The Better Way Agency | The Big I Fall Leadership Conference

I'm Roger Sitkins.

I'm Dave o'. Brien.

We want to thank you for being here today. It's really an honor and a pleasure to be here. Last night was a lot of fun. Got to meet a lot of new friends, got to meet some old friends, had some comments that were greatly appreciated and humbled. Thomas Edison was a longtime winter resident of Fort Myers, Florida, my adopted hometown. And he had a saying that drove everything in his company. There's a way to do it, better find it now. Mr. Edison was America's greatest inventor with almost 1100 patents. You know, we all think about the phonograph and the light bulb, but overall, about 1100 patents. Well, after 35 plus years of consulting, training, working with independent insurance agencies and their associates, I found a better way to do business. A better way to have a high organic growth. Very, very profitable agency. The first agency that was ever a better way agency started at $130,000 of gross commission income, three employees, including the owner. Twenty, 20 years later, he was a $10 million income agency. All Organic Growth had 23 employees before he hired his first outside producer. It was all internal growth, the internal staff selling personal lines and small commercial. This past June, I worked with an agency in a small town, small Midwestern town. Two young guys, 32 years old, as the owners bought an agency that had a million dollars of commission income. Six years later, it was 5 million of commission income, all organic growth. Probably the most exciting thing to me about it is the fact that they were doing everything right. And I always look at key indicators such as revenue per employee, revenue that the csrs handle. In this agency, their average personalized, what we call personal risk manager was handling $650,000 of revenue. The best practice study says that the average personal line rep handles about $300,000 of revenue. So there truly is a better way to do business. The better way agency. Dave and I both believe that these are very, very scary times. And I think a lot of times agents don't realize what's really happening out there at scary times. But we also believe it could be the most exciting times ever. It's scary, number one, because of commoditization. I'm sure it's something that your agents talk to you about all the time, that it's just become a commodity game, that everything is about price, price, price, and the agents can't differentiate. Everybody says, you know what, you guys are all the same. It's all about price. It's that commodity or vendor thinking. Now our friends Flo and The gecko are spending a billion dollars a year each telling the consumer, click here for a free quote. Call this 800 number for a free quote. We'll. We can save you money. We can save you money. Our concern, and a lot of you know this analogy, our concern is that the average agent may be like the travel agent. Travel agents never saw it coming. They never thought they could be replaced by this thing called the Internet, whatever that was back then, or that a mouse could replace a travel agent. And yet people clearly are going through and they're just clicking on Expedia or whatever. They're getting all the prices, all the options. They choose one, they click on it, they get an electronic ticket, and they got replaced by the Internet. Now, a lot of agents try to play the commodity game. And this is a sample website. We took the agency's name off, pretty cluttered, but if you can see the top, it says home quote, auto quote, flood quote, liability quote, business quote. And down in the right hand corner, you probably can't read it, it's so small, but it says, get your free quote in seconds. So what are they doing? They're obviously trying to compete in a commodity game. Well, I don't think you can win that commodity. As a matter of fact, what they're doing when they do this is they break a rule that if I've ever spoken at your state association or some of you at some of our events, you remember this. No practice quoting. They're doing a lot of practice quoting. In fact, what they've done is they've automated the practice quoting. They've sped it up. Practice quoting is the art of providing a quotation to an unqualified prospect in order to get the incumbent agent to lower their price while retaining the account. It's just not a great way to do business.

So let me ask you this question. How many people are familiar with the company on the screen here? Raise your hands. Okay. Imagine these guys getting into your business because Google is getting into the insurance business. Now we're going to do this magic trick. I don't have any technology in my hand, but it's great when I do this. Look how that works. Isn't that really cool? That's going to be my cue for Roger. How many people are familiar with. With Zenefits, I named a few. Probably just a few. Here's the interesting thing. It's a company you should get to know very, very quickly. They are the fastest startup company in California's history. They three years ago, there were zero. Today, they were 100 million dollar company with 1800 employees and their name is somewhat of a misnomer. Here's what they are. He comes out and they have a total bend administrative system. So employee onboarding, offboarding, you can choose your employee benefits, right? All of that phenomenal software, very, very slick. It's really geared for smaller employers. But he's already moving up the line and it's free. And how is it free? He's an insurance broker and what he's doing is saying you can get the software free. Just give me a broker record letter both on the benefits and on the property and casualty side. Okay? So I can tell you right now, there's a very large prominent broker here in New Orleans that lost their largest client, both benefits and pnc, both sides of the house, due to Zenefits. And this is what's coming. All right? If you look at the screen as we keep going, all of these companies all of a sudden is something an insurance agent or broker has to start to worry about. The game is changing out there for the broker. If that isn't enough, let's throw some more fun into this. Is that in the PNC side we have a soft market, right? So on the soft market, commissions aren't exactly going up for the broker. At the same time, when you look at the benefits side due to Obamacare, ACA, they have what they call the MLR. MLR is medical loss ratio insurance carrier can only have 15% in expenses. Guess where brokers commission falls. Right, right in that line. So insurance companies across the country are all. Brokers are getting letters, brokers and agents are getting letters. And guess what? As we move forward, commission scales are coming down. This year already estimated $300 million just went right out of a broker or agent's back pocket. Right? Disappeared in there. And they've got to figure out not only how to compete against those other companies, but do it with less dollars.

