Insurance in the time of technology and self-service with Bernie Heinze | Ep. 12

The insurance industry has changed very little in the last hundred years, but now it’s evolving in leaps and bounds thanks to changes in the market, the economy, and society itself. As clients and owners skew younger, and technology finds its way into every aspect of insurance, many agents despair that this is the end of the agent as such.

Fear not. Insurance expert and lawyer Bernie Heinze has seen it all before, and he believes the insurance agent will survive and thrive, and in fact be even more capable and effective thanks to technology. 

Join me as I discuss the future of insurance in the time of technology and self-service with Bernie Heinze, CEO of Heinze Group.







Tony Caldwell:

Hi, everybody, and welcome to another episode of Uncaptive Agency - The Future of Insurance. I'm Tony Caldwell, and joining me today is Bernie Heinze, who is the CEO of the Heinze Group located in King of Prussia. And Bernie, you were telling me just before we get started, you're also known as the King of Prussia.

Bernie Heinze:

I wouldn't go that far, Tony. We're not trying to recreate The Crown here or anything like that. We live right across from Valley Forge National Park. So King of Prussia is a suburb of Philadelphia.

Tony Caldwell:

Okay. Well, a challenge to our listeners, if anyone wants to get in touch with Bernie, just write him a letter in care of King of Prussia, and honestly, I'll bet it shows up.

Bernie Heinze:

It will get to me.

Tony Caldwell:

Yeah. So, Bernie, we're talking about how the insurance industry, particularly the insurance distribution industry, is going to look in the next three to five years. We have a 100-year-old industry model that is undergoing rapid and profound change, and agents want to know: what is their business going to look like in the next five years? And what do they need to do to get ready for that? And I was interested to visit with you today because you have a deep and extensive background, particularly in the excess and surplus lines world. But would you give just a thumbnail for our listeners or viewers, of your insurance industry background?

Bernie Heinze:

Sure. I started back in 1983, as an insurance defense and coverage counsel working with two law firms here in Philadelphia, and had cases and coverage matters throughout the United States and also in Europe, representing a number of Lloyd's syndicates and underwriters as well as domestic and international insurance companies here in the United States in courts, both state and federal and also did some testifying in front of the state legislative bodies, National Association of Insurance Commissioners, state and federal legislators and then also I have been an expert witness with regard to insurance-related matters on the duty of good faith and fair dealing, agency malpractice. We don't like to call it that sometimes they call them errors or omissions issues, I like to call them E&O or excitement and opportunity claims. I always try to put a positive spin on things. But it has been quite a career of looking at it from the sides of the insurance agency, insurance company, and also policyholder issues.

And for 17 years, I was the executive director of the American Association of Managing General Agents prior to its merger with NAPSLO, so I understand some of the issues that our agents are facing both on the wholesale and retail side and the program side as well. So program managers, program administrators, aggregators. And your question, Tony, I think is a good one and is appropriate to be asked in these days of COVID. Now that we're going to be recording this interview today, but it'll be probably watched for months to come. Who knows how we're going to continue to evolve through this COVID situation? But I'm going to pose a different question I've been thinking a lot about lately. And that is, are agents going to still be around in five or 10 years?

Are we heading to a contactless type of insurance distribution model? I don't think that's going to happen, but if we look at what's happening with fast-food restaurants, you go to any hotel now you can get your room key in advance, you don't have to go to the front desk anymore, you get the key on your phone, you go to your room and away you go, you're all set. So are we heading to a situation much like we've seen with some of the internet type based lemonade type insurance companies? Where agents and brokers are also going to have situations where for their customers, they're going to be able to log on to a website, answer some questions and then have their policy spit out back to them. It may work, we may be heading toward that as some of the vanilla type, slip and fall, general liability, homeowner, the auto-type situations of policies, but for the broader type coverage lines of business like employment practice liability directors and officers, some of the professional lines, products liability and some of the property damage type claims.

I think we're going to continue to have smart agents and brokers involved and engaged to answer the questions that people have because not everything can be algorithmically put into a box and answered. We see a lot of what's happened now in London, I'm sure Tony, you I've seen this too with the key syndicate. That was that joint venture between Brit and Google that's using all algorithms now. So you present your risk, and they will run it through an algorithmic AI process and say, "Okay, we'll take 20% of this, we'll take 35% of that." They won't lead any of the business, but they'll take certain sections on a subscription basis for some of these risks. So my question in looking at this somewhat opportunistically, is what level are agents and brokers going to be at in the next five or 10 years? And what is that going to look like? What do you think is going to happen?


