The Future of Insurance | Ep. 24

Join me as I discuss the power of giving back selflessly to your community with Nicholas Ayers, Chief Marketing Officer at Better Agency.

Nicholas believes in the abundance mindset, and how sharing with peers can only make everyone stronger. In 2013, he pioneered Insurance Agency Owners Alliance (IAOA), an advocacy group for independent insurance agency owners. IAOA is built on three pillars: selflessness, innovation, and collaboration. They want to selflessly share, innovate, advocate and collaborate together to create the best agencies that they possibly can.

Better Agency was created to simplify the daily work of insurance agents and support them in areas they are not naturally strong in. Better Agency combines automation and integrations to create workflows, pipelines, and campaigns that remove the technological friction and allow agents and brokers to do what they do best.

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Tony Caldwell: Hey everybody, it's Tony Caldwell. Welcome to another edition of UnCaptive Agent where we're talking about the future of insurance distribution. It is middle of 2021, and I've got a great guest with me this afternoon, Nicholas Ayers from Mesa, Arizona. Nicholas is a serial entrepreneur insurance agent and currently has a business that's helping lots of agencies with their automation, their AMS, but especially marketing. And I want to dig into his brain just a little bit this afternoon on technology, InsureTech and those kinds of things. And where are we going to go in the next few years with marketing? How are agents going to build successful agencies in the  next five and 10 years? So, Nicholas, welcome.

Nicholas Ayers: Hey Tony, thank you so much for having me. Appreciate the opportunity. 

Tony Caldwell: You bet, I'm glad you're with me today. And again, we've had to delay this for a couple of weeks because as I was saying, just before we got on here, we all quit wearing our masks because COVID's over, but colds aren't. And so I had a vicious cold. Anyway, I appreciate you hanging in there and coming back. So here's the first question I've got for you and that is you're on your third or fourth company. So that qualifies as a serial entrepreneur. Have you always your whole life kind of have lemonade stands and stuff like that? Or is this something that everybody in your family does or how did this happen? 

Nicholas Ayers: No, I think if I got the bug from anybody, it would definitely be my mother. But no, honestly I started my first company after I got fired in 2011 from a sales producer job. I was a producing agent in a captive company and I was the number one agent in the territory, large captive company, if I said their name, many people would know who they are, and broken into territories Northern California, Nevada and Utah. And I was the top agent. 

2011, this is kind of at the advent of digital marketing to somebody ... What we kind of think of digital marketing today, was doing a lot of those things. Company didn't really care for it because they kind of control it. I was in my mid 20s, I was really dumb and they said, "Hey, you need to take this stuff down." And I said, "No, I'm not going to do that. That's silly and I'm your best agent? What are you going to do, fire me?"

And I learned really quick that in corporate America, yeah, they will fire you. I remember driving home that day and I said, "I will never for the rest of my life ever work for somebody ever again." And so that's when I launched my first scratch agency. 

Tony Caldwell: That's great. 

Nicholas Ayers: Yeah. I would make a horrible employee. I recognize that I'm not a good employee, but I can seemingly do other things. And so that's just kind of where that came into play. 

Tony Caldwell: I love that story because it seems to hit really close to ... I had a fellow who was the president of the company I worked for and he was an accountant and you should never put an accountant at the head of anything, right? The same thing happened to me. Got fired on a Friday, self-employed after that. Best thing anyone ever did for me, he did me a favor, I'm unemployable and he was just making that obvious comment on Friday afternoon at 3:30, but anyway, welcome to the entrepreneur ranks. 

I mean, you've been done it for a really long time. And you've been an insurance agent. One of the things I was intrigued with is you believe in giving back. That also resonated with me because I think that if you cast your bread on the water, it does come back to you. So you actually helped start an organization that works with a lot of agencies around the country. Tell me just a little bit about that. 

Nicholas Ayers: Yeah. So in 2013, co-started with a partner Insurance Agency Owners Alliance, IAOA. It's an advocacy group. It's a group that we ... It's only membership is that you are an independent insurance agency owner. And the whole goal of that is it's really built on three pillars, selflessness, innovation, and collaboration.

Everything that we want to do, we want to selflessly share. We want to innovate with our peers. We want to collaborate together to create the best agencies that we possibly can. If I go through existence and I believe that and I operate from this level of the scarcity mindset that says that if you're winning I must be losing, then that's not really any recipe for success, but when we share together and we collaborate together and it doesn't matter if you're three states away, three blocks away, three miles away or three doors away. There's plenty of business out there for every independent agent out there. 

