Uncaptive Agency: The Future of Insurance, Ep. 23

Join me as I discuss managing technology adoption in a people business with Kerri Roberts, Chief Operating Officer for TIG Advisors, focusing on Operations, Sales, Human Resources and Marketing.

The increasing speed of business makes technology a must for agencies that want to not just survive, but grow. But insurtech requires an investment, and also an enthusiastic, committed adoption from the entire team, for it to give the expected results.

Our guest Kerri Roberts has some hard truths for smaller agencies, and a refreshing take-no-prisoners approach to team members who refuse to embrace change and adopt technology. Given her meteoric rise and outstanding results in the insurance field, she is definitely worth listening to.

Watch

Read

Tony Caldwell:

Hey everybody. It's Tony Caldwell. Thank you for joining me again on Uncaptive Agency. Today, I've got my guest is also from the Midwest. Her name is Kerri Roberts and Kerri is an awesome person. She got all kinds of awards. If you look her up on LinkedIn, the thing that attracted me to want to talk to Kerri was the fact that she's a chief operating officer for a pretty significant agency here in the Midwest. But more than that she came up through the human resources profession and I'm fascinated with what we're going to do with people in a people business that's increasingly dominated by technology. So as you know Kerri, we talk here on this podcast about the future of insurance distribution, and it's the springtime of 2021. We're looking at three to five years and trying to figure out where we're headed. So welcome. Thank you for being with me.

Kerri Roberts:

Yeah. Thanks for having me.

Tony Caldwell:

Oh, I'm delighted. And would you just give our listeners and viewers, just a thumbnail sketch about your history and background? How did you come to be the COO of TIG insurance group and where did you come from in the business?

Kerri Roberts:

Yeah, so I started my career as an implementation analyst in technology, fresh out of undergrad. And then I really wanted to get in human resources, actually in the company that I was with. And at the time that was healthcare and they weren't hiring from within for HR unless you had experience. And so I went into the private sector and got involved there and I can say I've never went back into healthcare since then because the private sector and the pace and the power behind business and innovation really drew me in. So kind of worked my way up through HR and spend some time studying the Malcolm Baldrige National Quality Award. Backed once The Missouri Foundation, The Missouri Quality Award and really loved operations. But to me, a good HR person is going to focus on operations and not event planning and all the touchy, feely things around culture - while that is important, it's the data that's going to drive us. And then we need to make sure that we're treating people appropriately with the data.

And so I've spent years as an HR director and then I was a client of this agency and they reached out and said, we're looking for an operations person, but the person needs to run a human resources as well, with your background would you be interested? And I was not at first, insurance was not an industry that I was excited about. I talked about fast pace and business and the speed of business. And to me that does not describe insurance or the independent agency sector.

But love the group that I've come to work with. And I've been here for three and a half years and we have sped things up in a major way and changed nearly everything about the agency, except for a core group of our people. And it's been a really fun ride and I feel it's been a great fit for me, even though I wouldn't have anticipated that.

Tony Caldwell:

Well, welcome to the independent insurance industry where you fit right in. There isn't anybody that works in our industry that intentionally came here on purpose. At least I didn't start off that way. I mean, there probably are some people out there and they probably have lots of designations and aren't very fun to talk to, but at cocktail parties. But almost everybody has come from someplace else, never imagined themselves being in the insurance industry, and then here they are. You said something interesting, which is your impression was that this was not an industry that was fast paced and probably by extension not on the cutting edge. And we talked earlier about conservatism, very conservative, right.

That doesn't seem like a description or a recipe for an industry or a business that's going to succeed in a fast paced, highly technologically driven future. Does it?

Kerri Roberts:

No.

Tony Caldwell:

Yeah, do you really think, now that you've been in this business three and a half years, setting yourselves outside of your own agency, just looking at the industry, do you think that's a fair description or do you think you were wrong about it as you look from the outside in?

Kerri Roberts:

I think the industry is evolving. If agency owners and partners and principals are allowing it to. I mean, even three and a half years ago for me that wasn't that long ago. And you would think that some of the things that I've encountered wouldn't have occurred in 2018 or '19 or '20 or '21, but I I've seen it, whether it's been a female in the executive space in insurance, or just trying to get a producer to utilize a mobile app or to stop taking paper applications to a client.

So there are several things that have been very accurate with what my original opinion was. However, I do feel like there are plenty of agencies that see what needs to happen, and they just need someone whether it's internal or hiring somebody externally that can come steer the ship, turn the boat and get them moving in the right direction because it's a bunch of smart people who really, really care about risk management and they want it to succeed and they understand the importance of them.

Tony Caldwell:

Thank you for that. I mean, change usually happens for a reason, right. It's usually necessary. But the rate of recognition of its necessity is different based on the human beings involved. And so it's interesting to me that I think we have an industry that needs to change a lot in order to be relevant today versus not even talking about the future. So, for example, I'm also involved in banking and banks have actually been open six and seven days a week for a generation. Try to find an insurance agency open on Saturday. Or try to find an insurance agency that you actually speak to a person on a Sunday afternoon about a problem, without having to go through a whole bunch of harangue, right.

