Uncaptive Agency: The Future of Insurance, Ep. 11

The market is changing rapidly, with younger people using technology in a very different way than the older generations. This has a direct impact in the industry and the way we make business, and COVID has only accelerated it.

While older agency owners have the benefit of tenure and experience, the younger agents adopt technologies naturally, use them more and better, and get much more for their technology money, since they are naturals at giving feedback and demanding upgrades. How do you leverage technology to grow your insurance agency? 

Join me as I discuss the role of technology in the future of insurance with Nag Rao, CEO of EZLynx.

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Tony Caldwell:

Hello everyone. It's Tony Caldwell, welcome to another episode of Uncaptive Agency: The Future of Insurance. And today I have as my guest Nag Rao, who is the CEO of EZLynx Software; I'm sure everyone knows a lot about that company, even if you're not using his product. But I'm particularly fascinated today to talk to Nag, who has a technology perspective that I think will be interesting to hear in terms of the future of insurance distribution, where we're going. So welcome, Nag.

Nag Rao:

Oh, thanks Tony. I appreciate this opportunity.

Tony Caldwell:

You bet. I'm glad to have you. And I'm curious: you've been in the technology business, helping insurance agents and insurance companies communicate with each other, and do business faster, better, easier, and cheaper, I would say. And as you think about the next three to five years in our industry, what's going to change from a technology perspective?

Nag Rao:

I think the biggest change is the demographics. I think if you look at the technology needs and how the next generation buys their products and expect service, that is going to be the biggest change in my opinion. So that has two sides to it, right? So there is a customer side to it. So our agents will have to learn how to deal with these millennial customers, who want 24/7 service, instantly. They don't know how to wait. They don't like to email and do all that. And then there is an employee side to it. The agencies, more and more when they go to market now to hire, very likely they'll be the largest block of employees now, right? In the country. So their needs are different.

They're used to texting all the time. They're probably not like you and me, disciplined to not take their phones out during work hours. They don't follow all the rules. And so I think that is probably the biggest change. So that has implications on technology. So, overall, I think you probably agree with me that in the world, I think technology is becoming the core focus of every business. There's no longer any businesses that can say, "Well, we're not going to invest in technology." And with COVID it looks like the world is going to move to virtual very, very fast. And it has implications on our industry too. And don't forget our agency owners are becoming younger... More and more millennials are coming into the agency ownership side too. So that has implications for people like us, for our vendors.

Tony Caldwell:

Sure. It's interesting. You just mentioned agency ownership by millennials. I think this is an industry, where we're a little behind the curve and that's not at all surprising.

Nag Rao:

Agree.

Tony Caldwell:

I read recently that 52 or 57% of all businesses in America are now owned by millennials. And while that's not yet true in the insurance agency industry, I'm guessing that it's more or less true for your client base that uses your products. Is that a fair statement?

Nag Rao:

Yeah. I think if you look at our growth and management system, as you know, we started off with a rating product, which is pretty much well liked across all demographics and all parts of the country. But when we started doing a management system, the ones who really took to our product were millennials. And if you look at the average age for agency owners who use our management system, it's in the mid to late forties.

So I think some of the features and everything we're building, in fact, our team, the product team consciously have changed it in the last two, three years, is now completely managed by millennials: product management, product engineering, so I’m letting them make decisions on how the product experience should be, what kind of technologies to use. And you and I kind of become obsolete when it comes to technology because it has changed so much.

Tony Caldwell:

Sure.

Nag Rao:

So rapidly. So, I mean in the last 10 years, especially after the smartphone came around 2008, the world has moved really, really fast. And I'm sure you probably feel the same way. And it's very easy to get obsolete now.

Tony Caldwell:

No question. I want to unpack this 10 year gap you just identified, in terms of your own client base. I think that's really interesting because more than likely your clients, if they're 10 years younger than the typical insurance agency owner, are also maybe 10 years ahead of the typical agency owner in terms of technology adoption and what they think about. So one of the criticisms of the typical agency here is that they only use a very small part of the capabilities of their agency management system. And as we move to a world that is increasingly driven by intelligent decisions about data and data collection, and data analysis, and use of data, it's interesting because most agencies don't use the fundamental system that they've got to expose capacity or capability. How do you see that, just in terms of those two demographics you gave me, 50s to 40s agency owners? I'm assuming that the younger group makes much more thorough use of their agency management system. And if that's true, the followup to that would be, what benefit does that give them compared to the competition who does not?

