In the first episode of Uncaptive Agency: The Future of Insurance, Tony Caldwell discusses the future of insurance agencies with the CEO of SIAA, Matt Masiello.
Hello, I'm Tony Caldwell and this is our first podcast on the future of insurance. And I'm delighted to have with me this morning Matt Masiello. Matt is the CEO of SIAA, Strategic Insurance Agency Alliance based in New Hampshire. Matt runs an organization that has about 4500 insurance agencies of all sizes from brand new to tens of millions of premiums scattered in all 50 states. In addition to that, Matt is involved in the retail insurance business and banking, and a variety of other things. And so, very well equipped to talk to us about the future of insurance distribution. In fact, Matthew, you have a brand new book coming out, I think, just in the next month or two on something that'll be interesting to our listeners. What's the title of the book and what's it about?
Thanks, Tony. So the title of the book is Insurance Agency 4.0. And the premise of the book is basically we're in the fourth industrial revolution right now, which is really bringing digital capabilities to all the prior industrial revolutions. And insurance is very much caught up in that, and we're seeing that. We're seeing consumers looking to go more digital, we're seeing obviously our interaction with our carriers need to go more digital. And certainly, the evolving business model of the insurance agency needs to go more digital.
So what Insurance Agency 4.0 does is sort of identity what's going on in the industry. I talk a little bit about insurtech and the investments that are coming into the industry. But then what we do is we help an insurance agency sort of find their path. They find where they are today relative to their digital capabilities and then we help them define a digital strategy movement forward that they can implement in the coming years to continue to evolve their agency.
Okay. So I think it's interesting that you've titled the book Revolution 4.0 because that implies that, fundamentally, everything is going to be different. I gather that you see the future of insurance distribution not as a gradual, slowly changing boiling of the frog, but completely radical in a new way of doing business.
Well, so it's Insurance Agency 4.0. And I actually do believe it's more of an evolution than a revolution. I do think that change is going to happen a little bit more rapidly. I think the current pandemic has sort of added rocket fuel to people's need to increased digital capabilities. I don't think things are going to completely change overnight, but I think if insurance agencies aren't starting to evolve and make their changes now, it's rapidly going to become too late. So those that are at least taking steps towards increasing their digital capabilities across their whole agency are going to be in a good shape moving forward. Those that have sort of not started yet, I think the clock's ticking. I think that with virtual employees and with the pandemic and with the economy and all those things, agencies have to be more efficient. We have to use these digital strategies.
I think the big thing in the book, the biggest takeaway in the book is, a lot of times when we've talked about digital and the digitization of insurance agencies, it's really been with a marketing twist. And I think what we all need to understand is, it's not just marketing. I think if you're going to build a digital strategy for an insurance agency, you have to first and foremost look at your people and make sure that they're prepared and maybe can help you with it. But then you have to focus on your marketing, but then also your operations, your service, and your sales. It really needs to be a holistic view of the digital capabilities that an agency's going to need in the future, and that the agencies are going to start to have to evolve into in the coming months and years.
Yeah, I want to unpack this if I can with you just for a few minutes. You mentioned operations, and that's something that I've had a lot of interest in for a long time. In fact, my book that was published earlier this year, Uncaptive Agent, really is mostly about how to improve operations. And as I've thought about what COVID is doing, particularly in commercial insurance where it's reducing income, and as I've talked to agents - in fact, I was on a call last week with agents from around the country, larger agents, who are really trying to figure out how to prospect in the Zoom world that we now live in. So it's a totally different way of going about trying to get new business.
My point has been that it takes about five dollars of new income to make up for one dollar of reduced expenses, and that the big opportunity right now for agents is to really focus on operations and on expense reductions. So with that in mind, what do you see from a virtual or tech point of view that can really, as you said, provide the rocket fuel for small agencies particularly in cutting expenses?
Well look, I guess there are a couple of points. One is, technology levels the playing field, whether it's in operations or marketing if you do it the right way. I think the other point is, is the investments that agencies need to make in technology, and we do look at these as investments, not expenses, they make them more scalable. The expenses or the investments around technology do not go up as revenue goes up at the same increments. And so it's going to make the agencies more efficient, it's going to make the agencies, give the agencies the tools to manage better. We talk in the book about the key performance indicators, sort of the basics that agencies should be looking at on a weekly or a monthly basis depending on how they're growing and how much new business they're writing.
