As I write this article 50% of the American public is elated and 50% is depressed over the outcome of the national election. By the time of publication we will all have had time to get used to a wealthy, non-politician President with historical media exposure more as a personality than as a leader. I was around for the first time this happened when 50% of the American public was fearful that the “button” would be pushed and we were headed for Armageddon.
As I remember, that period of our lives wasn’t too bad – for individuals and for businesses. I hope and trust that the scaremongers that pictured the future of the country in extreme terms are wrong again and, while half of us won’t like the direction of the country (by the fact of political motivation alone) the result of the election will, once again, be directed by someone who wants the best for the country.
The P&C business in 2016 was relatively stable. Agency ownership transitions continued to accelerate, but not because of business failures. Our network of independent businesses are operated by folks in their 50’s, 60’s and 70’s. If you are an agency owner in your 30’s and 40’s consider yourself in prime condition to benefit from the conversion of agencies in the next few decades. The reason we continue to see so many agency sales is because we did poor jobs preparing our own Succession Plans.
In general when you see agencies sold to conglomerate’s, regional agencies and national agencies it is because the seller was ill prepared to continue their agencies internally. Owners faced the fact that they could only get the value of their asset by selling outside of their agencies to larger insurance groups. We expect that to continue into the future as the big agency groups continue to grow by commoditizing the agency business for greatest efficiency. Unfortunately, the loss of small and medium sized independent agencies may not be as beneficial to the employees and to the clients who were used to more personalized service and a local culture. Historically, the independent agency was, like the local doctor, a cultural fit for residents who wanted to deal with someone they knew and trusted to protect their assets and their families. All promises aside of local representation, the economies of scale of larger organizations surrender some of the personalized service in favor of business efficiency.
In 2017 we will begin a series of seminars in every state sponsored by state PIA affiliates on the subject of Succession and Perpetuation Planning that will teach agents how to achieve value as strong (if not stronger) than they would get from outside buyers as well as the basics of agency valuation (no, it’s not a multiple of anything) and how to internally perpetuate their agencies if they would prefer to safeguard their employees and clients from a conversion to a different type of service “culture”. You will soon see and hear from your associations regarding the scheduling of these seminars locally.
P&C agencies have been enjoying resurgence as we have finally learned how to attract new customers through effective advertising and marketing instead of competing with our direct writing competitors by getting on their level and simply quoting price. The agency carriers generally have rates competitive with the non-traditional markets but we will never gain long term growth by playing on their field of PRICE. They want to convince the consumers that all insurance is the same and that price should be their only consideration. This has worked in the personal lines market causing the agency system to lose some 20% of the market to the non-traditional market over the last few decades. This works until claims occur and the customer is exposed to less than generous settlement of claims with no advocate beyond the carriers, themselves, to stand by the insureds. Without that advocate the customer is trusting the wolf to guard the henhouse in the event of a claim. The agents who have become advocates for their clients and publicize the fact are gaining customers and keeping more customers. We see personal lines growth in agencies with proactive claims handling and on-going communications with clients (not waiting for client complaints to communicate with their customers).
Commercial lines growth was also seen in 2016 although much of that growth remains in smaller commercial lines. The competition for medium and larger commercial accounts appears to be coming from program managers who continue to grow new programs specialized for different types of commercial clients, not from the direct writers. Both traditional agency carriers and direct writers continue to sell standard commercial lines products while the innovative companies are focusing their products to the needs of specific client groups.
In 2016 we took a role in the evolution of Monday Morning Markets, a company dedicated to a revolutionary new marketing device for independent insurance agents. It was created to act as the intermediary between Program prospects, the independent insurance agents local to those prospects and the innovative program managers throughout the U.S.
Monday Morning Markets gives agents exclusive rights to market featured programs and is signing up Program Managers who want full penetration of their specialty program in their marketing territories. There is no cost to the agents for participating and Monday Morning Markets currently has over 700 specialty programs that will be placed on agency websites for marketing to the prospects in their areas.
In 2017 Monday Morning Markets is expanding by offering agencies full multi-media, multi-step marketing programs that include identifying all program prospects, marketing to those prospects and referring all leads to the sponsoring agency. This resolves a multitude of issues that have made the distribution of specialty programs difficult, a) the distribution and education to agents about specific specialty programs that provide better coverage at more reasonable cost than standard markets, b) the service of active marketing of programs to acquaint and familiarize prospects within an agency’s territory with the programs AND with the agencies, and c) the referral of all targeted prospects direct to the agency to form relationships and sell new coverage. Agents interested in obtaining a territory for Monday Morning Markets (at no cost) should link to www.mondaymorningmarkets.com for more information.
The health insurance industry has been in the throes of panic since Obamacare was enacted. Many agencies simply stopped selling health insurance. However the progressive agencies studied the complex program and have been helping their clients negotiate the requirements of the program. As of November 8, 2016 the results of the national election will most certainly convert this failed program to another form of insurance much more friendly to the independent agency system. Agents should learn all they can as the health insurance industry re-converts to a different concept and they will enjoy the benefits of aiding their clients in re-establishing health insurance programs over the next several years.
2016 has been a challenging year full of succession plans, perpetuation issues, new marketing programs and growth for many agencies in both personal and commercial lines. Health insurance has either been dormant or an aggressive consulting source of income. We see 2017 as another growth year for agencies that have set assertive goals for themselves.