And so we want to share best practices. We want to share operations. We want to share marketing, we want to share tactics. We want to share strategy. We want to help improve the channel because we believe that we're better together. And when we come together as a channel, we can really do a lot of good things both in our communities, in our industries and our own personal lives and for our families. 

So it's a group that started in 2013. We hold a conference every year. This year it's in November. We'll have over 1,000 agency owners in attendance. And it's really been life-changing in the sense that I've made some of my very best friends out of that group. Our families have gotten to know each other, we've done life together, and it's more than just figuring out what the coverage A dwelling is on a home and all that. It's really building relationship and community. And that's the value of it. 

Tony Caldwell: So you've heard of something that the independent agents of America brokers of America have called the Young Agents. And I was never a part of that but I had a lot of friends that were. It sounds a little similar to that in some respects, although it wasn't limited to agency owners, but how are you different than other industry organizations, would you say? 

Nicholas Ayers: I think they all have a place, to be honest with you. I think one thing that I tell people is IAOA is not going to get involved in litigation or in legislation or any of those things. And the associations do a really great job at that and they should. We'll support their efforts, we'll back them, we'll be a cheerleader where we can and we'll be a supporter where we can, but that's just not our game. Our game is day-to-day agency operations from a peer level. And it's agency owners helping agency owners. 

There's over 7,500 of us now. And spread out from everywhere from Hawaii to Maine, to Florida, to Washington State and everywhere in between. So it's different in that it's peer-to-peer advocacy and support and working together. 

There are things that we've done in each other's communities that's been a really cool. One thing that comes to mind, I remember 2016, I think it was 2016, hurricane Harvey hit Texas, devastated a lot of the state in the Houston area. We went down there with a group of agents. We helped in the cleanup efforts, we helped in the get back efforts. We've done that in California with brush fires. We've done that in Florida with hurricanes. 

We've done that everywhere where we can, I think we're bringing together something for the recent thing that happened in Miami, where we can help brother to brother, sister to sister, we can help each other out. That's what we want to do. It goes beyond just, "Hey, this is the script I'm using in my sales calls." It's that and it's a lot more. So I think the associations, they do a really good job at what they do and what their place. And I just think that same as with any agency owner around the corner, it's not an us versus them. It's how do we come together and how do we improve the independent agency channel?

Tony Caldwell: Yeah. Well, I think we're a business that attracts outgoing, gregarious, community-minded human beings. And so it makes sense to have as many outlets like that as you can. So tell our listeners and watchers how to reach you. I mean what's the website address where they can go to find the organization. 

Nicholas Ayers: For IAOA you would just go to www.IAOA.com. You'll find the engagement and the interaction in our Facebook group. If you just search out Insurance Agency Owners Alliance, you can request to join that. That is again, it's only for agency owners and you have to own an independent agency and that's how we try to keep it as pure as we possibly can. There's no pitching, there's some selling. The only thing we tell people to do is come to an event so we can all hang out in person and that's all we want to do. So it's all about relationship and community. So that's where you would find us on Facebook and then also on our website. 

Tony Caldwell: Great. Well, hopefully there'll be some folks who'll be interested in their organizations as a consequence of the call today, but let's shift back more to the topic about insurance distribution. So that's just a fancy word for how we're going to sell insurance in the future. And you've obviously you've started from scratch and built a couple of agencies, you pivoted to the InsureTech space. Tell me just a minute about Better. 

Nicholas Ayers: Yeah. So, Better Agency is it started out as an idea to help agents do some of the things that they don't do very well, frankly, by the law of large numbers. And that is to think like a marketer, to involve technology, the simple frictionless into their agency. I'll give you a classic example. This is something that we've seen for years with agents.

They'll say, "What type of campaigns are you running? What are you putting in those emails? When do you send out text messages? What are the triggers?" Very tactical stuff. So Better Agency sought to kind of solve some of those things so that an insurance agent didn't have to think about them. So it started out as a fully automated CRM with campaigns for sales and service and renewals and claims. So you put information in there and you can automate all of your communication and tasks. 

You don't have to think about what to send, it's all done for you, it's all built for you. We sought to do what a lot of companies in the software space do and that's to integrate. It's weird when you get outside of insurance, a lot of these companies have no problem integrating with each other. That's kind of normal thing, but in insurance, that's not always the case. 