Tony Caldwell:

Well, I think that agents are always going to be necessary because human beings want to look in the eye of another human being, not a chatbot, even though those are getting really good. And know that at some fundamentally human level that they really are okay. I had an experience a couple of years ago with a partner of mine that operates a... It's an auto club for truck drivers. And they have people that answer the phone for them in about 16 different languages. And the reason that they do that instead of all in English is, he said, "When people want to talk about the contracts and they're really important things that are going to affect their livelihood, they want to do it in their native tongue." Well, if people want to have that conversation in their native tongue, they still on really important issues are going to want to talk to a human thing. And so I think that agent is still going to be necessary for that.

But I think the agent role changes. And I also think, and I want to ask you, I'm going to flip this back to you in just a second and ask another question is, I think that one of the things that technology is very likely going to do is to increase the professional demand that consumers and businesses have for their agent. Because AI doesn't let you do a lot of data sorting. And so generic vanilla solutions for people are probably going to be less prevalent and less acceptable in the future. You've had some experience with malpractice, as you said a minute ago, and you know claims. And I think that what happened at the beginning of COVID is a massive indictment of insurance agencies and agents, not just insurance companies. And I'm referring here to the business interruption debacle, which has resulted in over 1300 lawsuits being filed so far, for failure to either provide coverage or to question the coverage written in the forms.

And my own experience is that agents typically don't ask a lot of questions and business interruption coverage is one of the coverages that can be written in almost limitless numbers of ways, but require the agent to deeply understand not only the business that they're insuring but also the mindset and desire and what keeps you up at night questions that the owner has. Because only with all of that information, along with deep knowledge about the coverage forms and the ways of underwriting, could really tailor coverage properly. And so the fact that tens of thousands of businesspeople represented by these 1300 lawsuits, were surprised that they didn't have coverage for a virus that shut down the economy, I think is an indictment of insurance agents, because it's clear they didn't have those conversations in advance. What do you think about that?

Bernie Heinze:

That's a very good question. But I think a lot of it depends upon whether we're using ISO type based policies, whether we're using manuscript based policies. The whole issue of business interruption has always been prefaced upon the fact, has there been a realized conceptual loss that can be documented, can be somehow tangibly felt like when the World Trade Centers collapsed, right? All the businesses around the World Trade Centers had business interruption losses because people couldn't get there, there was a loss of access. So we haven't really had that situation in the COVID type sense. I think going forward, I'm hearing a lot, Tony, I think you may have been... We talked about this a little bit earlier too, about whether we're going to have a terrorist base type pandemic backstop, whether it's from the federal government, or whether insurance carriers are going to get together and have a reinsurance vehicle, like the wind pool over or back over in Ireland, we used to have the IRA terrorist attacks, there was a terrorist pool for these types of situations.

Is that going to be developing? Because if you read what the Center for Disease Control is saying, we're living in an age of pandemics and we're going to have more and more of these types of situations coming about. Is COVID going to mutate itself so that as we're sitting in November prior to the week of Thanksgiving, as we are today in 2020, but a year from now, will it be COVID 2020? Will it be COVID-21? Will it have mutated itself with the flu so we have a mutual pandemic? All these things are being discussed now with underwriters and looking insurance companies, to your point looking at how can we rate? How can we evaluate the fundamental basic structure of business so that we can analyze what the anticipated losses are going to be and how do we get a proper rate for that is affordable, and something that we can write so that people can know that, yes, they do have coverage for this if they want it, or no, they don't?


Tony Caldwell:

Well, one of the things that you're talking about raises for me, is a question about where the market is actually going to be. So you mentioned earlier certain syndicates in London's ability to use AI to help make some decisions about what they want to purchase in terms of underwriting coverage. And you've just now really talked about the fact that insurance policies have not been as dynamic in the past as they may need to be in the future, to accommodate things like COVID that come up unexpectedly. So it makes me wonder what the future looks like. So today, if there's a lawsuit, it takes ISO perhaps a few years to modify a form, which then all the carriers then modify. And so maybe a decade or so after something happens, we have coverage that responds to it more or less appropriately. Lots of things are speeding up and I'm curious what you think about the real-time adaptations of the industry to coverage neither, is that going to speed up, or are we going to-


Bernie Heinze:

It has to. It has to. It just absolutely has to. The pace of business has just exponentially increased in terms of speed and in terms of size. So yeah, I think that's going to have to increase, I think regulators and our friends at the NAIC are going to have to wrap their arms around the fact that as new forms and terms and conditions come before them, they're going to have to look at those a little bit more quickly than maybe they have in the past. I think bureaucracy is going to have to take a backseat to the expediency of getting these forms and coverages out to people so that they know that they're adequately insured. I don't know that I would agree with you, Tony, that there has been a lack of dynamism with regard to insurance companies in providing the necessary terms and conditions for coverage. I think business reacts to the circumstances they have before them at the time, right?