Or being the biggest customer in the agency. And so you've got the cell phone of the principal. I mean, so when you looked at us and said, gosh, it's a conservative industry, you weren't kidding. In many respects, we're way, way, way behind the curve. And yet my view is that we compete with Amazon every day. They're not really yet in the property and casualty business, although they may get there. But they set the standard for what customers and clients have come to expect, which is instant gratification, right. And an ease of doing business, that means that somebody is always thinking ahead of the customer, knowing in advance even before the customer does what they want. And so if you think about that, and you say, "Gosh, Amazon is our competitor." I think we have a lot to learn. I'm curious how you view us in that context.

Kerri Roberts:

Yeah. I think there's going to be some baby steps to get there. You're right, a lot of our clients of size do have their salesperson, producer, agent advisor, or whatever people call them. They have their phone numbers, and so they're able to make that progress, but I think some baby steps that I've seen some independent agencies do have been, adding mobile apps, adding chat-bots on websites, utilizing HubSpot for constant communication or other CRM.

So I'm seeing some tools put into place that maybe it won't be a human, an operator sitting on the phone over the weekend, but the availability of accessing policies and answering one's own questions in self-service portals, I am seeing agencies put some of those things in place to kind of bridge that gap.

Tony Caldwell:

Yeah. So what do you think are the most important things that an agency, and obviously this is something that you're grappling with everyday, professionally. If an agency wants to go from 2021 and be in business and growing in 2026, what are the changes that you see as a newcomer that it needs to embrace?

Kerri Roberts:

Yeah. I think if you talk to any agency, owner or leader right now, they're going to talk about the pre-existing producers or sales staff, or support staff, and then the newer sales and support staff and how those two groups of people typically operate very differently.

And so that's one of the challenges is addressing that discrepancy. And do you allow people to continue to operate in two different ways? My answer is no, but that's what's happening even in my agency right now. I've got two different methods of operation, whether it's support or sales, and there's an allowance and respect for long tenures. You don't want to use, we utilize Indio, so you don't want to use electronic applications or electronic documents, signatures, but you still get your job done so we're going to let you do that. For this other group, we're kind of going with the willing and that can't last forever. It just can't. And whether it's going to be through forced attrition or really figuring out how to sell and get people on board that's going to have to change.

Tony Caldwell:

I think the statistics hover around 50% to 60% of the people that work in the industry are going to be age eligible for retirement the next five years or so. So it's coming to a head. I mean, those folks are going to age out of the business anyway. Right. so I guess the choice is, hey, just grin and bear it for other four or five years, and they're going to go away. Or if they stick around at some point you have to say, here's the line in the sand and you've got to do it the new way. Right. Is that kind of your approach to this? Or you have a better idea for folks?

Kerri Roberts:

Yes. My goal is... I've got a book sitting back here. I don't know if you can see it. One of my favorite books, Never Split the Difference by Chris Voss.

Tony Caldwell:

I know Chris.

Kerri Roberts:

Oh, well, he's awesome. Former hostage negotiator, for listeners who haven't heard. And so to me, it's working with the outliers that don't want to adopt, and it's going to be individual attention trying to get them to adopt. Or I guess the natural consequences of choosing not to adopt. But when you say that they're going to age out statistically or by the data, yes, they are. However, our industry is unique in that people do not leave when they're 62 or 65 or 69. I mean, we've got many people that stay into their 70s, which is great for a lot of reasons. But if you're kind of taking that wait and see approach, or wait until the age of the second to work, I mean, we're still going to have to force some hands essentially. And that's just not my agency, that's what I hear from peers, for sure.

Tony Caldwell:

Yeah. Okay. Well, you know what? I'm glad we're a business that doesn't force you, I'm a pilot and they make you retire. If you're an airline pilot, I think 65 is the new age. I'm 63, so I'll be starting out in the face and I'm planning to work to 100, at least. So at least I picked the right industry. So I'm glad to hear that

Do you see, we got to get people to work different. Okay, that's clear because technology gives us efficiencies and it gives us speed and gives us accuracy, and gives us this whole bunch of things that we need to successful going forward. Does it mean that we need a different kind of talent set, a different orientation, different personality type, or is it just getting people to use new tools?

Kerri Roberts:

I think it's a mix. I hear very often, hey, this is like a relationship business, don't forget. But I was on a sales training the other day with one of our vendors. And they were talking about the relationship span, how it used to be very, very long, right? Somebody is in a relationship for a long period of time. That relationship span is getting very small.