Nag Rao:

The short answer to your question is “yes, they do.” They're more eager to use all the new features that we built. They interact a lot more, they give a lot more feedback, sometimes very demanding, and they have a new tool called social media. So they know how to get your attention. As a vendor, they have a way to reach me without calling me or talking to me, or emailing to me, right? Because they make some comments and they gin up other people to kind of support. So we deal with that constantly. But it's a challenge even for millennials that our product is evolving so fast. I mean, I don't want to say that nobody else has gone as fast as we have with the management system, but it seems like that to me. I don't know how anybody can go faster than we have. So it is a little challenging for them to keep up with our product changes too. 

And to be fair, to be critical of what we've done, I think we've not focused as much on the training as we did in the last few years, we put a lot of effort into that. We built something on EZLynx University, and we've done a lot. But prior to that, there was a little bit of a frustration with the users that you build all these cool features and you don't really spend time training and doing all that. But we've kind of corrected that now, but we still have a challenge with older agencies, who kind of complained that, "Oh, I didn't know I had this." And well, I mean, it's kind of a two way street, right? I mean, sometimes, you as an user of the system, you have a responsibility to go see what has been done and to kind of educate yourself.

Tony Caldwell:

Right.

Nag Rao:

And what all has happened. We try to communicate by various means. That's the other challenge, right? How do you communicate with users? There's about 10 different ways to communicate now. It used to be just one way and now it's like, social media, LinkedIn, Twitter, or YouTube, on and on, and on. It's been a big challenge, but I think they take it up, in a way. We feed them features and they take it and we get good feedback. And I think the team being millennials, I think there is good synergy there, good chemistry between our team and most of our customer base. I agree with you on that.

Tony Caldwell:

You commented that you've made a lot of progress in the last five or 10 years in terms of feature development on the management system side. I wonder if we can use that as a standard for thinking about the near future. So if you look back five years and you go, "Okay, here's where we were, here's what we're at." And then you think about that projecting into the future. What does the agency management five years from now have as a capability set for agencies that it doesn't have today, not just EZLynx, but all of these?

Nag Rao:

So the biggest area where we are focusing right now, which I think is going to be the highest demand is, being able to connect with third-party vendors. So if you look at the most frequent request we've gotten in the last two years, all these millennial agency owners, right? The biggest request we've taken is, “can I have your product integrate with this product, that product, this vendor here, that one…?” So that is the biggest request. So we have two paths we could have taken, one path was to kind of do this one-off integration with each vendor, and kind of work through all the process slowly, that's too slow, and I didn't want to do that. And secondly, we are sharing data. Many times we share data with these vendors and this is, we are custodians for agencies’ data - we have a lot of responsibility to make sure that we manage the data well and we share the data with the right people and all of that. So we came up with this idea called Connect, EZLynx Connect.

So the idea is very simple. It's somewhat similar to Salesforce and to some extent, similar to what Apple has done with their app store concept, that we kind of came up with this app model. So a vendor can now integrate with our product by themselves. All they have to do is go through the due diligence with us. So we do the security review. If we are going to share confidential information with a vendor, we make sure that we've done all the reviews, our security reviews and security rating, and also the legal side of the document, and everything to make sure that it's proper and then ready, and things like that.

So agents can also ensure that when we bring a vendor into this platform, they've been thoroughly vetted and they can share the data with them. That's the whole idea. So I think, the thinking there is very simple, the agents’ demand has become so wide and it's no longer just about management system, right? Management system, by that, I mean, servicing policies and things... They want to do more than that, they want to do video proposals when they send it. So we are not going to build all the features. So I think it's the best of both worlds. And also if you're an agent, you get to now pick which vendor you want to work with. So, because for a given vertical, for example, an email campaign, EZLynx has email campaign features. And we've spent some time on it, but it's not the greatest email campaign feature because we have other things to work on, right? Other things to focus on.

So now we're bringing three or four email campaign vendors through Connect. And now the agent can look at the features and say, "I'm going to go with this one." Another person might go with the other one. So I think it's to everybody's advantage in this model. So we have now suddenly become a distribution platform, for all these vendors. And for the agent is very simple, if they think of something, they just go to this Connect marketplace, select the vendor, say, "I want it added to my account." There could be some legal contract they have to sign with the vendor sometimes, but the payment is another thing between the agent and the vendor. We stay out of it. So we just facilitate the data exchange. And I think that's going to be our biggest focus area, because we feel like we've built all the necessary core features for a management system.