Next scary thing out there we see is a talent gap, something that all agencies are dealing with. Okay. It really is the number one thing. When I ask agency owners, what frustrates you the most about your business today? What are you most concerned about? And whether it's a three person agency in Fort Myers, one of my buddies that belongs to the same golf club I do, or a discussion I had last year with the CEO of one of the national brokers with 7,500 employees, they all say it's talent gap and they're always trying to hire people with insurance knowledge. I think that's a pretty expensive Way to get talent. And then more importantly, does sometimes insurance knowledge come with baggage? Yes or no? Yeah, absolutely. So what we see is there's this talent gap, and then on top of that, we have an aging workforce. Report I read recently said that there are 2.5 million people in the insurance business, but a little over a million of them are age 50 and older. That means that in the next 10 to 15 years, we have to replace 40% of the workforce. 40% of the workforce. Or maybe what we have to do is get more efficient and replace 20% of it, but it has to be replaced when they finally hire people and they bring them into the business. And I'm preaching to the choir here, what do they spend on training and education? Well, the best practices study shows very clearly that training and education as a line Item is only 4%. That's all they spend. And yet, if you look at other professional services firms that are very profitable, they spend 2 to 3%. Well, I think it's about hiring talent first. How many of you, by the way, when you graduated from high school, had any insurance knowledge? Two. Okay, how about college? Did we gain some knowledge in college? Maybe three or four. I have twin grandsons, Nolan and Logan, and they're. I'm prejudiced. I admit it. They're really sharp kids. And I'm already talking to them about getting into the insurance business because I think it's a great business, and I think we'd all agree it's a great business to be in. They're really sharp today. They have no insurance knowledge whatsoever. They do dress for success, though. That's when they were eight months old. They are now 10 months old. And the one with the glasses kind of looks like his Polish grandfather.

On top of that, Right? So if the workforce is changing for the broker, what does that mean to their customers? And one of the biggest things that's facing a broker today is look across the table. Who they're dealing with today isn't going to be who they're dealing with tomorrow. Here's an Interesting stat. 2020, not too long from now, right? 2020, millennials will make up half of the workforce. Think about that. Millennials make up half of the workforce. And if you look at how baby boomers operate, right? Look and think of how you're teaching to people, right? As the young youth is coming up, they're a little different today, aren't they? So, typically a broker. Let's sit down. Let's have a renewal meeting. Let's have a lunch. You're engaging conversation. The CFO who's 55 years old, right. That's kind of what they like. That's changing very rapidly on an agent and a broker right now. If you look at millennials, how are they? How do they operate today? Matter of fact, millennials aren't great at having conversation and across the table. And you know what they want? They want technology, they want automation, they want 24, 7, get me my answers now. Use technology to get it for me, right? And I don't want to pick up the phone. Matter of fact, they don't even know how to use a phone. They'd rather, you know, they just text and email. And so an agency, a brokerage operation, I use those terms kind of together, right. Has to adjust now to the changing face of the buyer as well.

We see all these things, these scary things coming together where agents are losing market share. We hear it all the time. It's a great concern. And the ones that are still in business and doing okay are. I always have litmus tests I look at. And here's one. Are they doing a great job and are they creating full time clients? A full time client means they buy everything from the agency. In small to average commercial lines, only 51% of the customers buy everything from one agency. In personal lines, only 10% of the customers have three or more policies with the agency. 67% are one policy. Tremendous concerns about what's really happening out there. Another interesting study that was just done. 1000 professionals were surveyed about their relationship with insurance agents, financial planners, et cetera. 53% said their financial advisor would not recognize them if they passed them on the street. So this becomes the whole thing about it's a commodity relationship, it's a transaction relationship. It's not a true trust based relationship relationship.