So I think this whole new aspect of this COVID environment that we're now living in, is going to accelerate that and we're living in an age of acceleration, where small businesses and agents much like their customers and their insurance markets, are going to have to learn from one another of what it is that the customer needs and wants, and how we can best get it there. I think we're going to see an incredible entrepreneurial wave of exciting times within the insurance marketplace of new forms, new coverage opportunities, ways of pricing that we may not have seen in the past, but perhaps some deductible or self-insured retention, SIR type situations, maybe even some captive models that can come in where larger organizations can go to a captive or perhaps a group as we've seen with OBGYNs or other types of unique risk purchasing groups getting together to form their own captive to insure themselves. The canvas is white at the moment.

The whole way of doing things of the past those days are over. I love it when people call up and say, "Gosh, I can't wait to get back to the way it was back in 2018, 2019." Right, Tony? "I can't wait till we get back through again." Forget about it man, those days are over. It is over. This is normal, what you're seeing today, what you're dealing with, when your phone is ringing, the emails are popping up through your screen. That's normal. That's today that's what we have to react to, that's what we need to figure out a way of how do we put our arms around it and do the best we can for our customers.


Tony Caldwell:

Well, let's unpack this market thing just for a minute, because you obviously have a tremendous background experience in the E&S world. And one of the things that the excess and surplus lines marketplace has done I think really well, at least as compared to say that the standard typical insurance company is that E&S markets are typically able to respond a little quicker to evolving business need and then it gets picked up in the standard market. So I would assume that your opinion would be that the future is really bright for the... There are 3000 insurance companies in America, roughly about 900 of them are typical main street type operations, you got a couple thousand that are largely written through MGUs, MGAs, and so forth, not to mention the London markets. And so obviously, you've got all these hundreds and hundreds of companies. And I would think you think that they have a really big and bright future. Is that right?


Bernie Heinze:

It is right. And I do agree with that. Throughout history, the excess and surplus lines marketplace has always been able to act more like a... I relate it to more like a jet ski compared to an aircraft carrier. You can adapt, you can move, you can shake, you can do whatever you want based upon changing market conditions. And we're in those conditions now, more so probably than ever before in our history. And it's interesting when you think about the derivation of the E&S marketplace and MGAs and MGUs. MGAs actually started when the war between the states was finalized, and we had northern insurance companies looking for ways to help rebuild the South. And they used the intellectual capital of people who were on the ground in the south to be their managing general agents and gave delegated underwriting authority to them because they knew the landscape. They knew the people, they understood how things work in their area, we become so much more demographically tinge now than we ever have been before, Tony.

I think what we see here in the northeast in Pennsylvania, where I am compared to where you are out in California, is a world of difference. Right before we got started, the listeners won't appreciate the fact that we had a little bit of a conversation where you said to me that the governor of California has put in a law that if you have more than how many people in your house at any one time you get a hotline number to call into to blow in your neighbors?

Tony Caldwell:

Yeah. That was an announcement that was widely talked about a couple of weeks ago. I would say an overblown effort to try to keep people safe at Thanksgiving. I live in Oklahoma. Our governor in Oklahoma won't even issue a mass mandate. So you're right, culturally, politically, socially, there are many Americans. So, that's right. So Demographically and geographically-

Bernie Heinze:

Yeah. Right. So demographically. And we've seen this also in the election that we've just come through, right? We just had the 2020 election campaign. And if you take a look at the map, in so many states, the margin of the mandate was 1%, some states less than 1%, some states a little bit larger. But as a nation, we had probably about 160 million people vote in this election. And the margin is between 51 and 49%. That's not a lot. So we've got real demographics involved. And I think one of the opportunities that present themselves to not just the E&S marketplace, but also to insurance market practitioners in general, is how do we manuscript, how do we shape and form our products and our services to the demographics that we're serving? Are we looking at Northeast versus Southwest, age-related situations? Jerome Powell, the Federal Reserve Chairman has said we're going to be at least another several years before the economy gets back revved up again coming out of COVID.