But the technology is going to make everybody scalable. It does require investment. And it's not just monetary investment; there's a human capital investment. You have to prepare yourself as an agency principal to do these things, and you have to make sure your staff is prepared as well. But in order to grow efficiently and effectively, we're going to have to increase our digital capabilities.
And I think we've seen that with the pandemic. We've seen agencies pivoted very quickly, since we were essential, we pivoted very quickly to virtual work. About 75% of the agencies in the country do have their management systems hosted in the cloud. Hopefully, by now that's 100%. And that did give everybody the ability to pivot rapidly, send their folks home. And in some instances, right now keep their folks home as well.
Okay, all right. Well, let's back up. Tell me what you think the typical insurance agency looks like, let's say in three years from now. And what's different about the agency three years from now in 2023 compared to the 2020 agency?
Yeah. I think it's important to note that as you indicated we work with both startup agencies, insurance professionals looking to hang out their shingle and open their own independent agency as well, as well as existing independent agencies. I think the things that have made independent agencies successful over the years, you always want to play to your success. So if you're looking at your agency and you know where you're successful, you want to do more of that. I think the big difference is we can start to plug digital capabilities into what makes an independent agency already successful to continue that runway. So if you are an independent agency and you do a great job in your community, sponsoring, coaching, involved in rotary and chamber, then how do we overlay digital capabilities within marketing for you to build that digital footprint within your own community a well? So the strong attributes of an independent agency don't go away, we just enhance them we these digital capabilities across, as I've said before, marketing, operations, service, and sales.
I think in three to five years, independent agencies aren't going anywhere. We've had conversations around the changes in the distribution channels within insurance. And the exclusive channel is definitely seeing a shrinkage right now. Some of the automobile insurance, private passenger automobile insurance we're seeing going to the direct side. And maybe some of that belongs over there, but we're seeing a big opportunity for independent agencies to grow market share in their communities in both personalized, preferred personalized insurance, and obviously a blip of the economy right now, but obviously in commercial lines as well. Some of that requires building a better community brand for these insurance agencies.
At the end of the day, insurance agencies, I believe, are going to be an advisor in the risk coverage process in the future, and we're going to be an advocate for when self-service or other service capabilities, or claims issues come into play and our staff still needs to step in. But we're not going to be organizations that are staffed for service. We're going to have to be advising in sales, we're going to have to be business development focused, we're going to have to be putting our service either into self-service or service-centered capabilities, whether insurance companies or third party providers. So when we're having our conversations with our clients, we're not having transactional conversations with them, we're having meaningful conversations with them whether it's on service capabilities or new policies.
You mentioned service people in an interesting way. I gather you think that the customer service agent, or the CSR, as it's existed for the last 100 years, is basically a dead position. Is that fair? How do you see that changing?
Yeah, I think it's headed in that direction. All the studies show that consumers want a first-call resolution of matters. They don't want to call the agency and then the agency has to call the company and the phone tag starts. Consumers want to do it themselves to a certain degree. We have do-it-yourself capabilities in other parts of our lives, and we're beginning to expect that more and more from our insurance agencies. We've played on the CSR role over the years. I think you're the one. A couple of other folks have coined the phrase “it's not a customer service representative, it's a customer sales representative” moving forward. Traditionally, and look, these are the people we hired, these are the people we trained, and we taught them how to service this business, but with all of the other service capabilities out there we need staffing at our agencies that's going to pivot to more business development, more revenue generation discussions with our clients and how they act on a day to day basis.
From an operating point of view, if you made the decision that okay we're not going to have customer service reps in our agency anymore, they're all going to be salespeople and we're going to compensate them as salespeople. You still have a service function to perform, but if you ask for a second or third party, all the data shares that you could cut your expense factors by as much as a third. So back to how you grow the agency, is there a strategy that you think makes sense right now for agents to think about embracing as far as cutting expenses and moving service to a third party?