You're dealing with a lot of legacy providers and software providers that ... And if you're an insurance agent, you know this. You go to your AMS and you're like, "Hey, can you integrate with so-and-so?" They'll say, "No, we don't want to." We had a dream of trying to be kind of being that integrator and really providing value with real integrations without getting too nerdy just because something integrates with another doesn't mean that integration is very good. 

But we wanted to be able to make it as seamless as possible so that an insurance agent only had to really be in one system as much as possible. We found out really quickly that there was a software providers in the insurance world that said, "No, we're not going to do that." And there were some that did that and we just found, "Wow, this is not very good. This doesn't help solve the problems that we're trying to solve."

And so we quickly said, "Well, why don't we just go get the data that some of these AMS are getting? Why don't we just create a connection to Ivan's?" Found out in the last 11 or 12 years, there's only been two companies that have actually been able to successfully do it. We were one of them. And it's the development work that goes into it. It's the thinking about the processes.

So we kind of said, "Well, we're going to add the AMS component to the CRM. We're going to be the first really kind of hybrid, what we call a sales-driven AMS." An AMS that actually does something with your data. It takes the data and it does stuff with it, automatically. So you don't have to think about it or do it. And that's where that came into play. 

Now it's kind of taken on a life of its own. There's over 100 built-in campaigns, there's multiple pipelines, still trying to stay true to that spirit of making it frictionless and simple, because we realized insurance agents, a lot of them didn't go to college to become a computer science expert. They don't have a degree in programming and engineering. They're insurance agents and we want to help our customers, we want to build stronger books. We want to build stronger agencies, have employees and clients that love us, build strong communities, and we need technology that's going to come alongside of us and help us do that. 

So Better Agency takes the whole approach of automating that entire customer lifecycle as much as possible. We're still adding, they're still integrate. There's still iterations that are still things that are on the horizon that we're trying to accomplish and really proud of what we're doing in the agencies that we're helping today. 

Tony Caldwell: I'm intrigued. I mean, you're a young person, relatively speaking. I mean, at least compared to me, and a big future in front of you and here you are building software not to replace agents, which is what a lot of people are trying to do in one way or another, but to enhance so I'm intrigued with that. 

Nicholas Ayers: We call it and we didn't coin the phrase, so I can't take full credit for it, but we tell people there's the traditional stereotypical InsureTech where it's kind of carriers and big private equity firms coming in and Better Agency's up to this point has been bootstrapped and self-funded. I's broker tech is what we're trying to champion. We're trying to champion broker technology. We can put in the hands of agents and brokers and say, "Go build the agency of your dreams." 

And not even that, but use the technology that's simple and simplified so that you can create more seamless workflows between you, customers and employees, and you as the agency owner, you don't have to feel chained to your desk seven days a week thinking about how you're going to get your next customer. So it's broker technology that we're really trying to champion.

Tony Caldwell: So somebody who's really involved in the industry with other agency owners ... And by the way are you still operating your own agency? I can't recall whether you sold that one or you still have it.

Nicholas Ayers: I haven't really made it too public, but I actually sold my agency effective January 1st, 2021 so that I can go all in with Better. It got to that point where it was hard to serve two masters.

Tony Caldwell: Gotcha.

Nicholas Ayers: So I did sell my agency on January 1.

Tony Caldwell: All right, but nevertheless, you've still been an agency owner multiple times now and you're building this new company. Obviously in both of those roles as a visionary entrepreneur yourself, you've had to think a lot about the direction the business is going to go in. 

A lot of people are scared that a big chunk of the market, especially at the low end, personal insurance in small commercial, are relentlessly either moving online, moving to alternative forms of insurance, automated insurance, that sort of thing. And maybe away from the agent.

I'm one of those who believes there is going to be a role for agents. There'll be different, but we're not going to go away from the picture. But there are those who are worried that that's going to happen. You're obviously not worried about that. 

Nicholas Ayers: No, I'm not worried about it. Like you, I think there's going to be a change, an evolution of the independent agency channel. When I first started in the business, I started as a selling producer in 2005. And at that time, a lot of agents were still advertising in the yellow pages and that was actually still a thing. It's changed and now we are becoming more online and we're becoming more digital. 

What I will say is I do think it will be more turbulent waters for those agents who are not fully invested in their agency and those agents that maybe only rely on a certain line of business. So if they're very strong, just in auto insurance or home insurance, perhaps I can see more challenging sides on the personal line side. 