With most of the people now still working from home, I can look outside my parking lot here and there's one car in the parking lot and it's mine, everybody else in this building is still working from home. So that means fewer cars on the road, which means fewer accidents, which means the incidental type claims that we're talking about may be a little bit different than what we've seen in the past. So to your point, we're going to see a lot more opportunities to change and mold insurance coverages to the risks that are presented. And I think the E&S marketplace will continue to grow and continue to adapt to those types of evolving type opportunities.


Tony Caldwell:

Well, if nimbleness is the thing that's going to drive the E&S marketplace success in the coming years, and I think that's really what we're saying, what's the implication for standard lines insurance companies? So roughly 900 of those in the United States, and 80, 90% of the business is done by the top 20, the balance of them are picking up small pieces of that. And then the standard marketplace, speed issue, and ease of doing business and all those kinds of things are what's driving success for the carriers with agents right now. And that's accelerating. The problem for most insurance companies is that with their very thin margins that they've been experiencing over the last decade and surplus that's not maybe what it needs to be, many of these 900 face a tough future because technologically, they're going to have a hard time keeping up. And so it seems to me that there's going to be a lot of consolidation in the insurance company ranks.

And I'm curious: if you see any of that spilling over into the E&S carrier world, or because of the ability to adapt in the refractions nature of the future, do they stay pretty much where they are?


Bernie Heinze:

That's a really good question. I've been thinking about that a lot too. As we know, over the last, gosh, eight, nine, 10 years, we've seen a tremendous amount of merger and acquisition activity primarily in the broker agent world, not so much in the insurance company well, but some of the smaller insurance companies have been objects of acquisition interest as well. I think that's going to continue, because what we're seeing is, with the volatility of the stock market, there's so much undeployed capital in the world. There's an article in the Wall Street Journal last week, that said there's an estimate, there's probably an additional three to $6 trillion in the United States of undeployed capital that's not sitting in a bank, that's not part of the stock portfolio, that people are just sitting on cash that's burning a hole in their pocket, that they're looking to deploy in certain ways.

So we have a lot of these angel investors and venture capitalists in the market that are looking for ways to deploy that capital. And they're becoming more and more engaged, we're getting calls here all the time from investors who are looking to look at picking up various large loss portfolio transfers, or looking to do some acquisitions of insurance companies and looking to ask whether their risks and their capital and their reserves are adequate, so that they can make the purchase or spin-off some of the losses and just buy the assets of the company. But I think that is something that is going to continue the investment appetite is tremendous now, because the insurance marketplaces always provided a little bit more forecast stability, if you will, more than the stock market does, where you can depend upon for certain return on investment. Now, this year we've been challenged a little bit, given the non-manmade events that have taken place of the hurricanes, I think we're up to like 26 or 27 named storms now across the Atlantic, right?

Through the Caribbean, we've had a number of them make landfall here in the states in the Gulf and also along the Florida coastline. So climate change is one of those things that are driving these types of discussions as well. But yeah, I think we are going to continue to see that investor interest, Tony, where companies will look and investors will look to see where those opportunities exist. The interesting thing for me is, what is the knowledge base of that capital? Right? Because what we've seen in the past - if you look at someone like Hank Greenberg, a person like Bill Berkeley, and others that have been stalwarts of the insurance marketplace, who've been there that are always looked to, Warren Buffett that are always looked to to talk about what's going to happen in the future. 

Are they being transplanted now by naive capital, or investors that are looking to come in, that are looking for maybe a short horizon of time to get back something that they would invest in, as opposed to people like the Greenbergs, the Buffetts, the Berkeley's of the world, whose families have been in the marketplace for generations, and will continue to do so, will they be replaced by some of this capital that's looking to maybe make a short term investment, make their money and then get out and go somewhere else? Or are they going to stay? So that to me is one of the interesting things on to your question about what type of investors are going to come into the marketplace and what their interest is going to be to remain?