Yeah, and I actually go through this a little bit in Insurance Agency 4.0. And I start, as I said before, I start with the people. You've got to look at your people in your insurance agency. You've got to start with yourself and then you've got to look at everybody and see are they ready to start to put the service someplace else? And I want to be really clear here. When we talk about putting the service someplace else, a lot of this is the mundane transactional things that we're trying to push to an area where it can be done more efficiently. We're not saying don't interact with your client. There's great practices in place where when a client reaches out to a service center, the agency has that information the next day and can make an outbound productive phone call to discuss additional policies, make sure the service was okay, sort of like the hero syndrome in working with the clients.
The other thing I do want to point out, though, is I have a lot of agencies that will challenge me on the service center thing. And they'll say, "Look, my clients want to deal with me. Service is my value proposition," and many of us have been hearing this now for decades, and every agency thinks that's what it is. I'll have some agencies say to me once in a while, "Well, look, you might think I should be at a service center or alternative service capabilities, but my phone is ringing off the hook," and my response to them every time is, "Well, what about the calls you're not getting?" 25% to 40% of the phone calls that carrier service centers are receiving are after hours, when insurance agencies are not open. And what about those consumers or those clients in the agencies that during the daytime don't want to call their insurance agency, don't want to deal with their insurance?
And so I think that there are two things. One, we have to evolve from an expense standpoint insurance agency. We have to build a model of an insurance agency that is a lower cost, more agile business than it's traditionally been. But equally as important, we have to provide the service capabilities that our clients want. And this is sort of that revolution versus evolution we were talking about a minute ago. Not every client's going to just right into self-service capabilities or service centers. So we do sort of have to bridge that gap, whereas an advocate in our agencies, we are still available to help the clients that do want to talk to us, but as folks, the consumer continues to evolve, we can keep pushing them into the other avenues as well.
There's a lot of conversation over the last couple of years about the coming talent desert, basically, in the business. I think something like, depending on what study you look at, between 50% and 70% of the employees in the industry are age-eligible to retire over the next five to six years. And certainly, massive changes usually speed that up. There's a lot of people that are just bailing out of working altogether as a consequence of COVID, for example. And older people that have been doing something for 30 or 40 years, traditionally, are the least likely to make changes to the way they operate. So with all that in mind, do you see a coming volatility of agency ownership? Do you think the rate of agency ownership turnover, sales, mergers, acquisitions, is going to be increasing over the next few years? And if that happens, does that create additional opportunities for savvy younger entrepreneurs to come in with a totally different business model and take a lot of business away?
Yeah, I think it does. Let's be honest, a lot of the agencies that get published in merger and acquisition lists and studies tend to be larger agencies. Those are hard to replace, but they also create big vacuums in communities where younger folks looking to come in and create insurance agencies in those communities could pick up some of that vacuum, especially in small commercial and preferred personal lines. I don't know if merger and acquisition are going to ramp up, but clearly, there are agency owners, there are agency principals out there that are not going to make this sort of digital transition. And they have a great opportunity right now.
They can build a very strong, very profitable book of business and very likely receive a very nice return when they sell it, whether it's to a larger acquisition aggregator or whether it's to another local agency coming in. If it's the more digitally focused agencies that are the acquirers, the advantage to them is the fact that because of their technology, they will have the ability to bring that business in that they've acquired, and bring it in efficiently and effectively and then implement or overlay their digital capabilities across everything in working with those clients. So it becomes a more valuable, more efficient model for the buyer, and the seller does have the ability, obviously, to get rewarded for what they've built over the years.
I do think there's a tipping point in the next couple years. I think that agencies that have not aggressively made some digital steps in their evolution, if they've done some stuff and they've built profitable agencies, they're going to get their value, but at what point does that value start to slip because the digital capabilities haven't stayed at pace with the evolution of the industry?
So I think the next couple years are actually going to be a pretty good time for agencies. There may be fewer agencies, but we're also seeing... Or, we may lose a lot of agencies through mergers and acquisitions, but we are seeing a lot of startup independent agencies right now in the industry. I think it's a great time. Personally, I've been doing this for 26, almost 27 years. I personally believe this is the greatest time to open or own an independent agency if you're willing to make the changes that you need to make.