So now after all that we just said, you probably look at this screen going, what are you guys, nuts? That's awful, right? Could it be any worse? At this point, I will tell you, I started out as a broker in 1992, smiling and dialing, let me market your plan. And it was terrible because medical trend was 2, 3%, the PNC market was soft. I mean, nobody cared. It was just not a lot of interest. Today, the market couldn't be any more dynamic. And we say it's the best time ever for agents and brokers. What we should say is for some of them, and it's the ones who can't have their cheese moved and actually engage, roll and take advantage of the brokers that don't. So it's no longer can a broker function the same way and go like that website. We saw quotes and let me quote your plan and things that basically we did in the 90s. It's now changing on the broker. So really what is it about today it's about the amazing client experience. And what's interesting, when you walk into a brokerage oper an agency and you go, what is it? What makes you guys great? And the answer always is it's our people and our service. You go, okay, I get it. But if I line up a hundred of you in a row, how do I distinguish between that? That doesn't mean anything to me. What is that client experience? You need to be able to focus on that and bring that really to a wow. I love working with this insurance agency. And how do you do that? Okay. And if you look at their companies and you think of great service. Right. Companies come to mind. I would argue this hotel. I don't know about you, but when I got out, unbelievable greeting, very friendly. It was nice. What can I do for you? Here's the reception desk. Anything else? Fantastic. Right? Today for an agency, they've got to figure that out. So how do you get there? What should they be doing? Well, the good News is at XYWave we work with 3800 Brokerage Operations Agencies across the country. We actually have an office in the UK and in Canada, but majorities in the United States and we work with them. We survey a lot of employers out there, companies and ask them, what are you looking for in an agency and a broker? And this last survey we just did a couple months ago was a thousand companies across the United States and asking what are you looking for in an insurance broker or agent to find out what should they be doing to create that amazing client experience area of all lines, benefits, P and C compliance and HR. 70% said very important, 28% said important. So 98% of companies said this is important and pretty important. Instead they would change brokers who don't provide this. A third of them would say, if you don't even do this, we're gone. The question is, do brokers provide that or not? And I'll tell you in a second communication. On the benefit side, they'll work with a broker communicates regularly. You know what the definition of communicate regularly is? 5 years ago it was quarterly. Companies told us they wanted to see their agent and broker quarterly the most. Today it's monthly. So think about that. In five years it's changed that fast. Great news for the broker you know, it'd be worse if it was the other way. Right. I didn't want to see the guy. Right. They actually want to see you because it's getting more complex out there. Right. 33% again, would change brokers who don't provide that administration. This is that Ben Admin, that type of thing. It's weird. Insurance agencies are getting a lot more involved in this game. And I will argue Zenefits is one of the big things that's really pushing that. They're changing the expectations of what a broker provides. Today, it's 50% said it's very important. Okay. It's another 30% who said it's important. So it's 80% all of a sudden are saying, yeah, it's important or pretty important for a broke to provide this. 33% again, would change if a broker didn't provide this. Risk management on the P and C side, 60% very important again. Another 30% said important. So really 90% are saying it is important that a broker is doing this. Check this out. So over 90% are saying it's really it's important or very important. 50% say they're even getting it from a broker. And one final part communication on the P and C side again, 75% said very important. Another 20%, so 95% said important or very important that the P and C broker communicates regularly. 42%, it starts to climb. Said to change brokers who do not. Now the question is, are brokers providing this? And here's the interesting part. Here's the thing that really, if brokers and agencies need to understand is when we ask these firms, is your broker providing it? On average, 30 to 50% are saying, we're not getting this from a broker. So if you want to start talking about that amazing client experience, it isn't that difficult. The roadmap is already clear. They're already ready to go. The brokers, though, need to change. Right? And making sure that they're providing that for all of their clients.

So imagine this. Imagine that there is a better way. Imagine that agents can go from being a vendor. And if you were out on Bourbon street last night, you saw a vendor selling hot dogs on the corner, a vendor of a commodity to truly become a trusted advisor, somebody that's at the same caliber as their banker, their attorney, their cpa, perhaps their wealth manager. But there's really another level. And if you're taking notes, it's worth writing this down. It's getting to the point of being indispensable. Partner, an indispensable partner to the agency, to the client. So that everything they do is priceless. They're saying we get all of these things that the survey said. So again, are they vendors, are they trusted advisors or are they indispensable partners that never get fired? Well, as Dave mentioned, the new buyer wants things differently and we believe it has to be high tech and high touch. High tech and high touch. Zywave certainly provides the tech very much. So here are an example of two things that I've talked about for 35 years. That with your best clients there should be a plan in place of exactly what you're going to do. And there's a stewardship report that's given to the client every year. At a minimum the top 20% of the clients because that's 80% of the revenue in the average agency. 80, 20 rule yet. How many agencies do that? Way less than 10%. What about a risk survey? Now you're in the education business. Should customers receive a risk survey? Absolutely. What percent have a formal risk survey up front? Way less than 10%. One of the keys to the Better Way agency is that you will have an annual review with them and you will do a risk survey up front. Whether it's personal lines, small commercial, large commercial or a benefits benchmarking. One of the keys to the productivity I mentioned the agency that has 650,000 of revenue per personal lines versus 300 best practices. One of the keys is the use of the automation system Angela Adams that we sang Happy birthday to last night. Who's our content and training partner? Angela Adams Consulting. Best I've ever seen in the business on internal workflows and automation. She's a partner with us and when I asked her about the average agency she told me money going down the drainage. The average agency uses less than 50% of the capability of their automation system. Then they wonder why they can't get their productivity where it should be.