Tony Caldwell:

Well, so we have a lot of fluidity, I would say in the intermediate future, then because coverages are going to change of necessity, the [inaudible 00:24:37] of companies is going to change, the rate of acquisitions of companies among themselves may change. E&S markets are going to be perhaps more active in the future than in the past. You have a whole new set of entrepreneurial or return-seeking investors entering the marketplace and how they manage their investments and the implications that it has in the future, or the stability of the insurance marketplace is up for grabs. We've covered a lot of stuff that talks about, or points to a period of time coming or that we're in right now of uncertainty, change, and heightened risk for almost every player in the business. And so with all that in mind, if you're an agency owner, where do you place your bets?

Insurance agencies have to develop relationships to be successful, not just with clients, but also with companies. And so is the insurance agency of the future going to be more successful in niche markets with relationships with E&S carriers and the like, or is this the time to turn to the big boys in the insurance business and put your bets with them?


Bernie Heinze:

Well, that has been always a $64,000 question, isn't it? Whether we want to stay independent, or whether we want to sell to one of the larger people? And the larger people are getting larger, right? And when you see the amount of venture capital that is being invested in some of the larger agents and brokers, and they're looking to continue to build out their portfolio and get more opportunities to involve themselves with other agents that are out there in the marketplace, you're absolutely right, Tony. That is going to be the continued landscape, I think that we're going to face. So let's take a look at this. I think if I were to break it down, there are probably seven areas that I would, as an agency owner look to, to analyze where I am in my agency, and what my longevity opportunity is. If I want to stay in the business, I have to have, number one, a strategic plan, a business plan, a continuity plan, and what I refer to as an innovation plan. The old days of doing business are gone. We can't operate anymore on a gut instinct.

We all have it, that's where we got involved in the insurance business, because our gut through experience told us the right things to do. And by and large, we usually called it right. But I was reading one of your articles the other day, Tony, which I thought was really spot on about data and key performance indicators. And you mentioned a term in one of your articles that said data is our friend. And that is so true. We can't get away from that. We have to have, as an agency owner, a sense of intentionality. We have to be intentional with where we want to go and how we're going to go about getting there. Every customer wants to know, every market wants to know what our plan is for moving forward. If we're older, if we're over the age of 50, 60 years old, what's our plan for handing off leadership to the next generation? Do we have someone in mind that's going to come over to take our place so that they're going to continue leading the agency?

What is the transparency that we can provide to those who are looking to continue doing business with us? And do we have the authenticity to build that trust and allegiance that you rightly said is so necessary? We just can't operate in the same old ways. So the second thing I think, is you mentioned nimbleness. I refer to it in a little bit of a synonym of resiliency and agility. I think those terms of being resilient, of being strong and looking at our core values and our core intellectual capital that resides within our agency, those people that have the experience and the intelligence that we can help our customers and our markets deploy that capital better and assume that risk in a more intelligent way, is going to be data driven.

So I think we need to have that resiliency to be strong and really dig deep down and engage our bench strength and look at the basic blocking and tackling we've always done but to also have the sense of agility to change on the dime. Because while we're always preparing for the marathon, we got to prepare for the course to change. And it's going to, no question. Who would have thought 12 months ago as we're sitting here in 2020 and 2019, Zoom was something that was related to a Mazda commercial, right? Who used Zoom? Virtual was something that was kind of, sort of, but not right. Well, it's got to virtually this or that. Now, virtual is the age. So we need to I think, prepare for the ability to turn on a dime and to have not only a plan B, but a Plan C, D, E, F, G, and H. So that no matter what is thrown at us, we can adapt to it and continue to provide that service, that professionalism, that trust that our companies and our customers are looking to us for.

Third, I think the acceleration of digital competency across various demographic categories is going to continue. We need to understand and enhance analytics and projections in order to make better-informed decisions. Fourth, I think developing a story is very important to agents. What is the story of my agency? How am I differentiating myself from the other folks that are down the street or across the next county? The next I think is community engagement. We've always talked about the insurance professionals getting out into the marketplace, it's great to run an agency providing a noble service to the economy, as well as to the marketplace overall. But how can we expand that? How can we get people to realize the benefit that we do? Get involved in some community activities, get involved more in your church or a nonprofit organization, and let them know that you're part of the insurance community. They will come to ask questions. To your point, people always like dealing with people that they know, or speak the same language, like the truck driver example you gave a little while ago.

And then seventh, I think is that relentless pursuit of excellence. We have to continue to maximize our full potential and measure performance at all times, we can't be an all sort realm, if you're going to be in the business, dang it, be in the business. If you want to sell, then go ahead, let's get things shored up to such a point where the balance sheet looks right, things are stable and you can go ahead and get the best amount of money that you can for your agency. But if you want to survive and be long term, then let's go ahead and do those things as well.