So to say, it's a relationship business, isn't going to help as much anymore. And with that, I feel we've got a partner that with lead generation. So when we used to reply or rely on the relationships and the face to face and all of that, that's going away. So then we add lead gen. And so now we've got to focus on our website, our SEO, our social media presence, link backs, partnerships online, all of that good stuff. So that way we're bringing these clients in. However, then that seeks to two different types of salespeople, right? That relationship slower to close, longstanding versus the lead drops in. If you don't contact somebody within five minutes, the odds of you actually closing that deal diminish. And so that quick constant contact, getting that lead in the door, getting them their applications out. And so I think those are two different types of people when it comes to a producer.

Tony Caldwell:

Okay. I'm been working on some thinking around what the small commercial comparative rating systems that are now becoming increasingly adopted what they're going to do to the commercial lines business and asking myself, is it going to be the same as what happened to personal insurance? So, if you think back to EZLynx coming on the scene, maybe 15, almost 20 years ago now, it did a couple of really interesting things. One is, it changed almost the entire conversation with a prospect to price. Because that was the thing that was the big differentiator and it forced insurance companies to standardize product offerings so that they could get through this technology, right? The technology wasn't really designed to have endless permutations of coverage. And that in turn caused the people using the system to quit asking as many questions as they used to ask, which meant they didn't get to know the prospect quite as well.

And which also resulted in additional speed, which was of some benefits. So you got speed and you got consistency of product offering, and that was followed up by carriers adapting to that. And you got customers and agents also focusing almost exclusively on price for decision-making. And the result of that was commodity. And so, people schrade gasoline, oil, wheat, all kinds of things solely based on price. When things become a commodity, that's the only thing that's a differentiator.

And it seems to me that that's what happened with the personal lines, a part of our business over a period of time driven by technology. Also driven by marketing. And so that in turn caused agencies that wanted to grow in personal insurance to become less focused on being salespeople and more focused on being marketers because the secret was getting the top of the funnel.

Okay. So now you have companies like Tomigo coming out with a practical, usable functional which has been a big missing piece up until now, a piece of software where you can actually quote a bunch of bops against each other. And so I'm wondering to myself, does this imply the same thing is going to happen to the small end of the commercial market? And if smaller agencies in particular are focused on small business and personal lives what does that mean for their culture, their operations, and the kind of people they're going to hire and employ going forward. Based on what you're telling me, it's kind of the end of the small business producer. What do you think?

Kerri Roberts:

That's interesting. With being a smaller agency and I say smaller compared to carriers then they blocked us. We care about small businesses, small to midsize businesses. So we say that, but then if we start putting them in a radar tool like that, it feels less caring. Kind of when we utilize the carrier service center, right. Nobody really wants to tell the client that they're being in a carrier service center, but they know internally it's hard to make money off that smaller client by servicing them. So you give up the 1% to 2%, you send it to the carrier service center. So I think it's attention that we'll have to manage because I agree it becomes more transactional. We're looking at some insurtech right now. We don't use a radar on commercial lines, but I definitely am doing demos on it very regularly and trying to figure out what that looks for us and where the line would be? If it is feeling impersonal?

I've got a few of my client managers or marketers that all they want to do is hop on and rates. And I've got some other ones that all they want to do is pick up the phone and get rates, it's divergent. And I think it speaks to the relationship and the connectedness or the value that they perceive coming out of that. Whereas the ones who want to hop online and rate either they're valuing their time, or they do feel it's a commodity scheme. So it's a tough balance. And I don't know if it will lead to further segmentation of clients size based on revenue. I'm assuming, so, I mean, the data is probably going to drive in.

Tony Caldwell:

Well, I think it's an important question for smaller agencies, especially because if you take my thesis and you go, gosh, that makes a lot of sense, then the future of small commercial is about volume, speed and lowest costs, right? Not just for the consumer of the insurance, but also for the producer of the insurance, because you've got to run a lot of people through your funnel and that consumes margin. You're looking at hip rates on bigger flows of business. So what that really implies is that you've got to load up the front end of this thing with lots of prospects. And that's a marketing question. And so then the question is, well, okay, is a small agency, four or five people, a traditional agency, are they equipped to change their focus from selling linearly, one person at a time to marketing, which is not a linear question. It's a question of big numbers.

Are they equipped to do that, and then are they able to compete with really large agencies like those that are being created by the acquirers, the mergers and acquisitions folks. And if those people choose to focus in on small commercial, will they take the bread and butter away from the small agency? I mean, the small agency has already been challenged from a profitability and revenue perspective on personal insurance with direct sellers.

The independent agency competes really well against [inaudible 00:19:19] much more so even than 30 years ago, we've got a breadth of product offering and pricing and service capability that has meant increasing market share for the independent agent. But it's harder to make money. And so as small agencies over the last 10 or 15 years have sort of migrated more into small commercial to bolster bottom lines. Now, they're faced with potential for similar kinds of challenges and what does that do for them? And so I think it's an important question for agencies to be thinking about because the next four or five years are going to determine the answer.