I think the well-rounded agencies that are looking more at their operations as risk advisers and risk managers, I think are going to have a strong place. Listen, if travel agents can stick around forever, then I believe that insurance agents will also stick around in greater force. 

I do think there's going to be a lot more opportunity on the commercial line side. So if you're a personal lines agent, I would strongly recommend starting to learn commercial or starting to learn other things that you can use to enhance your value proposition to your marketplace. 

The data tells us everything that there is to know from a carrier side. The data says very clearly that business that is written with an agent and has a field underwriter as an agent performs a lot better, retains, has lower loss ratios, is more profitable, carriers know this and I think that there's always going to be a play from the distribution side for agents, but I do think you need to kind of evolve your skillset a little bit and diversify your value proposition. 

Tony Caldwell: It's interesting you say that, because there's a gentleman who does a lot of analysis of insurance carriers and their results. His name's Chris Burand, he's been on my podcast before. Are you familiar with Chris?

Nicholas Ayers: Yeah. 

Tony Caldwell: Chris wrote an article it's been about two years ago now in the Insurance Journal where he actually made the counterpoint, which is that carriers that are selling direct in personal insurance have better loss ratios, better operating results and lower costs than those selling to agents and that this was actually creating a conundrum for traditionally agency-distributed carriers who are looking at those numbers and asking themselves, "Why are we paying more money to insurance agents to getting lesser results from a loss perspective?" 

In other words, the [inaudible 00:17:55] writing piece wasn't really working out for them. The flip side would be that agents would say "Well, but you've increasingly taken away our ability to influence those numbers because you're pricing and customer selection criteria are all algorithm driven." So it's interesting. I mean, I don't know that the data does support your contention. I don't know that it doesn't but I think there's a big problem in C-suites trying to figure it out. 

Nicholas Ayers: Every report I've seen direct from a carrier speaks to my point that the policies that are written with an independent agent tend to perform much better than policies that go direct. You can look at the case studies that you see now with current InsureTech providers. The ones that have fruit as their name, their profitability does not stand very well. Their loss ratios are through the roof and their profitability isn't very good. 

Every public report shows that to be the case. Now, over time will that be improved upon? I'm sure it will be. But I think that what agents are doing now is they're using technology to almost regain the competitive advantage. Right now with the amount of private equity money that's in the software world and that is funding these companies, it oftentimes feels like David versus Goliath, and all you got is five smooth stones in your hand. But sometimes five smooth stones is all you need.

I think that the agents that are embracing technology and the agents that are increasing their value proposition becoming less transactional, more relational and using technology to do so will still be around. I think, again, they'll need to diversify what they're doing. And if they're just self-reliant on just one line of business or one vertical personal lines or commercial lines or whatever, I think those agents will have to face a tougher challenge. 

Of course, there's all kinds of variables in place between geography, brand position in the marketplace where they're at. I think there's all kinds of variables that will speak to those particular success points. But I think the independent agent is here to stay. I think you're going to see the pendulum ... it's a pendulum that swings back and forth. And I think that if I'm an independent agent, I think that we're doing all right. Not that we don't have things we need to get better at, but I certainly think that I don't fear the media is going to take us out any time soon.

Tony Caldwell: I don't either and so we're in agreement on that, but I think you said something just now I think it's really interesting. You talked about moving away from being transaction oriented. So that's something that I've talked and written a lot about over the last 10 or 15 years, because I think it's been almost the death of many agencies.

To me, there were two things that happened, and about 15 years ago both. So really around the time that you were entering into the selling process, I guess, but one was the multi-company ratings system. And the other one was that you had carriers really beginning to use their own algorithms to select and price business. And they had a lot of issues with that, especially in the early days. 

But you brought in a whole generation of agents into the, particularly personal insurance who focused on price, not on solving problems, answering objections and other things like that. The way I characterize that is that they were using technology to foster transactions. You just said using technology to foster relationships. And I think that's actually where the future is. 

Tell me a little bit more about your thinking on that. How do agents best use technology to multiply as well as foster relationships? I mean, obviously CRM is a piece of this, but I mean, how do you do it? 

Nicholas Ayers: It's a lot more than just showing up for customers when it's time for a renewal or it's time to ask for referral or even a Google review. I think you can automate certain portions. Now there's and I'm a big fan of automation. We created an automation platform. There's a lot of things you shouldn't automate, but there's a lot of things that you can use automation to really enhance that customer relationship in a way that feels very real and tangible and kind of speaks to the customer where they're at in the customer journey, the customer life cycle with your agency. 