At XYWave we have 14 software type products, things like that that we live breathe every single day for driving our insurance brokers results. We have 350 some odd people every single day. That's what they do is they drive to it. So we have a tremendous amount of support in place in order to help the broker make this easy. Okay, so the key here is not only having you have all of this stuff but a broker oftentimes or an agent gets very overwhelmed. They've got a lot to do and Roger's kind of got this phrase but what we want them Doing instead of just doing their business is to start thinking about building upon their business. And sometimes you have to slow down a little bit to speed up, but we have to make it easy. And that was a big part of this. So what we've done is taken really a bunch of groups of people that are extremely passionate about the industry growing insurance brokers, helping them to take it to the next level. Starts out with the Sitkins Group, which is right here. Roger Sitkins in the better way. Taking Zywave as we bring that into the fold as well. Angela Adams, the Lighthouse that is again, we talk about taking deeper workflows instead of just doing things. This is the way we've always done it. How about taking advantage of best practices, right, that have been proven and bring that all into play. And we base it, even bringing it together on a platform called Integral. Integral is a software platform. Think of it this way, where an insurance broker, let's say 100 people walk in and they're looking for quotes, right? Roger's looking for boaters insurance, okay? And these people come in. What typically happens in an agency? 100 people walk in, maybe they close 10 of them. What happens to the other 90? Gone, right? And what does an agency do? They just keep running and gunning and they got their type of stuff and keep trying to go. What you gotta do is you gotta be a lot smarter in today's world. You gotta have what I call scalable intimacy. Scalable intimacy is you gotta be able to touch. What do all your clients want? They want to be touched monthly, right? What do all these prospects want? Right? You can't just quote and go, right? They want more in today's world. So what the system software system does is very easily. I caught, you know, he came in for a quote and whatever. I now have his birthday. The system automatically will generate Roger, happy birthday and whatever. By the way, here's some boating safety information because you're looking for boaters insurance. It also says right now those 90 people were sending information out. These 25 keep opening our stuff. They're interested, they want to learn more from the agency. Guess what? Roger is one of those guys been opening this stuff. Boom, his renewal is coming up. Okay? So when you look at that, it moves very, very quickly. But it's a great software program that builds all around this as well.

So there are four paths that we take agencies through. The first path is discovery. When you're doing any planning and improving an agency, it all starts with where am I today? So there's a discovery process where there's an online tool that the agency takes, a risk assessment. It's not insurance risk, it's business and strategy risk. What things are they not doing properly to build their business? The next thing is once they realize exactly those things they have to work on because they filter down, there's a knowledge library on the Zywave University where they can go in by topic and they can find a video, they can find a follow along workbook and any tool that we talk about, they eventually start implementing, whether it's the personal risk management, commercial risk management, major risk management or benefits risk management program. And it's the step by step hows, how do they do it? Again, it's all video based, mobile and on demand training. And finally the agency can become a certified better way agency. What does that mean? It means that we've taken them through an audit, they've proved to us that they're doing the right things and now they can start marketing in their marketplace. That there are two types of agencies. There's a transactional and there's a relationship based agency. Here's what we provide, here's how we're different. They have a compelling story that they can actually implement.

So at the end of the day, it's high organic growth. As we wrap this up. Okay, and what we have found, we work with 3,800 insurance brokerage operations. There's only two things that separate an insurance agency that's bumping along at 2 to 3% growth versus one that's 15, 18% growth. Only two things. The first is having a compelling story, right? What makes your firm be different and sing. The other one is execution and firms that focus on that take it to the next level. And that's really what we look at is it's all about this whole thing is bringing together, helping brokers grow and retain their clients. So how do you learn more? Again, we're@www.zywave.com. we also have webinars that we can set up and do. So if you're interested in that, to go even deep further detail about how we can help, we'd be more than happy to do that. You know, if you need speaking, if you'd like to hear, you know, have as far as speakers go, we could certainly kind of be interested in doing that. And then also XYwave's exhibiting I think at quite a bit of the events coming together. Not all of them, but quite a few of them. So there's that as well. All right, well, thank you all for listening. We really appreciate it. I'm excited. Thank you.