Kerri Roberts:

Well, when you're talking about 4% to 5% agencies, I guess to me I'm not even thinking about, will they use a multi-rater tool? I'm more thinking about they're going to get bought, in my opinion. Last year we purchased two smaller agencies, rolled them in, one in April one in December, and they weren't going to survive without getting purchased. I mean, the writing was absolutely on the wall. And even though multiples are pretty high and M&A and insurance, I still think I'm going to continue to shop for those smaller agencies and build those relationships and show them how they can become a part of TIG because they can't afford the technology. Who's working on SEO for them. Who's looking at workflows and workloads and scalability. I mean, it's not there anymore. And I even see at our size having to struggle to compete with some of the bigger players that have all of the resources. And so, we make a big push on focused outsourced resources and things like that.

So we can play in that space, but the smaller agencies I think in rural communities will continue for a period of time. But even Columbia is not a super large town, which is where our headquarters is. And for us to compete, we've got to grow, we've got to continue to acquire. So I just I don't see them lasting the 4% to 5% shops.

Tony Caldwell:

Yeah. Well, one of the things I think is implicit in what you're talking about is that the nature of the people that work in an independent insurance agency are going to be... We've been talking about this, be different, right? In some respects, are they more technical, are they more sales of relation, all that kind of stuff we talked about it earlier. But something else I'm sort of picking up from our conversation is that specialization is going to become more important in a successful independent agency in the future. You mention, SEO and things like that. I mean, that's a very highly specialized function. And there are other functions that technology is creating that are pretty highly specialized. And they're hard to afford that specialization. It's not a generalist that you can work 15 hats in an agency anymore. You've got to have people with real serious specialized expertise. And if you're not of a certain size, how do you afford that? That's really what you're saying.

Kerri Roberts:

Well, when you're talking about specialization, I think the same goes for producers. I mean, when we used to focus generally on liking a person, liking to do business with a person, I think if you just look on social media right now, people aren't following, they follow people they know, but they're also out there following personas, right? People that they can get access to that they want to follow, that they find interesting, whether they're a thought leader or an influencer. And so taking that specialization approach to producers, and then saying, what is your niche? What are you going to be known for? Getting active in those communities? I think that type of social selling is going to continue to grow as well.

Tony Caldwell:

Yeah. Well, and clearly there's a limited number of producers who are going to be good at doing that, or they have to have someone do it for them. Right. And then maybe this not even a real persona, it's Jake from state farm's persona that got created by an ad agency. That's again, a marketing function designed to drive traffic to an agency. So from an HR perspective it sounds like we have lots of challenges, not just in terms of bringing... We haven't talked about recruiting these people that we need. Right. But figuring out who we and then how we make the industry attracting back to your own experience of, no, I don't want this job. It's an insurance after all, who wants to work in insurance.

So how do we go about it if we can figure out the kinds of folks we need and we can figure out that they're going to be different than maybe the people that we've been recruiting over the last 30 or 40 years. How do we get them? Because frankly, your attitude about the industry is typical. It was certainly my attitude many years ago. I mean, who wants to be in the insurance business? That's boring. It's certainly it's the attitude of my two sons in their 20s. I can't even get to talk to them about. What are we going to do to bring in the massive number of people we've got to have to continue to operate and grow our business.

Kerri Roberts:

Yeah. You've talked quite a bit about marketing. I mean, branding of course is a big piece of that. We have our social media presence, we have focused on growing, not just from a value add, like what we're providing to clients, but we're trying to show who we are and what it's to work here. And so that way when we're posting job postings, I'm probably selling our agency to potential employees just as much or more than I am to potential clients these days.

We've got some job openings right now and I exhaust my own personal network and just where people slick with it, we hire an external recruiter. And then we're using our company's social media, we incentivize our employees to post on their social media and we've got referral bonuses and things like that for our employees to go out and promote.

So it's a multi-pronged approach, but candidly, it's a lot of poaching. I mean, it's going and shopping at other local agencies. And if any of the local competitors that we have listen to this, they'll probably laugh. And then also want to poke my eyeballs out because I have stolen a number of people and we've just literally sold our culture and where we're going, we've cast a vision and said, you're going to want to be on board here because we're going to be sustainable. We're running a private sector business and people have joined us. And then I've got to hold up my end of the commitment and be that employer. But we're just kind of robbing Peter to pay Paul with these agencies. And I mean, either, eventually we will all form together or we'll fight each other. It's very competitive.

Tony Caldwell:

Well, but you're also in the process of really approaching existing talent in the face of what we've been discussing, which is that meeting the talent needs are changing. Right. So that's not going to work for anybody for very long. I mean, yes, you only need a customer service representative, but then that begs the question is, does the customer service representative OF today, is that what we need five years from now? Will that function? All those jobs change? Well, the very nature of the kinds of people that we need to fill them change?