We were working on commercial line features for I would say last, two to three years. And we feel like we've reached a good point, at the end of this year, Q1 of next year, a couple of features got pushed to Q1. We feel like it is at a good place. And also it gives time for users to learn what we've done all these years. And why we focus on adding vendors to Connect. It fills the gap nicely. There are a lot of gaps in every management system. So Connect fills the gap very nicely.

Tony Caldwell:

One of the challenges that I see for the future is that agencies are going to need to be more cost-conscious than they have been in the past. Insurance carriers have got increasing cost pressures. And the likelihood is that as those work their way through the channel, agents compensation is likely going to be affected. The other thing is that there's a possibility that some of the business that independent agencies have written in the past will move away either to a direct writer or an online vendor. All of those things likely will create some cost pressure in the independent agency that they need to solve. A lot of ways to go about doing that, but how does technology pose the promise of cost reduction?

Nag Rao:

Yeah. So the biggest area where we are focusing on, maybe I need to backtrack a little bit. So, about four years ago, I came up with this idea of four pillars that underlies our EZLynx's platform, right? So productivity, profitability, serviceability, scalability, it means exactly what it is. So we have... Any feature that we build has to hit one or more of these pillars. Right?

Tony Caldwell:

Okay.

Nag Rao:

So, if you look at the biggest cost, I've talked to several agents, right? The most expensive part of an agency is servicing, especially commercial.

Tony Caldwell:

Yup.

Nag Rao:

And five out of 10 times or more, servicing is either a non-revenue process or sometimes net negative revenue, because you could make a change that will reduce the premium and hence the commissions. So that is an area where we focused a lot in the last three years. It turned out that in this year, with everybody suddenly going and working from home, our idea hit the perfect timing in the market. So we have a product called Client Central that we focused on. So the idea and concept is very simple: empower your policy holder, that's what everybody wants. They don't want to call. They don't want to come to your office. They don't want to send email if possible. And they want access 24/7. That's what Client Center is.

So I challenged my product team to say, "When you're building a feature, don't think of what the agent needs, think of what the policy holder needs." How does the policy holder want to communicate with the agent? And build a feature for that. And then as part of that, there is an agency part to it, right? So handle the agency part. So for example, if I'm a policyholder, if I want to add a vehicle, how do I want to do that?

Most of them today will say, "I want to be able to go online to an agency website, make a change request. And preferably I would like to see a quote instantly," right? Which unfortunately our carriers cannot do today, many of them. Some of them are beginning to. And then if I like it, I want to be able to finish it. Okay. So that is the ideal system. So let's work backwards from there. So what does the agent need for this to happen? Preferably automatically, so that the agent doesn't have to get involved, right? So that's the end goal, but obviously we need the carriers’ help for all that, but that is kind of the goal. So our goal is to make sure that we take away as many change service requests processes from the agents day-to-day work. So that gives them more time and it reduces friction.

Sometimes customers have problems and they make a request, and agents say, "Oh, yeah, I'll add that." And something happens, they forget, they don't put a task for themselves.

Tony Caldwell:

All right.

Nag Rao:

So, a lot of things happen, right? So we want to take away all that. So Client Center is going to be front and center of EZLynx going forward. That includes both personal lines and commercial lines, number one. Number two, we are working on a product, but it's still in beta. It's been in beta for a while because it's kind of complicated. It's called Virtual Agent. So the tagline for the products is you want EZLynx to be the most productive employee and agent. What does it mean? Virtual Agent is something that sits and listens to all the incoming requests that are coming to an agency. Today we monitor the text channel, EZLynx has built in-texting. So when somebody sends a text request, it reads the text first. If it understands what the customer is asking, then it will respond automatically. Today there's about two or three things that it understands, right?

One is “I want to set up an appointment”. It will automatically create a task. And it doesn't matter what time of the day, it looks at the agency calendar. And they'll say, "Okay, these are the times available." It's all through SMS. Remember that, all this is happening through SMS. And the other thing it understands is “ID card”. If it’s late at night, and if you want an ID card, you realize that you don't have the latest ID card, you send the request and it recognizes that. And so more and more agents are bringing it to light. So this will continue to grow.

So it's the very early days. With insurance, you have to be careful. This is not like sending pictures to somebody or something like that, this is a lot more serious business. So we are treading very carefully, but the goal is to take the agents away from servicing as much as possible. I know there is some sort of service where they have to be involved. So that gives them more time to sell more, service special customers, there are harder policy changes, things like that.