Yeah. So, Peter Diamandis who wrote the, he's written a number of books. [inaudible 00:17:16] wrote Abundance. There are six billion people on the face of the earth with one of these, and if you've got one of these, you're a potential consumer for somebody that can reach you through this. So absent the... There are obviously legal and regulatory issues with insurance agents, but the point is that the marketplace is also changing because of all of this technology.
Earlier you mentioned a lot of things around the community agent, rotary and doing things in the community, defining your marketing and your marketplace as your local community, which has been the traditional way agents have operated. But with technology like we're using today, Zoom for example, you and I are 1500 miles apart having a face-to-face conversation. Do you see that the agent of the future is going to have a different want of defining the marketplace in which he works or she works?
Yeah. I think there's a couple different ways to look at it. I talk a lot over the years. I've talked about building a community brand and overlaying an agency's digital capabilities to all of their traditional marketing and branding in their community to develop that community brand. The basic fact is, is the direct writers have a marketing impact of somewhere between five and seven impressions a day on our current clients. And so we have to increase the branding in our communities because these large spends from a marketing standpoint, billions of dollars, the only thing they can't do is build a community brand.
I think the pivot that you're now talking about as well for independent agencies is defining a community. So I've traditionally talked about that geographic community where we can maybe put ourselves out there as generalists, but now what agencies have the ability to do is take these digital capabilities and build a digital community, whether it's niche-based or whether it's certain target markets they're going after. So that digital community is an alternative for somebody that doesn't want to be restricted by the geography, or maybe the demographic within the geography that they're in.
I think the second part of that is the whole virtual staffing thing. I personally was an individual that for many years was not a fan of remote staff, had actually done it very early in the idea and the concept of remote staff. And I don't think the management training was there, I don't think the technology was there. With the pandemic hitting and the move to virtual and all of the different technology like Zoom, like Teams, like some of the other things where we can manage key performance indicators, do we really need staff in the office? I think for a culture, to a certain degree we do, but agencies have the ability to expand their operation virtually. And I've talked to a lot of agencies now that say, "We sort of don't care where somebody lives. We just want the best person because we have the tools to work with them." So both building a digital community outside of your geographic restrictions, and then staffing outside of your geographic restrictions. Those are real things for agencies moving forward. I think they open up a lot of opportunities.
You've used a term that I don't know that I've heard anybody else use, which is this term “community” in terms of rethinking what community means. As you were saying that I was thinking about two or three guys I know that as a pilot, I'm in the pilot community, we've replaced hangar flying that used to be done 30, 40 years ago, with an online community. And it's three or four agents that are part of that community, has 60,000 people in it, if you will, all on a common, similar interest. And they have built their entire books of business inside that community, because they're a part of it. Everyone understands they're not just selling insurance, but they're contributing in many other ways. So I guess the challenge in that regard for agents is not necessarily to create a community, but perhaps it's to find the community that they want to engage in, just like you find the community you want to live in. Interesting way to think about building your book.
Yeah, it absolutely is. That's the whole thing with social media. Look, social media is not going anywhere, it's real. All the numbers and the statistics are there. I think what agencies need to understand and what principles and marketing, well marketing folks already know this, but what principles and producers need to understand is they're not going to sell anything through social media. You're going to build branding, you're going to build awareness, you're going to become viewed as an expert, you're going to get into these communities. And then you're going to make yourself as much center of mind as you can when people do think about their insurance within those communities.
And I just want to point this out, too, is whether it's social media or whether it's all the digital marketing, at the end of the day, people still sell things. And so it is still a relationship business. You're just using these digital tools to make your process a little smoother, so when you're having conversations with the prospect or the client, as I've said before, they're more meaningful conversations. You've used your marketing, your digital capabilities to sort of build yourself up, build your brand, and be seen as the expert.
Something else you said a minute ago, I want to come back to, which is you said “acquisition aggregators”. And I thought that was interesting. It may be the first time I've heard somebody refer to acquirers as aggregators, but in fact, that is what they're doing. The term aggregation in our industry tends to be more around agent groups, clusters, even organizations like SIAA, like your organization, where you're aggregating premium to create leverage with the insurance carriers. I know a lot of those kinds of aggregators are now referred to as MAPs, or market and access providers.