Kerri Roberts:

I think in the past, the perspective has been, you have to get a seasoned client manager or CSR, or you have to get an insurance producer that already knows who they're going to go after. And I think if we have enough lead gen and we're focused on SEO and marketing branding, then we need salespeople. It doesn't matter if they sell copiers or whatever, we need salespeople. Then we need to partner that with good training programs, a good sales management program, a sales playbook. So that's one part. And on the support side, same thing, people who are hungry and want to grow and have good customer service and they're reliable, and then teaching them the insurance aspect.

But even inside of our agency, it's been a tough sell easy for me to say, BEcause I'm not an insurance person. I came in as a non-insurance person. So I'm like let's hire all these non-insurance people, they're going to do awesome. And all of my long standing insurance people that feels disrespectful to them, to not honor those long years that they've put in learning the nuances of the business. But my argument is they're still learning every day. So as a new person, we have to do this. So I agree, it's a challenge, but we've got to get some people who have no idea what they're doing to get in here and starting.

Tony Caldwell:

Well, one of the challenges, this is a business, okay. But it's a profession at the same time and it is different than a hardware store let's say. And I don't mean to denigrate a hardware store, you've got to know your hammers. But it's a highly technical profession on the one hand. On the other hand, it is a business in which the functions of the business are the same as any other business. You have to have really good business people. And I think if you look at agencies that have succeeded over a long period of time, grown consistently, they're really good business people. And I think that argument that you're making resonates with them because they know, hey, you have to have the discipline. And I think that's really part of the question I'm asking is how do the disciplines change?

That you have to have really smart insurance people that know the difference between an HR three, four, five, six, and seven or the different CGL policies and all that. Of course, at least until you get that so highly put into software that you no longer need. I don't know if we'll ever get to that point. But it is interesting that if you're stuck on just experienced people, you're in real trouble, because even though they may not be retiring as fast as the statistics, that we talked about earlier dictate, they still are leaving. And it takes five and 10 years to bring somebody all the way up to expert from a technical standpoint. What surprised you the most, I'm just curious, coming into this business. You were a client of your agency and you came from an HR background, operations background. Now, you're running this business that is a new industry here. What were the things that most surprised you?

Kerri Roberts:

The agency that I'm in is over 120 years old. And so the assumption would be that there's very rich business foundation built under that. And what I learned is there were some very successful sales staff and some long-tenured support staff, but that does not mean that business and analytics and data is rich underneath that long standing tenure of this agency.

And it made me realize at first I was holy banana. It's we've got to work on this, but it's also very, very common in across independent agencies that a producer started this business or bought it from his dad or his uncle or whatever, and has grown. And his sons is involved. But nobody ever said, do all my people have job descriptions and are we doing an employee engagement survey? And what's our fire safety evacuation look like? Some of those general business things aren't happening. Do we have annual performance reviews and how are we assigning [cola 00:30:57]? Are we giving performance-based increases in incentives and bonuses and all of those things?

And so that was a big surprise to me. Kind of along those lines, I would meet with agency peers across the US and we'd have these big meetings. And the first couple of ones I went to, I'm looking for me at other agencies and it almost didn't exist at all. I would find maybe one to two other operations people.

Now, it made me realize really quickly how marketable a COO in insurance is because we don't exist. There are almost no people looking at the day-to-day business and all product lines, all employees, for us all locations and saying, what are the workflows flows? Are we managing workloads? What's our strategic plan? That's really not happening. And so when I was like, hey, how are you guys doing this? More people would be like do you want to come over here and do that for us? Because we don't have anybody doing that. And I'm like who are my peers in this industry? And that's been kind of a struggle to find peers, even across the US, I'm not just looking in the Midwest.

Tony Caldwell:

Well, in a business that is largely linear. In other words it's one at a time, people pay a lot of money for the product. The commissions are pretty rich. There's bonuses available. There's a lot of income. A lot of money on a relative basis for the work. And so when you have something like that, obviously you can be sloppy you can... The oil and gas business in my home state of Oklahoma is famous for that. I'm sure it is all in the rest of the oil patch. When the good times are good and oil prices are high, people make obscene salaries and they spend lots of money on offices, and everybody drives big cars.

I mean, it doesn't matter about controlling expenses. It doesn't matter to them about running their business operationally in an efficient way. And then all prices drop and you've got to get serious. It strikes me that if we enter into a period in time in which more things are known by everybody. The mystique is gone and technology and data do that, that's also possibly going to squeeze out some of the excess money, system, if you will. And if that happens then the implication is that when people have to become better operators. I don't know if you coming from your broader business background, see similar things, or if you think that's not going to happen, what do you think?

Kerri Roberts:

I have a decent amount of peer to peer phone calls with agency owners that will ask to get some time on my calendar. It's not because I know what I'm doing. We're just doing it differently. And they'll call and say, how are you doing this? And I share a ton of resources with competitors across the US because I feel for them, they are really great salespeople with far more dynamic personalities than mine. More social and all those things. I really respect them for a lot of reasons, but they are at a loss on figuring out, let's say how to buy down commission splits, because they've got these longstanding situations with producers that they want to figure that out, or how to implement a variety of different programs. And sometimes I feel I'm oversimplifying it, but it is that simple to me if you've got a dedicated resource that's well-versed to do it.