Tony Caldwell:

Are you familiar with a New Zealand company called Soul Machines? Does that ring a bell?

Nag Rao:

No, I don't.

Tony Caldwell:

So I encourage you to look it up on YouTube. It's a company based in New Zealand, and they create digital personas. So they have an avatar that is modeled on a human being, very lifelike. The only thing, the way you tell they're not humans is by looking in their eyes, which have a little bit of a dead feel to them, but not very much. Anyway, but the real secret here is the AI behind that digital human. And so they have demonstrated projects for one of the New Zealand airlines, for example, where this digital avatar can answer and take care of about 600 discrete questions and service requests. They've done it for credit card companies as well.

And when I first saw this a couple of years ago, I wrote an article saying that the CSR is dead, because customer service representatives and most agencies don't need to deal with 600 different things. And it's all done with AI. And it's personalized. So that seems to me to be, kind of the future that you have pointed at with some of the work you're doing.

Nag Rao:

Kind of.

Tony Caldwell:

Which means that, hey, the agent never has to do anything drudgery wise, right? And so-

Nag Rao:

Eventually. One day.

Tony Caldwell:

... Yeah.

Nag Rao:

So it has a name by the way, I didn't tell you the name, it's called EZLynx Virtual Agent or EVA is what we call it.

Tony Caldwell:

All right.

Nag Rao:

So it'll answer as Eva. "This is Eva at the agency." You can customize the name, we have given an option for them to customize the name. So based on what you said, it could answer without the customer knowing that this is a machine answering that.

Tony Caldwell:

Right.

Nag Rao:

Because we are entering into that world now.

Tony Caldwell:

So, when will Eva or tools like that be commonplace, do you suppose?

Nag Rao:

I think if you look outside of the insurance space, it's pretty common already, right? Many times, especially credit card companies, they're probably the most advanced, they're financial companies. These are Wall Street companies and they're really always at the cutting edge of the technology. They've been doing this for a while. And sometimes you can't even tell, even after I hang up sometimes you don't realize that you just talked to a machine for 15 minutes and you didn't realize that. That's already been happening. Again, with our industry, it's very, very sensitive. We have to be careful how we handle it. So, I think we'll tread carefully. We have about, from what I know about 40, 50 agencies using this Eva right now. And they've been using it for nearly a year. 

One of the challenges we had was it has a bad habit of interrupting if there's an existing conversation going on. It can interrupt in between an answer when it should not answer. So that's been a little challenging for the technology folks to figure out, okay, this is an existing threat, but here's the challenge, right? When somebody texts you, they could be texting you about two different conversations they might be having.

Tony Caldwell:

Right.

Nag Rao:

So it's not necessarily one thread. So one thread could be adding a vehicle, another thread could be adding a coverage or changing something else in the policy. So how will the machine know that these are two separate threads? So there are some challenges like that, that we're trying to figure out, we're going to hit more challenges like that.

Tony Caldwell:

Yeah. What's interesting is you're dealing with the challenges, which means you're on the way to solving the problem. And so are other people. So, as you think about, 2025, you have 50 or 68 agencies using this product, but would you say that it will be commonplace in agencies in 2025 or still on that adoption curve?

Nag Rao:

I think so. When we first came with Client Center, back in 2015, we had maybe like 50 agencies using it today. With COVID, it became so popular, usage of Client Center has skyrocketed, and now almost 70% of our agency post-management, I would say, are enabled on Client Center and it's active. We see the logins, all the clients logging in. And so if you go even further in the back, we came up with consumer coding in 2008, 2007, most agents were like, "Why would I do that? I want to code by myself." And then the financial crisis came in 2008, 2009. Suddenly it became very popular. And today obviously consumer coding and agency websites are on a decline, because I think these online agencies have become more popular for consumers to go to.

But it's a trend that I cannot realize five years ago that servicing the client on the website is going to be the future... There's two things, right? One for us, it's a differentiator because the other windows are not focusing on another. And then second, I think it is a feature you need to have. Really, I personally would prefer that and other people too. So I would say by 2025, I think we'll be in a good place, with Eva. In fact, even maybe sooner, in another two years we might probably teach it to do the vehicle additions and vehicle changes, driver changes, and maybe some cover changes and things like that. So you have to take it case-by-case, right? I mean, and teach it how to do it.

Tony Caldwell:

Well, I mean, these things are hugely important. The average insurance agency on a personal line side spends about 25% revenue on customer service.

Nag Rao:

And that's a challenge.