So whether it's somebody acquiring businesses to aggregate premium, or if it's agents voluntarily joining some sort of organization to aggregate premium, it really seems like this is not just a part of the future, but it's part of today. But how do you see, and I read last week that something like two-thirds of all agencies now belongs to some form of aggregation organization. How do you see that evolving into the future? If an agency is not a part of something like that, are they left behind? Do they have a future? What does that look like?
Yeah. I do think you have to be part of something bigger. There's a lot of things going on. In my book Insurance Agency 4.0, I make the comment there as I talk about insurtech, that almost without exception, most independent agencies, we don't have the economies of scale to really ourselves get into insurtech. We have to align ourselves with organizations that are forward-thinking, that are looking to partner with the insurance companies, and sort of understanding the capabilities of the technology that is out there in the industry. It's also important to note that in an independent agency about 70% of the independent agencies in the channel are under a million-two or a million-five, depending on whose study you look at. But under about a million-two to a million-five of revenue.
And so we've got to partner with somebody that can do these things, that can help us with these things. It's funny, when I use the term acquisition aggregator, obviously there's also the term of aggregator that's been around in the industry for quite a while. Sometimes when people start referencing aggregators, especially when you're talking at the company level, you do have to say are you talking about acquisition aggregators or are you talking about agency aggregators? Because they are separate terms out there.
You've got to be part of something bigger. You mentioned market access providers. The ability to provide access to markets is really table stakes nowadays. You can access standard markets through wholesalers. And I think within that two-thirds, by the way, if it came out of I believe the [inaudible 00:25:29] Universe study, does include wholesalers and brokers as well as market access providers. So the question isn't joining an organization to get access to markets. The question is how do you get access to markets? The question is, what is the financial relationship or reward in how you're going to access the markets? And then, are you aligned with somebody that's going to be investing and be around for the future? Because it is changing. And there are a lot of things happening.
And the basic fact is, and we know this as independent agencies, is you're busy on a day to day basis. You are dealing with your clients, you are dealing with your staff, and you are dealing with all that stuff.
So, who is sort of looking down the pathway and making sure that we're collectively heading in the right direction? So I do think people are going to have to be part of organizations. And the definition of what a large agency is today is sort of fluid, it's sort of changed, because the big ones are getting bigger out there. So different people have to look at what they're going to be part of and what they're going to do.
On the flip side from big to small, Dan Sullivan who runs a program called the Strategic Coach, said many, many years ago that the microcomputer was really the precursor to the new economy, and that if you had a computer you could run an entire business from the computer. And now we see all the changes that the pandemic is really creating in terms of business. So is there an argument being made that the successful insurance entrepreneur of the future is a really successful salesperson who's outsourced everything else in his organization, living and working wherever he chooses, and selling insurance wherever he chooses, without the trappings of the traditional insurance agency, the office, the rotary membership, and all that other thing? What does that future look like in your opinion?
So I'm going to answer that with a yes and a no. So I do think that if you're an insurance professional and you're in your community, and you're proud of your community, and you want to have your brick and mortar, and you want to have your sign, and you want to be involved in your community, that is a very viable business model. It just has to be enhanced with digital capabilities. There should be no insurance principle out there that think that their office in their community is going to disappear. I realize that sounds sort of old fashioned, but I do think that the local retail agency is a viable business.
On the flip side, we are seeing folks, and you and I both do business with some, that are creating completely virtual agencies. They have made the decision that they will be focused just on sales. These tend to be younger men and women but focus just on sales and they're going to outsource everything they can do. And it's fun when you sort of talk to some of these folks, because you start talking to them about how they're running their agency and what they're doing and how they're handling their operations and their marketing. And because they're digital natives, they just assume this is the way it's supposed to be done.
So I do think that the local community agency, there's a lot of room for us in the industry moving forward. I think we've all seen this flight to local and trying to do business locally, and that's going to continue. But there is a really strong business model for virtual insurance agencies moving forward. So I think you'll probably see more of the virtual agencies start to come about and start to grow.