So I think utilizing technology to create automated touch points throughout the year that are value based, they're not necessarily solicitations of any sort, but they're really value based. And by that, I mean, it could be and if you're doing the work as an agent, this is where I'm speaking now, but you're maybe creating a value piece that's going to speak to people in Sandusky, Ohio, and that's where your agencies and things that they need to know around their community or around that. 

And you're becoming kind of that central figure, that authoritative piece in your community. I think that's where technology can really help you out. It can help you scale. You got an agency of 5,000 clients, you're not talking to all of them, which means you're probably not retaining all of them in a very commoditized insurance world where they're bombarded with solicitations every five minutes from other carriers or on the radio or on the internet or wherever the case is.

You've got to position yourself much differently. So I think utilizing those automated touch points to build relationships, whether it's with content or whether it's utilizing life events or things that endear you to your customer at scale is where the benefit is. Like I mentioned, if you have 5,000 clients, I think every agent would say, "I would love to be able to talk to all of them. I'd love to be able communicate with all of them prior to the renewal and see if there's anything that they need or making sure there's any gaps, but that's really impossible."

And even if you could do it, you couldn't do it with any margins because you'd have to hire so many people, it'd become unprofitable for you from a business standpoint. So technology allows you to maintain those margins while still creating those touch points and automating workflows and communications. So you can build relationships with your customers. 

Tony Caldwell: I don't know whether you've done any work in this area or been thinking about it or not. But I am curious, one of the things that people love to do is do it themselves. I think it's a little surprising. I remember when self-service gas stations became all the rage and you could get your gas, I mean, a lot of people didn't like that until they tried it once or twice. I remember 10, 15 years ago driving up to a gas pump that didn't have the credit card machine working, it's like, "I have to go inside?" [crosstalk 00:24:42].

Nicholas Ayers: You have to go into that death hut and you're not sure if you're going to die in there. 

Tony Caldwell: "I'm not going to do that. I want to take care of myself." So we're one of the last industries in the face of the earth to actually let people serve themselves. One of the things that technology really hasn't cracked in my view yet is giving agents tools to let clients serve themselves effectively. Do you see that coming in the next years?

Nicholas Ayers: I actually see it now, honestly. I think that there's a couple different players in the space that are actually doing this now. And I think that their enhancements are only going to get better. And so from a self-service standpoint, being able to give your customer something from your agency that allows them to, I guess, effectively service their policy in a way that is correct or is underwritten properly, that is actually technology that there are people solving for and problems that people are solving for right now and vendors that are in the space doing that. And they're doing pretty well. 

So I definitely agree with you that it's one of those things that ... and of course there's reasons why. But it's interesting. I can look at my retirement accounts right now and I can make changes in my portfolio. I can make changes and nobody says anything. But I can't do it on my insurance because of an underwriting issue or because of this, that, or the other. 

So I agree with you, it is somewhat odd. Luckily there are and a lot of it, if we're being very frank here, it's not because the technology doesn't exist, it's because it takes two to tango and there has to be carrier access. There has to be allowance for that, so that technology can plug into that and make it happen. 

So I jokingly say from the company that I got fired from, I said it started in 1908 and I think the same people are still in charge. It takes a changing of the mind. And I don't know, I can't pretend to know all the reasons why, whether it's data security or this, that, or the other, I can't pretend to know those answers, but when carriers start to see that ... And I do think carriers are coming around to things.

Three years ago, if you asked a carrier for their API, good luck, good luck. Most people at a carrier probably even know what API stood for. And you couldn't do anything. Now, carriers are starting to come around and it might be a little slower than we want. It takes a long time to steer a big ship, but I do see that happening now and I see it actually getting better.

Tony Caldwell: I hope it does. Obviously we're a highly-regulated, heavily-regulated industry and there's a whole lot of issues surrounding that but that hasn't stopped the securities business bank and other heavily regulated financial organized or financial industry-

Nicholas Ayers: I bank with Chase. So if we're going to name it, I bank with Chase. I can go on to chase.com right now I can log in and I can start a new account. I mean, you can open a new account.

Tony Caldwell: Well, actually better to your point. And by the way I'm involved in banking as the chairman of a small community bank. Small community banks can do the same thing. And in the face of the Patriot Act, which is the most burdensome set of regulations, you can't believe how from the backend from a bank, how hard it is that the regulatory scrutiny and oversight banks enjoy as a consequence of the Patriot Act. 