But when you are a very successful salesperson, one, you're not the resource. You don't know how to do that, but they do see that they need it. And it's this whole new desire that I am seeing out there amongst agency owners, they want to do better. But what I've told all of them is, you're going to have to pay somebody. If you want to keep being a producer, now if you're ready to step out, maybe you can start being the business owner, the CEO, the president. But if you're trying to run your book of business and still hunt whales and run the business off the corner of your desk, you're going to stay in the same spot. You, your employees are going to be frustrated. You're going to say all these great things. They're not going to come to fruition. You're going to break trust. You're going to have to take some out of your pot and put it in somebody else's his.

Tony Caldwell:

Yeah, well, it's clear. I mean, to grow beyond a certain point, you have to specialize. And the agency owner who is doing all those things, wearing all those hats is increasingly challenged I think, into the future. But they're also limited because you can't get past a certain point if you don't do that.

You mentioned something I wanted to ask you about. So which is crucial compensation, and changing it. And, again, I'm curious as not in your agency but as you look at the industry, I'm guessing from what you said a minute ago, you might feel like maybe producers are paid more than they should be. Is that fair or?

Kerri Roberts:

I would say when I'm talking to different agency owners, I hear them complain about it. They want to untangle it. And most of them are even willing to untangle it for themselves because they see that that excess compensation that's sitting over here is prohibiting them from buying the next piece of technology.

It's moving from a lifestyle business to a scalable business. And for as long as agencies are run as a lifestyle business, they can't grow and scale. They don't have the money to invest. And so I feel the owners, if there's multiple owners, they have to get together and agree. Is this for us in our families? If it is, that's fine, right off into the sunset.

But if we're really trying to create a dynasty, we're going to have to limit our pay and we're going to have to have tough conversations. But I mean, there's methods to do that. It's just the willingness, because to me when I'm okay, here's what a buydown looks like, here's how you work this out. Here's how you can make people feel appreciated and still cut their compensation. So you have a more sustainable agency for the future.

People get that, people understand when you show the data, but it's a tough conversation. And many people just do not want to sit across the table from somebody and say, I care for you, but this is going to hurt.

Tony Caldwell:

Right. Well, I think if there's anything that anybody's listening to us today, we'd really love to know how to do it's to do what you're talking about. So do you have two or three suggestions as to how to start on that process?

Kerri Roberts:

Yeah. I mean, kind of a rudimentary perspective on it would be just taking a look at all the splits. And then if you were to take, let's say there's a 60% new business split. You take what a producer made off 60%, and then you do a model inside of an Excel worksheet and change their compensation. Let's say new business compensation to 50% or 40%. And then just see what spits out in excess at the bottom.

And I think that starts to become very motivating when you're looking for dollars to spend on marketing or different other initiatives. It's same thing, let's say personal lines renewal split, maybe that's something that producers aren't spending a lot of time on personalized renewal splits. Do you need to pay them 30% or 40% on a renewal split? Could you pay them 10? Could you pay them nothing?

So taking a model in Excel and figuring out what would spin off the bottom and all of a sudden it starts to be no knock to producers because this is going to sound very cold, but it becomes a game, where can this money come from? What can I do with this money? And then you go from knocking down the big new splits to knocking down the personal lines renewal splits to looking at your small business. So let's model, for example anything making us $500 in revenue and below. If we cut that renewal split off, how much money would we have? All right. Let's bump it up to 1000 in revenue and below, 1500 and below. And just kind of getting a gauge on creating either a stair-step to plan or ripping the band-aid off, incorporating buy downs, which means essentially taking what you'd be taking away from them.

And then going ahead and paying it all upfront with a guaranteed stay class for them. And you'll guarantee that let's say for two years, but you pay it in a lump sum instead of their commission. And then they know at the end of the two years, they better have recouped that with new business. And it's all just numbers. And for a good sales person, you sit down and have that conversation and say, here's how it could impact you if you wrote no more new business and sat on your hands. Well, most good salespeople are going to be, I'm not going to do that. I'm going to make you pay. You're going to pay me in the eye down and I'm going to write new business. And I'm going to do more than make myself whole. So does that answer your question? I know I've kind of breezed through a lot of it. Does that help?

Tony Caldwell:

No, I think here's what I heard you say. If I can summarize this. You have to look at the numbers and you have to see where you are and then as you said, you game it out to see if you made certain changes where would you be? And I think that's exactly what you have to do. And you may be even starting in a slightly different place. I would just would add to what you said is to say, all right, how much money are you supposed to make in a well-run insurance agency to the bottom line, because that's where the value is, right? I mean, that's what people who are buying agencies are buying, and it's that set into the end of the expense statement cashflow.