Tony Caldwell:

So a friend of mine who's a vice president for a large insurance company, who shall remain nameless, but based in the northeast, said to me at a cocktail party a few years ago, he said, "When I retire, I'm going to become an independent insurance agent." And it's like you need a little drumbeat there because it was hilarious when he said it... But that's the truth. The independent agency historically, independent agent, let's say not the agency, but the independent agent could go to work really hard for five years and then be affluent for the rest of their career with no real change. You mentioned Zoom, and whoever heard of Zoom. Well, I've been trying to get people to use Zoom for four or five years now. And we have a robot in our office where we can dial in Zoom, we can go around the office and see people in their offices.

And I actually believe, and I've written up quite a bit about this, that within five years, we'll be using not just virtual reality, but augmented virtual reality to have face to face conversations around a desk with people using a form factor headset that looks like your eyeglasses. That's where we're headed. So people think about Zoom as some magical thing, the truth is, it's just the model T of the automobile. And so the point is that first of all, life is harder if you don't want to work in the future, because to your point, all the things that you got to do require effort and you can't retire as my friend kidded me about a few years ago, as an agent anymore. You can't retire in place. It's that old sign you see in stores of all employees who die on the job, “Please fall over so we'll know you're dead”. Well, everyone will know you're dead in the future, because you'll be so irrelevant.

And so part of the whole point of this blog is to get people to think about, "Okay, if that's where we're headed, what do I have to do right now to be prepared for that?" And I think what you're saying is that well, it could be that this is the time to get out. Agency valuations on a nominal basis, for example, have never been higher. But rather point really about the need to manage your business, run your business, be a business person. In the first place, that's why I wrote my book on Uncaptive Agent, which was to talk about the business of running the business. But secondly to that, I have seen a number of transactions this year, which I'm very familiar with the agencies. And it's interesting because I've seen aggressive, ambitious, forward-thinking guys sell an agency for 15 times EBITDA, with really small earn-out potentials, and other agents who are basically “retired in place” like my friend described, not really growing, not really changing, sell for half as much on the same amount of volume.

So there's a huge missed opportunity on the one hand and tremendous opportunity on the other hand that agents have to really think about. So anyway, it certainly is a time of fundamental change that ought to drive a lot of thought and you've given five or six or seven different examples of things people ought to think about. Let me change the direction of the topic though, just for a minute and ask, you've had a lot of experience, as you said earlier in the world of who's involved and trying to figure out, did somebody screw up? And who should pay for that mistake? In other words, the malpractice arena. And I'm curious what you think the future holds for that, does the fact that we can do better data analytics mean that we're going to see a greater or an increase in the number of venal lawsuits? And how does that impact the agent going forward?


Bernie Heinze:

Really good question. It's funny, you should ask it about right before COVID hit, I was giving a presentation to a group of agents and brokers in the southeast. And the manager of the conference said, "Bernie, we want you to come in and talk about how do we avoid lawsuits?" And I said, "Great, happy to do it. How long do you want me to speak?" He said, "Well, speak maybe for 30, 40 minutes and have some Q&A time for the hour." I said, "Not a problem, I can do that." So I got up on stage. And I said, "Mallory asked me to come down and talk to you folks about how to avoid E&O suits for agents and brokers." And I said, "I've got the answer for you, and if you'd all like to take out your pens and a piece of paper, I'll give you the formula because here it is. You're ready? You can't. You can't avoid them." There is as much hunger among the plaintiffs’ bar in our country, as there is a hunger for defending them.

So there will be opportunities that will be looked at and scrutinized not just with a magnifying glass, but with an electron microscope to find out what we did that was not within the standard of care, not within the duty of good faith and fair dealing, if you're an insurance company, what did we do that violated that trust that that customer had us to place the business? And if it didn't get placed, why was it not placed? Was it because we didn't get adequate information from the customer, they didn't fill out the application properly, we didn't find out as much about their business operations to see that there may have been some other risks exposure that we weren't thinking about that a CGL policy or a D&O policy or property policy would cover? So those are the type of things that I think our friends on the plaintiffs’ side of the bar are going to continue looking to and asking. But that doesn't mean we can't be prepared for it. So to your point on the data, yes, keep the data, keep the analytics, but also document everything.