Tony Caldwell:

So, it can vary by agency, but that's a huge amount of revenue.

Nag Rao:

Yes.

Tony Caldwell:

And if you're able to cut the cost of servicing your business by 50%, you double your bottom line-

Nag Rao:

Absolutely.

Tony Caldwell:

... for most agencies today. Which is really important if you think about that. Another mega trend that's really happening in the business, there's 35,000 independent insurance agencies in the country. That's been a fairly static number.

Nag Rao:

Correct.

Tony Caldwell:

... for a long time, but demographically it is changing because the number of large and very large agencies is increasing fairly rapidly through acquisitions, which have been accelerating over the last five years in their pace to the point that we now have just a few years of what they define as “investible” agency, two, three, 5 million of revenue which is left.

And you have a lot of new startups, but what's happening is that the middle, if you will, demographically, the independent means of channels is hauling out. And so all these new agencies getting created on the bottom, having to compete with very sophisticated, well-funded, well-capitalized larger professional managed organizations on the upper end, they have to provide those same sets of services, data analytics, and analysis recommendations and everything else as the big guys. So increasingly it would seem to me, technology and technology tools who are more likely, as you say, to be adopted by younger owners than older owners, may be the secret weapon that the small agent has in that battle. What do you think about that?

Nag Rao:

I fully agree with you. So technology is an agency’s friend. I've written a couple of articles, blog posts, blog articles on our website on this: you have to adopt technology. It's a survival issue. I don't think it's a choice anymore. Like you said, I think that millennials grew up with technology. They're very friendly with technology. It comes naturally to them. If you look at why there is consolidation going on, it's happening in the next generation, right? If you look at the average age of the agencies that are getting out of the business, it's all in the late 50s and early 60s, they're basically saying, "Look, I've done as much as I can. I'm getting close to 60. I'm not going to go through another round of technology investment and with questionable or unknown returns, I'm just going to get out, fold the towel and get out." Right?

Tony Caldwell:

Right.

Nag Rao:

So that is happening too, on the other end. And these are the ones we're talking about where they're getting scooped up by buyers. We have quite a few of those customers too, where they're going and buying all these large agencies, but I would not write off the younger agencies, the newer agencies, let's say under 10 year old agencies, if they can adopt the technology, they can still thrive. Because insurance, unlike every other product, is judged by the quality of service. And because when you file for a claim, you're already in a bad situation and you need a friend, you need somebody who watches your back.

Tony Caldwell:

Right.

Nag Rao:

So I think if you can excel in service, I think any agency can survive, the key is can you provide that level of service where the customers will come to you no matter what, I think that's the key. Insurance is unlike so many other businesses, right? I mean, what is the joke? Every small town in America has a Dairy Queen and insurance agent, right? And it's very true, right?

Tony Caldwell:

Yeah.

Nag Rao:

Why? Because they go to church and meet people. They go to restaurants and the insurance agent is always there. And so I think it's a very unique profession that way. But you still have a responsibility. You still have to adopt technology. At some point, people are going to say, "No, I just need all these access technologies on your website and you don't have anything." Right? So they have to.

Tony Caldwell:

Well, one of the big problems for agents has really been solved and that is capital. Most insurance agencies have traditionally been a fairly low capital organization with the exception of the human costs, the cost of training and developing salespeople, which is expensive and takes a lot of time, effort, and money. But in the past buying technology was also expensive. And so agency owners looked at it and said, "Okay, I'm buying a new agency management system, it's going to cost this much money. And I've got to make it last for five or 10 years, pay off my investment."

So now with the speed of change of technology, those people's mindset is how can I possibly afford to do this because it's not going to last long enough to pay for itself? But software as a service, as a business model has completely changed that. I wonder. I mean, do you run into that in your business operations where you have a mindset of capital expanse and affordability, as opposed to the understanding... You can have the latest and greatest, it doesn't matter, just the monthly fee.

Nag Rao:

Yeah. Well, so that's where I think we have some more DNA compared to other vendors. Tony, we've never had a kind of initial cost. And so we've always been a monthly kind of service. Our product from day one was always running on the cloud. Even though initially we are private cloud, and today we are what they call hybrid cloud, where we use a little bit of public cloud, a little bit of private cloud, and we're kind of in the middle. And we are moving towards a public cloud in the center here. So we've always been a monthly kind of service, telephone connection, or an electricity connection kind of service. You can turn it off anytime you want to turn it off. So I think we've always had that advantage and don't forget, even the computing, is going to cloud.