I know in my own personal life, I sold a business in my early 30s and then moved into the insurance industry. And one of my goals, I thought if I could just get rid of every employee that I had, life could be really great. And then if you didn't have to have any customers, it would be perfect. We need customers, your clients. And so the insurance industry to me, agency industry to me, you can really minimize, that was a long time ago. Today, that capability is there in spades. And I just have to believe there are a lot of aggressive, ambitious, driven individuals who just don't want to have to manage an organization. And it seems like right now there's never been a better opportunity to build your own business and your own brand, your own future, by outsourcing it with technology. So it'll be interesting to watch over the next couple of years and see how many more agencies get built that way.
Yeah, and these are smart folks that are doing this. And I think the other part of it, too, is us traditional insurance folks, we're still 1.6 to 1.8 policies per customer. These folks, because they're sort of coming in with no preconceived notions, that doesn't make sense to them. And so they're immediately realizing that they can have a more efficient business with fewer customers, more policies, less staff, more digital capabilities. It is a really cool model for the future for the right people.
Yeah. So let's talk about this technology that we're using right now. We're on a Zoom conversation, and everyone is Zooming these days. I had a conversation with a friend a week or two ago who said that this is really early days and he said, "Think back to the beginning of the automobile. People actually described it in... They didn't know what it was, so they called it the ‘horseless carriage’ because that's how they understood it. And the same thing with what we call movies today. They didn't know how to think about that, so they called them moving pictures." So the whole lexicon changed over time as people really understood what the technology could do for them. Clearly, today when we're consuming media on all kinds of platforms, both computer as well as television and everything else, it's completely unrecognizable to what the moving pictures were, say, in the early 20th century.
So now we're on this technology we call Zoom. We're all learning how to have one-on-ones as well as meetings on Zoom. If we think of Zoom as the Model-T of the new technical age that we're entering, what is communication, face-to-face or person to person communication look like in the next three or five years? How does it evolve? And how does that impact the sales, marketing, service functions inside an insurance agency from your perspective?
Well, there's a lot in there to unpack. And to your point, we started the last century by converting from horse and buggies to cars, and we ended with the coming of the internet age. People forget that the iPhone's only been around since 2007. So not only are you and I 1500 miles apart, but I am doing this Zoom meeting completely with an iPhone with a wifi connection at home. And so the world is going to change a lot. And I think we've seen that. I'll say it again: I think that the pandemic is sort of rocket fuel to some of these changes.
As I went through a lot of the information that I researched for Independent Agency 4.0, technology is really at its early stages right now. So Zoom, obviously, has just blown up because of the need for it. They very smartly made it available for free to educational institutions in the spring. I have three young children, two in high school, one in junior high that this is how they get educated. I think what we're going to have to see is with all the insurtech investment that's being made into the insurance industry, that's being put into the insurance industry, we're seeing the agency management systems get better, we're seeing the capabilities increase.
And I think that as I think about this question there's a utopia out there. As I wrote in Insurance Agency 4.0, it's clear that all of our technology is having to come in bits and pieces. We have an agency management system, but now we need a CRM system. We need somebody that assists us with their digital marketing, we need service capabilities or self-service capabilities. To me, a utopia ultimately becomes a full AMS system that includes strong CRM capabilities, customer relationship management companies, that intertwines video, and chat, and text, as well as all the traditional capabilities on policy service, which really makes us more efficient with our carriers. But more importantly, we are interacting with our clients on portals that allow us to interact the way they want to interact.
You and I both witnessed this, and I'm sure a lot of the viewers do as well, most people now, I'd say 50% to 60% of the time, it's not let's have a call, it's, I'm going to send you a Zoom link or I'm going to send you a Google Video link. I've done both Zoom and Google Video links with folks in Italy recently, I've done it with folks in England recently. And so it's not just here in the US.
Trying to unpack the question, I think that the more we can get the operations within the agencies to sort of play nice with each other and integrate all of these things. This is a great way to meet with clients. People are busy. If people still want to go to the golf course, if people still want to do other things, that's great, we should try and do it. It's going to be difficult, again, through the fall and this winter. But this is real and it's an efficient way to do it. And we can kind of do it from anywhere at this point. And we can still build relationships.