And if you want your agency to be more valuable, or you want to have more resources, and as you pointed out to invest, to grow it, you have to increase the bottom line. We're a people business. There's very little you can do about almost all your expenses, except the biggest one, which are people. And the biggest people expense you have as producers. And so if you want to make any difference at all to the bottom, you've got to deal with that cost issue. And you have to look at it, right? So I think you start with how much money are you supposed to make where you need to go. And then you're exactly right.

You have to work your way through the painful analysis. You said something else. I think it's really valuable, which is that you have to be willing to have a painful conversation with people because more than likely you're not going to increase what you're paying the producer as a percentage, you're taking something, you're reducing, maybe and so that for most people, is a tough conversation to have.

But you have to do it. You mentioned Chris Voss's book, one of his favorite questions is how can I do that? It's just to ask, when somebody says, hey, you have to pay me more as a percentage, how can I? And the truth is you can't if you want to prepare your business as a business for the future, so.

Kerri Roberts:

I agree. There's a couple of things I thought of while I was listening to you as well, looking at EBITDA. So if you want to sell, or you just want to get into a place where you're sellable, which means you're a successful business. So that's where we should all want to be is sellable, desirable. And so taking a look at what your current EBITDA is, and then making a goal and then backing into figuring out how to get there.

But I hear a lot of times there aren't systematic performance review processes with raises and things like that. And in such a competitive talent marketplace, we've got to be giving our people raises and showing them reward and recognition. And if we don't budget for those types of things, that's just another line item that you've got to figure out. Well, if I'm wanting to give $50,000 in raises this next year, where does it come from? Here are some other levers that we can pull, everybody matters in this equation. So it's just math. I mean, unfortunately that's just what it comes down to.

Tony Caldwell:

Yeah. well, and there's an imperative there, which is that if you're going to give your employees raises, unless you're going to let some people go to afford them means you have to grow. You have to grow revenue, right. Because otherwise the only place those raises come from is off the bottom line. And if you follow that principle long enough, you'll be out of business.

Kerri Roberts:

Yes. I would say every agency has plenty of fat to your point earlier. It's lucrative industry, right? I think every agency has plenty of fat. They could trim in a variety of areas, but you can only trim the fat for so many years. And if you've got somebody eyeing that bottom line, you get as skinny as you can in a lot of areas, you're right. You have to grow. And whether you're purchasing small agencies or adding producers, a new business or creating sales incentives for your current producers, the growth has to come, we're sales organizations.

Tony Caldwell:

Yeah. And if you're not willing to ask those tough questions, if you sell your agency, somebody is going to ask those tough questions and that they're going to do what you're not willing to do, which is I'll pay you less money for your agency. And then they're going to cut those compensation numbers. And then the benefit is 100% for them. So which is what a lot of people were finding out today as they enter into those conversations. But I'm looking at the future and interested in what the future of the agency business is. And it seems to me that you have, I know you use the term rip the band-aid off, it's uncomfortable to talk about compensation, cutting expenses and doing things like that. Those are band-aid rippers for sure.

It seems to me that if you want to have a successful profitable growing insurance agency in a period of rapid change and adaptation, that you have to really take a look at your business as a business and make adjustments. So you have the money to invest in those things. So that you'll be relevant in five years. If I hear what you're really saying to summarize our conversation, I would say that that's kind of what it's about. It's you have to really know your numbers, you have to analyze your own data and you have to get really, really business-like about how you're running the business, because if you can do that, then you have the resources to invest in a future that's bigger. If I was summarizing what I think I'm hearing from our conversation, that's what I'm hearing, is that right?

Kerri Roberts:

Yeah. I think it's uncomfortable for a lot of people, but if insurance was a great place to go and settle in forever hopefully it can stay that way for a number of people, but then you've got to have some really gritty individuals, either in the background or the front driving and hustling. It can't be that slow, chill pace that it's always been.

I want it to be that way for, I want it to come across my producers, I want them to be out with non-profits and sponsoring a golf hole and being out there. And then in my four walls, I am hustling. I'm digging into the data. I'm having board meetings and having tough decisions that we're having to make. And then we're softening it and trying to roll it out. So I want to maintain, what's great about the independent insurance agency, but having the business suite, that's a group of hustlers is getting it down in the background. And you have to have staff that appreciate and respect that.

We did a survey recently and our office manager asked, it was an anonymous survey and she asked are you sick to death of change? There's a lot of change going on. I'm kind of rate this. I'm sick of it more, or this has been hard by understand the difference or why we need to do it. And then the next one was “change? what change? I'm good.”

And so far only one of my employees said they were sick to death of the change. Nobody said change what change by the way? Nobody said that, but everyone's sitting at that number two middle spot, because it's been an interesting season, we're evolving. It has been tough, but they all want to keep working here and they want to see the independent... They're working here because they see the value of an independent agent and they believe in this. They're attached to the purpose. And so we've cast that vision that this is necessary for us to stay alive and to be a trendsetter and to be proud of who we are. And so they're telling us we're uncomfortable, but we're in it. It was just cool to see. I was pretty proud of that.