So one of the offerings we have, we've tied up with a couple of vendors, who'll offer this so-called virtual office. This was before the pandemic, this is something, I thought is very important, for the agents to set themselves up, with being able to onboard new employees very quickly and be able to work from anywhere, that's very important. So, this was before pandemic, now suddenly it has become so important that if you're not set up to work from anywhere, you're in trouble. And in many places it was full shutdown, full lockdown, so employees could not go to work. So I think the idea of capital costs for technology is done already. That's the good news, but you still have to figure out how are you going to use technology and how are you going to implement technology, and how are you going to leverage technology for your growth and serviceability and things like that, so.

Tony Caldwell:

So there's a concept called a Chief Financial Officer or fractional Chief Financial Officer, a lot of businesses use now. They need the financial sophistication of somebody that they can't afford to hire on a full-time basis. They hire at a fraction. And I'm curious, I mean, you see many agencies beginning to think about hiring a fractional CTO to help them deal with just the decisions that need to be made. I mean, look, I'm an insurance agent. And I know about coverage, and I'm pretty good with people, and I'm ready to launch. I do really well at launch, but you're asking me to make seriously sophisticated decisions about technology that are going to impact the capabilities of my business going forward. You've got all these vendors saying all these different things, and I don't understand any of it. So what are the resources that you see, that are out there today, or shouldn't be developed to help the agency make good decisions about all this stuff?

Nag Rao:

Yeah, well, there are some consultants obviously, that can help you. These consultants have been around for a while, but I think given today's model of computing, all virtual, all you need is an internet connection and a computer, or even a tablet. You don't even need a computer because especially with our product, we've designed it to work on tablets, and with the next version that's being rolled out, you can work on a platform, right? So in that kind of environment, you already have everything that you need. Now with the phone, those telephones were another big problem, right? You used to have this black box sitting somewhere in your closet and you have to have, even desktop, now like with IP. So what are the first commitments as we're brought into our product, like sort of the integration.

So you can subscribe - very popular. A lot of agents love integrating WiFi IP. So if you look at it that way, the bar is pretty low. And remember technology has been simplified so much now that you really don't have to be an expert in a lot of these things, where you have to be an expert in how to use that. So for example, Microsoft Office is in the cloud, so it's no longer, you don't have to worry about buying licenses and installing it, but it's still equally complicated. Like I said a few minutes ago, you still have to take time to learn what the features are and how you are going to use it. You might need help there. So the need for help and training might have shifted more towards how are you going to leverage your software, then how are you going to install and get it running? Right? Because I think that depends on your business style. Because how you use software really depends on how you run your business. A sort of fractional, did you say CTO, CFO?

Tony Caldwell:

CTO, chief technology officer.

Nag Rao:

I've not heard of CTO, but definitely, fractional accounting person, CFO. One of the things we did was to separate the general ledger out of our accounting product. We don't have a general ledger. We integrate with a third party general ledger. So that was good because what that does is that, if you're not using QuickBooks, we'll bring other vendors into it. But if your accounting person is already familiar with QuickBooks, you don't need to do anything. They just get access to the same account that you are linked into and they just work on it, right? So those kinds of models are very helpful. So fractional employment is something that our agency should take seriously. So the first rule, they have a virtual agency. That's very important. If you don't have a virtual agency, no fractional, nobody's going to work for the fractional, right?

Tony Caldwell:

Right. Well, and, you're really answering the question. The thing I've noticed is that these people, the consultants you refer to, they're very good at the nuts and bolts of “here's how you push the button to make things happen.” What they're not good at typically, is thinking through the strategic decisions that you need to make, about how to your point, you're going to deploy the software, based on your business model to make you money. And again, the Chief Financial Officer's job is not to do accounting, but they'll take the history that you give them and help you think about the future, making strategic decisions.

And it does seem to me that that's a glaring gap in the set of consultants, or however, you would describe it, from the independent agency, because again, agents, they know what they're doing today. They know where they want to go. It's getting there and strategically thinking through that process, that there doesn't seem to me to be yet a lot of help for, but I'll bet it comes up.

Nag Rao:

Yeah, it does. So that's where I think industry best practices are very important. So one of the things we do now is when we build a feature, we define what is the best practice for this feature. Maybe it’s issuing a new policy, handling it, or making a policy change. What is the best practice and build the feature for the best practice. So all you have to do as an agent is follow the best practice that is inside the product. If you don't, then it becomes a problem. So I think that's where I think our industry and, some of the vendors could have done a better job of defining the best practices, a lot of financial industry if you go back and see, they have best practices for everything. And it's very important that we define best practices. So that way you don't have to think about all the things.