Back to the Model-T analogy, I've done a lot of research on virtual reality. There's a term called social virtual reality, which is the idea that you're using virtual reality to really immerse yourself in the social environment. Right now that technology is still limited by bandwidth, and tethering, and a bunch of other issues. But within the next three years or so, something like the Google Glass of 5, 10 years ago, will be back, but it'll be a virtual reality thing. So you just put on a pair of glasses. And it's very clear that face-to-face communication where you can read the visual clues along with the oral clues is 75% better. And the people prefer it, and to your point. And so I just speculate that we won't be zooming in five years, we'll be putting on a set of eyeglasses and having the face-to-face conversation.
But not only that, our artificial intelligence and what it is doing now. I talked to a gentleman last week who's built a hedge fund based on AI. And he said to me, he goes, "I have millions of AIs." He's been working on this for a decade. I don't exactly know what that means except that his AI is [inaudible 00:36:27] AI and you can instantly know whatever it is you need to know. So if that's true and we can then just immediately call up whatever is in our CRM system or our agency management system, information is sort of there almost like wallpaper. The relationship is one of the focuses because the information is actually there in front of us. We have to spend no time at all to go look it up, it's just contextual.
Yesterday I was looking at my iPad, wanted to see a picture of something I took last week. And it started... And I realized that it had sorted all my photographs into trips and all kinds of categories. I didn't ask it to do that, but it was really interesting what it had done with it. That again, that's the Model-T of AI in terms of how it organizes information. So if your agency management system does the same thing, it knows you're having this conversation with a client and pulls up the most relevant information it wants you to be sure and talk about with the client based on how you program the system.
So it seems to me that we are in this window that we're talking about, three to five years. That kind of stuff is going to be real. And that the people who master it have an amazing advantage, not just in the technical insurance area, but also in the relationship area. What do you think of all that?
I agree. And it's funny, I hit on AI. I don't hit on virtual reality in the book, but I do hit on artificial intelligence only to say that it's coming, it's real, other industries are already doing it. But we are an industry that lags. And so, I agree that that's where we will probably be in three to five years. I'm not sure the agency management systems are going to be the ones to deliver some of that stuff. The carriers are definitely out in front of that. They are working with insurtech and data-driven organizations. And so I think that at least today in our Model-T stage, we're going to have to let the carriers sort of move forward with what.
What I talk about in the book is that it's a crawl, walk, run scenario. AI is only relevant if we have the data. And so agencies have to get much better about the data that we're using, the data in our systems. It's clean, it's manageable. We can use key performance indicators to manage our business. And what will happen is as AI, as the evolution of the technology platforms and the consumer and all of these things continue to happen, if we're sort of blocking and tackling and following the technology process today into the next couple years, AI just ultimately becomes a step.
Right now when you sit here and we talk to independent agencies, and even some company folks, but certainly independent agencies, about artificial intelligence and virtual reality, that's a quantum leap in our minds. So what are all of the sort of boxes that we need to check and the things that we need to do so that ultimately doesn't become a quantum leap? And I think that's certainly where my focus has been, is let's crawl and walk over the next year or two. Let's make sure we're looking down the road and we know what these things are so we can turn them on when we're ready, when the consumer's ready, and when the industry's ready.
And so with that in mind, let's kind of wrap up with some thinking around what to do and when to do it. Obviously, we're in the early days, but as you said earlier, it's rapidly developing. Again, I talked to someone a couple of weeks ago, said, "How's your business?" And he said, "It's 2025." I said, "What do you mean?" "Well, we made five years’ progress in the last six months because COVID forced us to do it." So that's kind of your point about rocket fuel and the pace of change which is really accelerating.
So if we're headed to AI-enabled information and social virtual reality by way of Zoom and building and participating in communities all over the place based on what it is we want to do, if that's our future and our future is mostly in selling and it's outsourcing service and really developing stronger operational capabilities so that we can lower expenses and all those kinds of things, if that's the future of the agency over the next three to five years, what are the first one, two, three things that every agent's got to do? I like to ask, what's the one thing that you have to do now to start getting ready for that?