One of the key things that I continue to see in lawsuits where I'm called upon to testify as an expert, is a lack of documentation. And it needs to be commensurate with the activity that took place. I just had a telephone call with Tony, and here's what was said, and I write that down, and I have it in my file, it's dated, I know that if anything happens in the future, I can go back to my file, take a look or I can give it to my lawyers and say, "Oh, we can develop a chronology here. Here's what was being said between the parties. And here's what the mutual intent of coverage really was."

So I think the aspect of lawsuits is going to continue. We're getting into a culture also Tony, and it'll be interesting to see a year, 18, 24 months from now, what COVID has done with social inflation. Because we're seeing juries award damages in such a way that, wow, it really exponentially increases the amount of loss or the amount of recovery that it would take to put that person back to where they were before the loss. So all those things, I think will be interesting ones to watch going forward on agents type situations.


Tony Caldwell:

I'm a pilot and so flying across the country today, if you make a mistake, the systems that we now have, that we're finally fully implemented in 2020 this year, everything you've done is documented with data. And if you screw up, you get a letter in the mail saying, "Hey, you screwed up, and here's where you did it, and please justify what happened or we're going to take your certificate away from you." And it's all automated. So it bothered pilots when that all happen because you can't get away with anything anymore. And most of us said, "Well, okay, but we're doing a good job as pilots, nothing to worry about." This is a little bit like that, because to your point, in the past, maybe the plaintiff didn't have the smoking gun email, they didn't have the phone call, or they're going to have it in the future. And so you said you got to document everything. And that sounds onerous, especially when you have a lot of other things that you have to up your game on in the agency.

But I do think the good news and the promise of artificial intelligence and things like that is that that sort of drudgery actually will all become automated in the next four or five years. I'm curious what you think about that, but my view is, okay, we're having this conversation is recorded, it's filed, every phone call is recorded and we can search it very easily with technology software, same thing with email, texts, phone conversations. And so the documentation part of it will become easy.


Bernie Heinze:



Tony Caldwell:

What I'm worried about is that we have a generation of insurance experts that are walking off the stage. Half of the people in the business are going to retire in the next decade. There's some talent coming in behind them, but they don't have that experience level to ask the right questions, to make the right recommendations. So I see a real challenge for agency owners and agents in particular, with this whole thing about doing it right, so you avoid getting sued, or at least you prevail when you are, how do you make sure that you replace that sophistication, judgment, product knowledge, and all those other things which are so critical to doing the job right?


Bernie Heinze:

I think that that comes down to mentorship, right? We have so many agency owners now that have seen pretty much everything that you could possibly imagine up until COVID hit, that they can pass on to the next generation that's coming on behind them, which is another reason why community engagement becomes so important to pass along those lessons learned. But to your point, Tony, I totally agree with everything that you said with regard to data and documenting everything. I use... Right here, I've got a little headset that I use and I have what's called the dragon software system. So I can in my headset dictate into my laptop here, a conversation that you and I may have just had or a conference call that I had with the market, and just recap for my own personal benefit in 30 seconds, a minute just by dictating it into this little microphone piece and have it print out for me in real-time as a Word document and file that away.

So those types of things, like you said with the virtual reality are going to be where we're going. But to the point that you raised, I've always taken the position. People have always said, sometimes you got to paddle faster, right? We're all going down the stream, we just got to paddle faster to stay ahead of the current. And I know you've been a pilot for many, many years. Have you ever gone whitewater rafting, Tony?

Tony Caldwell:

I have.

Bernie Heinze:

I did it once, many, many years ago. And it was on the Youghiogheny River in Pennsylvania, which is very fast. And we all thought it was going to be great with a bunch of friends. And we thought, "This is going to be a ton of fun, we're going to have a blast, it's a beautiful day outside, we got a picnic involved." And then the first rapids hit, and I was scared out of my mind. And the key was if you paddle faster than the current goes, you're going to be able to control the current right? My feeling today is only dead fish swim with the current. If you want to be with the current, do what you always have done. If you want to reverse course and swim upstream for a little bit and have the current ahead of you, that's I think, the headwind that we're all facing.

Using an airplane analogy like you've had, you always take off into the wind because the wind is coming toward you, you know what to expect, you put the paddles up, the ailerons down, and you go ahead and climb. The same holds true for insurance agents or brokers in today's environment. Forget about having the wind behind you: put the wind ahead of you and control the destiny that you're meant to have. 

