With all the talk about the aging class of owners in the independent agency channel, we thought we'd ask a longtime member of the industry and the Agents Council for Technology about how technology can bring value to an agency whose owners are looking to perpetuate or sell over the next few years. Jerry Fox, director of client market strategy at CoreLogic, gives us some insights into what technologies agency principals might best focus on as well as some recommendations on how to capitalize on the 30-some-year-old millennials who are quickly moving into upper management positions.
ACT News: It seems like smaller independent insurance agencies that haven't kept up with technology would fetch a lower price in the M&A realm. Should they be worried about valuation?
Jerry Fox: I think they can catch up. Technology isn't an exclusive commodity. They can integrate a lot of capabilities without spending a vast sum. Many of these agency owners were hoping family would take over. Where that isn't happening, bringing young blood on staff is critical. That will also help with the technology side of the equation. If you hire people with tech capabilities, you will build in-house talent that can help your agency get closer to where it should be quickly. Look at the use of mobile phone technology as an example. If you have a customer who texts and wants to remove a car from their policy, an agency needs to make that work. There are built-in solutions you can buy, or there are ways you can help from the office once you receive a text like that. Agencies just need to decide how they want to handle these things, then pursue the technology to make it happen.
ACT: I think many agencies are worried about the cost and the return on investment, especially if they are in the later stages of exit planning.
Jerry: The most expensive piece of the puzzle is personnel, and you are already paying for that. Utilize your people for the best return on investment. Bring in the younger agents and staff. Let them use their devices. Embrace that. Work it into the agency's processes and procedures. Managers should also talk to their agency management system suppliers, because they will be able to recommend solutions. Some easy answers might already exist in the agency's system. Others can be added with hardly any headache.
ACT: You bring up an important point—young blood. They may, in many cases, know much more than the agency principals about technology and could play an important role in a merger or acquisition.
Jerry: Absolutely. At the negotiating table, principals can hand off tech to younger employees because the principals may not have the technological literacy to represent the new value. The principal, then, doesn't need to know as much about technology—just be a little conversant—and bring in the junior employee to discuss the details. The buyer not only learns about the technology angle of the agency but also sees the expertise in the younger generation he's buying. That's double value.
The Gen Xers took us from paper and pencil to the next stage—maybe in the background while the millennials and baby boomers got the headlines. The next step is millennials' taking us to a whole new level. It is evolutionary. For example, virtualization is something that is pretty foreign to many of the older generation except in concept, but for the younger workers, especially those just now entering, it is just another application. They are used to this stuff in other aspects of their lives and see how to make it work in any environment, even at work.
The reality is everything is instantaneously available to everyone everywhere. We have to go past just the insurance agency to understand what this means for the industry. What has this speed done to the world? To our customers? And what is next? Integrating young personnel can help older owners get a better view on this.
ACT: It's more about integrating their knowledge, capitalizing on what they come in knowing than it is about hiring people who know insurance well.
Jerry: There are gaps the traditional agency needs to fill. The younger staff and new hires are going to be good sources. Cyber security is the biggest hole right now, so having someone on staff who can and will take ownership of that is going to be a big step forward—making security part of the agency's work process. And then there's mobile—it's where the customer is, but for most agencies, it is a clustered mess of unintegrated junk. If you hired someone who can understand your needs and get those two things ironed out, you'd have made a valuable hire regardless of age, someone that is bringing immediate value to the agency. I don't think we need to worry about artificial intelligence or anything fancy at this point at the agency level. Just getting up to speed on the digital basics would add a ton of value to most smaller agencies at this stage.