Great question. I think the one thing, it's not an executable item relative to technology or digital capabilities, it's having a plan. Developing a plan, I think, is the most important thing. And I've talked to some very forward-thinking agencies relative to implementing digital capabilities. I actually participated in a panel a couple years ago on the future of insurance distribution that was sponsored by a carrier at one of the associations. And it was fascinating. I sat in the room and there were some very successful, traditional, independent agencies in the room. And then there were some organizations that were already completely digital agencies that were dealing with clients and dealing with carriers through application process interfaces, APIs, virtual businesses.
And I sort of sat in the middle of these agencies, listened to them, and I was shocked. I was shocked that we still have traditional independent agencies that are what I sort of call playing whack-a-mole. We're doing more digital marketing, we're moving to a service center, they're doing everything sort of on a reactive basis. And then the other end of the spectrum was these folks that had created agencies, and we see some of them on TV now or online, that are digital insurance agencies.
And so, what I believe the most important thing for an independent agency is today, it's to develop a plan. Don't play whack-a-mole. If you're playing defense relative to your technology and your digital capabilities, you're letting your business run you versus you run your business. And so I think a great first step is for an agency to take a step back. It is to understand where they are today, it is to understand what their needs are, it is to understand the resources that they need, and then to build a plan to increase their digital capabilities. And within a plan, they'll prioritize what's important to them.
We held a program, SIAA did, I guess it was not quite a year ago, called the IA Evolve where we brought in both carriers and vendors to talk about the digital capabilities that are available to insurance agencies within the industry. And when we were putting the IA Evolve program together, I thought wouldn't it be great to give an insurance agency a roadmap on what their digital capabilities should be?
And what we realized very quickly as we started to whiteboard this, which is where we came up with the people, marketing, operations, service, and sales, is that independent agencies are mavericks. We all think we're different, we all think our business is unique, so we can't tell somebody what their digital path is going to be. What we want to do is give them the tools to decide, for them to define and decide what their digital path is going to be. Because they may already be doing a great job in marketing but now they want to focus on sales and building a more efficient business model. It's sort of a long-winded response to developing a plan, massaging the plan, monitoring the plan, tweaking the plan, but having a plan to be proactive relative to the digital capabilities, not reactive.
Okay. So obviously, Insurance Agency 4.0 is a resource to help agents do that planning. So when's it going to be published? Where's it going to be available? How do I get a copy?
So Insurance Agency 4.0 should be released sometime before November 1, which is the goal. It will be available on Amazon and obviously directly from me as well. So looking forward to getting it out there. It is going to be a resource guide to help agencies build and develop their own plan.
Okay. Matt Masiello, CEO of SIAA. Thank you so much for joining me today to have this... It's been a fascinating conversation. I've learned some things. I've got some new buzzwords I've got to go look up now and start paying attention to. These new things will be just like a sore toe and I'll be tripping over them in the future. And so thank you for stubbing my toe with information. Thanks for being with me and we'll talk soon.
Great. Thank you, Tony. Enjoyed it. Take care.
I'm talking to independent agency owners about this all the time. If you'd like to have a more personalized conversation, click on the button or the link in the description and we'll make that happen. You can also reach out to me at tonycaldwell.net/contact
Always keen on helping others make their dreams come true, Tony and his team have helped independent agents grow into more than 250 independent agencies. This has made OAA the number one ranked Strategic Master Agency of SIAA for the last 5 years, and one of Oklahoma's 25 Best Companies to Work for.
Tony loves to share his knowledge, insight and wisdom through his bestselling books as well as in free mediums including podcasts and blogs.
Tony and his family are members of Crossings Community Church, and he is very active in community initiatives: he’s chairman of It’s My Community Initiative, Inc., a nonprofit working with disadvantaged people in Oklahoma City; and chairman of the Oklahoma Board of Juvenile Affairs., and he has served through many other organizations including the Salvation Army, Last Frontier Council of the Boy Scouts of America, and the Rotary Club.
In his spare time, Tony enjoys time with his family. He’s also an active outdoorsman and instrument-rated commercial pilot.