I'm a volunteer fireman, and when I first joined the volunteer fire company, there was a need for engineers and people who drive fire trucks. I was really interested in getting involved in buildings and doing the thing as a volunteer and they said, "Hey, Bernie, you wanted to learn how to drive a fire truck?" I said, "Yeah, sure what the heck?" There's nothing that exhilarates more than driving 500 gallons of water and six people in the oncoming lanes of traffic with sirens blaring and lights flashing.

But when I first started taking my lessons, the first thing I did, I jumped into the cabin and I looked around and I said, "Hey, John, where's the rearview mirror?" And he said, "We don't have them in fire trucks. And don't worry, we're not going in that direction." So we learn from our experiences of the past, apply them to what we see going forward. And that's where I think your whole discussion and an answer to your question, Tony, I think we're going in the insurance and agent marketplace, what do you think?

Tony Caldwell:

Well, I really agree with that. And the other thing is that it sounds when you ask somebody like yourself to speculate way out into the future, in five years, frankly, is a long time given the rate of change that we're experiencing. It all sounds just a little bit overwhelming. And not just a little bit intimidating. My experience is though that you just have to take the first step and the second step will be revealed to you. And that the really important thing though, is to try to see as far ahead of you as you can, because it helps you really just to be prepared. I took a race car driving course years ago, and I learned that the car goes where the eyes look. And so the trick was, "Okay, how do you drive 120 miles an hour in a sweeping turn, where you have three guys behind you and three in front of you and your five feet off the bumper of the one in front of you and not look at that car?"

And the trick to getting around that corner is to look at the curve and your hands magically take you where you need to go. And so the point I think that's important here is to be looking at the future with your hands on the wheel and relax because your eyes are going to take you there. But if you aren't doing that, if you get too focused on the risk right in front of you, that day right in front of you, you're going to have a crash.

Bernie Heinze:

Yeah, that's so true, isn't it? And we are in the risk business. None of us would have gotten involved in this if we were risk-averse, right? We take, like you said in your article, making intelligent and informed decisions. That's really the key right now, is using the data that we have and the experience we have of taking that step of letting our eyes tell us the direction we want to go. It's the same in driving a motorcycle, you fly planes, I ride motorcycles, and it's the same holds true in doing a curve on a motorcycle. You don't look down, you look ahead of you and your hands automatically take you where you want to go. And I think that's important. 20 years ago, when I started this business, I said to a friend of mine, his name was Tom. I said, "Tom, I feel like I'm standing on a high diving board and a swimming pool blindfolded and getting ready to take that leap, but I don't know whether there's any water that's going to be down in that pool to catch me." And he said, "That's your problem. The problem is one of perception, don't think of it as a diving board think of the diving board as a springboard to propel you up to the next level of where your destiny was meant to go."

Tony Caldwell:

Yep, I love that. That's a great, great analogy. You have a good friend in Tom. Well, Bernie, we've had a really interesting conversation today, and I appreciate you taking the time to have that. Any last thoughts that you want to share about the future of insurance over the next few years that we haven't covered already?


Bernie Heinze:

I think we've covered a lot of ground here today, Tony, but a couple of comments might be worthy as we come to the conclusion here. First of all, let me thank you, Sam, and Ashley, for the opportunity of coming on today and being part of it. I really enjoyed the conversation. I've always enjoyed it when we get a chance to even on the telephone, chat a little bit and share some worst stories and think about what lies ahead. And being able to share that is so important with our colleagues and friends in the insurance marketplace. And those who are risk-takers and those on the policyholder side, attorneys and agents, brokers, company, people, reinsurance, all of them, it's something that we all I think can learn from each other. The key for me right now is you mentioned who knows what's going to happen in the next five years of the insurance. You're right. I'll tell you, who knows what's going to happen in the next five months given what's happening?

We're standing right now on the verge of some vaccines being approved by the Food and Drug Administration for COVID-19. Five months from now they will have been approved and inoculations will start. So who knows what's going to happen after that. We live in a “who knows” world and a “what if” world. The key for me, I think, if I were to sum it all up, Tony, is that we all need to have the intestinal fortitude and the strength of our convictions to move forward, don't look behind, don't look at just what's in front of you today, look at what you can bring to the table tomorrow and maximize the full potential of getting there.


Tony Caldwell:

Hey, that's great advice. And I thank you so much for joining me, everybody. Bernie, thank you and I look forward to having another conversation like this again in the future.


Bernie Heinze:

I look forward too, Tony, best to you and the family.


Tony Caldwell:

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

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