such a big effect on our agency’s growth. Finding new ways to retain business is key to our annual success. We do this with the help of technology such as ClientCircle, a multi-faceted software built around customer relationship, reputation, and referrals. ClientCircle integrates with our agency management system to help us identify and understand our Net Promoter Score® from our clients.

Another key to our retention is a piece of technology called Donna, which is offered by Aureus Analytics and which uses the ability to get a SentiMeter^® score, a client-experience measurement that does not require us to survey our clients. It gives us data on whether our clients are happy with us—or unhappy and looking to leave our agency.

These two pieces of technology are instrumental in our ability to retain business. Of course, the data that we gather from them are only valuable to the extent that we use them. What I mean is, if a client is unhappy with us and gives us a Net Promoter Score of five, we must pick up the phone and find out why they are unhappy and come up with solutions to fixing that relationship.

If we do nothing, the results will be the same whether we have the technology or not. The Donna product also finds cross-sell opportunities that are placed right in front of us as we do our annual renewal calls. This has been game changing to our agency’s bottom line.

Scalability and profitability

In order to scale in today’s ever-changing insurance world, we must embrace technology such as Tarmika, a commercial lines rating offering. Using a product like this allows agency owners to turn small commercial insurance into a profit center much more quickly, because the technology allows us to quote many commercial carriers in a matter of minutes. Doing the same work manually—carrier by carrier—used to take considerably more time.

This type of technology not only allows you to be more profitable but allows you to scale. Without the ability to scale and be more profitable your agency is worth less on the open market.

Act now

Successful adoption of technology can have an exponential impact on your agency’s future. Not only will it transform your culture but also transform your procedures and processes.

Technology does not replace people—it only enhances your teammates’ ability to do a great job.

We must change our mindset about the insurtech industry and look at it as an asset that we need to pay constant attention to. We must always be re-searching what’s available so that we can find the next great piece of technology that will enhance how we do business.

Technology, people, and data are where we should be investing our money.

The author

Chris Paradiso is president of Paradiso Financial & Insurance Services, head-quartered in Stafford Springs, Connecticut. His agency won PIA National’s Excellence in Social Media Award in 2013. He also heads up Paradiso Presents, LLC, which provides social media consulting, seminars and workshops to help agencies thrive in the online marketing world. Contact Chris via email at cparadiso@paradisoinsurance.com.