I mean you should be thinking about how am I going to get more leads? How am I going to convert at a higher rate? Not how am I going to make policy change and how I'm going to issue policies fast? These are taken to be granted. Right?

Tony Caldwell:

Right. No, I totally understand that. So, assuming you like playing the piano, you got to learn how to play scales and chopsticks before you play something else. So that you can't go do something more complicated. 

I want to take a second though. You mentioned virtual agency a couple of times, and there's some confusion, I think, in our industry around what that means. I mean, I have conversations with agents and when I say “virtual agency” their eyes glaze over. And I think it's a place where all the business is done online. There's no human beings or maybe it's Jake at State Farm in the middle of the night or something, but it's not my brick-and-mortar place with the office there to begin. I don't believe that's what you mean by it, so.

Nag Rao:

Nada.

Tony Caldwell:

So give us a quick definition from your perspective, what does a virtual agency mean?

Nag Rao:

So you can be brick-and-mortar and still be virtualized. That's very important to understand. What I mean by that is there are some customers who are more comfortable meeting you face-to-face, then you need a place. So it doesn't have to be something you rent permanently. It's a place that you can use to meet customers. So that's a given, but all the computing needs and all the other agency needs can be handled virtually from wherever you are. You could be at home, or it could be on vacation in someplace, wherever you are. And a lot of your employees could be virtual too, with given the way we are talking, you and I are talking now. So all these challenges have gone away. So, what I mean by that is be virtual when you can and be face-to-face when the customers want, right?

So that's kind of the best model for it, because I don't think you can completely get away. But with the video calling, I think even the face-to-face need probably is gone away, unless either the customer on the other end is not sophisticated enough to handle all this. There are some people who are still not capable of doing this video calling and all that, but more and more people are. And some of the collaboration effort, like if you look at the way we are working at our office, right? We've been fully virtual, since early March, we shut down pretty quickly. And I go there twice a week, and I get all the product managers say in, once a week. The reason I do that is ideation. It's very important that you have multiple people sitting in the room, talking face-to-face reading each other's emotions when you're ideating.

So this kind of thing is very difficult to do online. So you still need an office. I'm not saying that you don't need them. But the technology pieces are anywhere, everywhere. So you don't need to worry about what I need to get. So you just have a laptop or whatever you carry with you, just take that with you wherever you go, and you can work, right? There are several employees who were moved and would not tell us. They get busted for some reason, when we tell them, "Hey, can you come to the office next week?", and they say, "I can't."

Tony Caldwell:

Yeah. I'm in California at the moment in Northern California. And everyone's been bailing out of San Francisco for that very reason. Right? They go, "Hey, we don't have to be here anymore. This is expensive. And it's not that great. So we're going to move to Texas."

Nag Rao:

Yeah, basically about a 20% pay cut, that's what I heard a lot of companies that are cutting the pay when they find out though.

Tony Caldwell:

Is that right? Well, that's interesting.

Nag Rao:

Yeah. That's what I heard Twitter and several other companies have said, "If you move out of the area you'll at least get a 20% pay cut."

Tony Caldwell:

They'll still be ahead because of the real estate prices.

Nag Rao:

Exactly.

Tony Caldwell:

But, that is a huge opportunity for agents because, and it's one that some agencies are trying to come to grips with, but I think it's very early days for this. And what I mean is you've made the point repeatedly that you can work from anywhere. So in an industry where talent and talent acquisition is one of the biggest impediments to grow, this really creates enormous flexibility. So if you're in a marketplace where there just isn't a lot of talent, you don't have to recruit there. You can recruit where the talent is and hire those people, and they can be anywhere. And in using software products, they can be just as much a part of your team as if they were in your office or in your town or whatever. And I assume that from your perspective, everything you're doing is designed to make them increasingly possible and easier.

Nag Rao:

Yeah, absolutely. Hit the nail on the head, right? So if you go back and look at our product, there's a couple of pieces in our product that needed local installation. One of the big ones, most popular one was to link EZLynx with your Outlook desktop email, that went well. So six months ago, we came up with a plugin that integrates with the Outlook web. So you don't need any local install. So we've completely removed all these local installations. So you're no longer sticking to a computer. You can go to any computer and log in, as long as you trust the computer, obviously - we recommend users to set up two-factor and trust the computers, as long as done all the right you can work from any computer. The only last piece that we have that is still installed is unfortunately, our industry problem, which is the downloads.