Tony Caldwell:

Yeah. Well, congratulations. I think people under sell or sell people short sometimes. Change can be fun, it can be exciting. People don't want to just do things differently to do them differently, they want to do them differently so that they can be better, they can make progress. And I think to your point, if you can show a vision for that, it seems to me that most people really it, they find that it exciting. Now, if you're just changing, because it's the new flavor of the month and nobody made any progress or benefited, the company didn't invest, they didn't benefit personally that are in the same place. Well, that's pretty frustrating. And people will get tired of that.

But I think you're onto something here, which is you have to have a vision for where you're going and if it's for a bigger future, everybody can get on board with that. So one of the things that I guess agency owners need to be really thoughtful about is casting a vision. And you also talked about the culture, right? The culture is the foundation and the vision is the thing up front. They both have to be there. And they're both business-like things that I think a lot of times as small business owners, we get really busy, we forget them, we forget how important they are.

Kerri Roberts:

Well, when I first joined the agency one of the first things I did was get everybody together and go through. Have you ever read The Speed of Trust by Stephen M. R. Covey?

Tony Caldwell:

I have.

Kerri Roberts:

Wouldn't call it a titillating read, but the content is so good. But it's not a quick page turner by any means. I always tell people that cliff's notes, that thing. But that content I knew I was going to come in and make a lot of changes, but I knew we're on a big boat. And if I turn too fast, people are going to fall off the back end and that's not all bad, but I didn't want to lose a bunch of people. And I didn't want to create a horrible week where people were falling off into it. And so we had to be transparent. And for the first time in our agency history, we shared our revenue.

We shared where we had been at as far as growth. And we didn't share more than we were comfortable with sharing, but we shared enough to help them understand what they are a part of. If we're saying, hey, we want to grow next year by 12%, what does that mean? How do they play a part in it? And how did we even come to 12%? Why, what are we going to do with that? And so it forced us as an executive team to sit down and ask ourselves some really tough questions. And then that way we could be transparent with our staff, it built trust. So then as we're making these changes, they at least have some idea of why we're doing all of this.

Tony Caldwell:

Yeah. That's really, really insightful. Hey, my last tough question for you is you obviously are a reader and I love to read books myself. I try to do 50 or 60 a year, at least just to keep up on what's going on. So you have two or three on the corner of your desk. Share with us what you're reading right now.

Kerri Roberts:

Yeah. Okay. I have got one of them is I keep Never Split the Difference. I keep it from anytime a producer's asking me a question. I'm like, I have a copy for you. Excellent wins, Horst Schulze. That is Fritz Carlson guy. And then if I was going to recommend for an agency owner, that's trying to figure out how to be an executive and a producer Rising to Power has been one of my favorite books for me as I've grown in my authority, because I think a lot of us picture a C-suite role or an ownership percentage or being a shareholder, but there's a lot that comes along with that and it should not be taken lightly. And so, yeah, I do like to read, I to better myself because why should all of these people listen to me if I'm not investing in myself? I mean, that's just unsafe in my opinion.

Tony Caldwell:

Yeah, that's great. And we'll get those book titles for our listeners and put them out there where you can easily find them. Just a quick plug for Chris Voss. One of the most fascinating things I've done in years is sit in a room with Chris and he role-plays with you. And he starts off, he's guys, he's got hostages and he's going to kill them in five minutes if you don't start doing stuff, and I'm not kidding you, that guy can create more tension in a room that's real tension than any human being I've ever seen, but you really get it after a while. So that's an outstanding book. I've had to read it three times and I don't think I've gotten about maybe 20% of what he's talking about, but it's all really useful stuff. And if you ever get a chance to be in the same room with him and role play with him, it's a very memorable experience. He's played something else as his son who works with.

Kerri Roberts:

It kind of sounds terrifying actually, to do that.

Tony Caldwell:

Oh yeah, trust me, it is. But you learn a lot. Anyway, they do a lot of online training work. And so for anybody that asks them to negotiate insurance companies with customers or clients, as you pointed out, not only his book brain, but their training is fabulous too. So Chris, you owe me one for the plug, but he's really, really great. And you've been great too, and I really appreciate you taking time to visit with me. You've had a lot of really practical wisdom to share, and I appreciate that. We've got to run our businesses in this industry at a different level and better than in the past, if we're going to be out there in the future. And so you've given a lot of great suggestions for folks to think about, and I really appreciate that.

Kerri Roberts:

Thanks, Tony. I appreciate you reaching out.

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 tonycaldwell.net/contact.

CHECK OUT MORE EPISODES: https://www.tonycaldwell.net/uncaptive-agency-the-future-of-insurance-podcast

VIEW THE BLOG: https://www.tonycaldwell.net/blog

TONY’S BOOKS: https://www.tonycaldwell.net/books

TALK TO TONY: https://www.tonycaldwell.net/contact