Tony Caldwell:

Right.

Nag Rao:

And the way our downloads work, you have to have a local software that goes and fetches the files. If the industry can get away from that, we are as a product, as a company, as a vendor, the agency is using our product, fully virtual. Look, I think if you asked me, that is the best of both worlds for everybody, both the employer and the employee, you can now get the best talent, you hit the nail on the head. And especially commercial, we've tried to bring some commercial expertise into a company when we are building commercial features. These people are hard to find, in our case, there is another problem, we cannot take them away from our customers. There's a conflict. And you'll hit the noncompete challenge there.

Nag Rao:

So it was even harder for us to find somebody, who was using, applied at a waterfall product and then was willing to come and work, but if we had nationwide access back then, it could have made it easy for us to find out, right? So I think you're right. You can now get the best talent. I mean, in our technology space, anywhere in the world, it doesn't have to be U.S anymore.

Tony Caldwell:

Right, of course. Yeah. No and in fact, very often it isn't in the U.S and it'll be interesting... The one thing that stops insurance agents from selling insurance all over the world is the regulatory environment. And the fact that policies respond to them, to the legal environment in which they're written, for very sophisticated agents, larger typically, they write multinational risks, worldwide risks, but that's a very, very narrow specialty.

I actually believe, though, that one of the things technology will do, it may not be in the next five years, but I do think it's coming, is we're in an environment in which I don't have to know all that stuff, all I have to do is be willing to write the check, to get the licensing taken care of, and I can write insurance anywhere I want to in a world, which is, again, that's another step past that, but I think that it's certainly coming. Where the promise of the iPhone, if you will, the computer in your hand is you can access every consumer on the planet. The only thing that's holding you up is the government, which of course is the thing that slows everybody up. But anyway, there is an interesting future in front of us, lots of change. But at the same time, one of the things that's come through in our conversation is that that change is not as complex as it appears to be.

In fact, a lot of change is just simplification. So a little easier to access than maybe what agents have thought about in the past. Anyway, I'm curious as you think about the three to five years in front of us: is there anything about the technology relationship that agencies need to think about that we haven't touched on?

Nag Rao:

No, I think, you asked some really hard questions there. To write that out, good question. I think the bottom line message is very clear: Technology is your friend. Don't be scared of technology. Like you said, "If you adopt technology the right way, it's going to give you unlimited scalability." Because I think one of the challenges in our industry is like you said, "Finding the right talent regulation and all these things." What it does is it really slows down the scalability of the agents. You cannot grow rapidly, especially in your world, right?

The map world, I've seen so many maps, they grow very fast, 100, 200 agencies, and then they stop. They slow down, I think because they don't adopt technology as fast. So using technology now our agents can come compete with a larger agency, like you said, even though they're well-funded or investor funded, you can still compete. Remember software has always been done by a couple of guys in the garage, remember that. Netscape was done by a couple guys in the garage and they almost brought down Microsoft.

Tony Caldwell:

Right.

Nag Rao:

And Google, was done by a couple of guys in a garage and they almost brought down Microsoft again. So software and technology is very powerful. You just need to know how to adapt it and how to fit it into your environment. Once you do that, it's the boost you're going to get to drive your agency forward, right?

So I'm a big believer in technology and for the right reasons. I'm very low-tech in my personal life, but very high tech at work. And I think, you have to adapt everything that you can get, and there's so much technology out there these days, right? So, you're really throwing away opportunities if you don't do that. And consumers are demanding, customers are demanding, that's a challenge.

Tony Caldwell:

Well, I think you just finished up by saying that relationships... And you didn't say this exactly, but what I heard was relationships were important, low-tech in your personal life. Right? And I do think that the real fundamental value of an agent is the personal relationship.

Nag Rao:

Absolutely.

Tony Caldwell:

And so if the agent focuses on a relationship with another human being and uses technology to do as much of everything else that can be done, they're freed up to be what they really were intended to be and what they're best at.

Nag Rao:

Yeah. Absolutely. You hit the nail on the head.

Tony Caldwell:

Yeah. Well, Nag I really appreciate you taking the time to visit with me today. I've enjoyed the conversation and hope maybe we can do it again sometime.

Nag Rao:

Absolutely. Thanks Tony, I really enjoyed talking to you. Thank you.

Tony Caldwell:

All right. 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 that button or the link in the description and we'll make that happen. You can also reach out to me at tonycaldwell.net/contact.