Well, intentional well meaning, but the point is opening an account's actually a gigantic pain in the ass for a financial institution, and they've automated it and you can do it in five minutes online. So why can't you do an insurance policy- [crosstalk 00:28:30].

Nicholas Ayers: Why can't I add a car and say, "Hey, you give me recommendations based on what you know about my risk." And say, "Well, hey, you're taking this car off. This car had full coverage." You can do that. We're not Elon Musk here trying to get to Mars. That can be done, technology's there. People will ask all the time, "Nick, can you guys connect to this?" And I'll say, "Yes, absolutely. We could. Do they want to? I don't know."

Tony Caldwell: I have a strong feeling or sense that we will be able to do that in five years. I don't know how you think about it. 

Nicholas Ayers: You can do it, like I said there are-

Tony Caldwell: We can do it now. I'm saying it will become commonplace in five.

Nicholas Ayers: For sure. Much more.

Tony Caldwell: In five years. Which is interesting then, because so if you're a carrier and you're not already working on that, if you agree with us, you better get busy. The flip side is if you're an agent and are not prepared for that, either with the software that you've got now, you need to be paying attention to it because it ain't going to be five years, it's going to be a few years. 

Nicholas Ayers: It might be five months. I mean, you don't know.

Tony Caldwell: Not likely from what I see, but it's coming and it's coming pretty quickly. It's just carriers have a much bigger problem, I think, in a sense, than agents do from a technology perspective. I talked to a senior executive with a regional carrier in the Northeast who, they're killing it with ... They're issuing homeowner's policies with almost no questions, and they're issuing them and their OSS ratios are outstanding. It's just it takes 30 seconds to do a policy. They're doing it with agents also and the agents were also killing it and making great commissions and also great pocket change checks. And so everybody else is not doing that is five years behind.

Nicholas Ayers: For sure. And you'll see the gap widen even more in that time. It's from the top down. From the carriers to the agents, those who didn't prepare themselves properly I think are in for a rough haul. I don't want to paint a utopian picture that I think that independent agents are immune from anything or where you have the superpower, you have to still protect your business. You still have to think like any business owner in any industry with do. 

And how do you take those next steps? How do you evolve? How do you stay relevant? How do you engage your marketplace? I think that you have to adapt to what the marketplace wants and needs and what they're doing. If they're already used to doing these things everywhere else, if I can go on Amazon, I can go anywhere and I can do all these things. If I can go on chase.com, those carriers and those people that do that are going to have a competitive advantage from a positioning standpoint. 

And I think that they're going to get a much further along than those that did it in the years to come. And you're going to see I think a lot of ... We're already seeing it. Consolidation, we're seeing a lot of movement in that area. I think that you're going to start to see even more of it in the years to come because people just ... The hurricane's coming and they got to get out of Dodge. 

Tony Caldwell: So as a technologist, let's switch gears just for a second and talk about the next 12 to 24 months with the hindsight and wisdom and lessons learned from COVID. So we're at least seeming to come out of COVID now, things are sort of back to normal. Even in California, they are more or less back to normal. And I think they're probably the last state to come on. But COVID was this amazing learning laboratory. 

And we learned a lot, I don't care where you were sitting in the industry, you learned a bunch unless you just checked out for 18 months. What do you think are the top two or three things COVID has taught us that agents ought to use to power their businesses over the next 18 to 36 months? 

Nicholas Ayers: I definitely think it's requiring in the right tech stack. And I can say this and anything I say at this point is take it as a grain of salt. So I'm going to try to remove myself out of it. But I think really knowing what your tech stack is ... Go back to March and April of 2020, offices were closing up, sending their workers home. And people started to realize, my phone system, I can't even use my phones. I can't use my AMS. It's locally installed. I can't even access it from a browser. Those things-

Tony Caldwell: [crosstalk 00:33:01] exist, by the way? I mean, I didn't realize you can ... People still have servers?

Nicholas Ayers: Yes.

Tony Caldwell: In their-

Nicholas Ayers: Yes.

Tony Caldwell: I know, some still have typewriters, but okay.

Nicholas Ayers: But even the technology, some of it was locally installed meaning they couldn't just access it from anywhere. So realizing that you need 21st century technology. I joke and I say some of these programs were created back when the O.J. Simpson trial was on and I don't think they've ever changed them. 

And I think that became very evident to people and people were quickly adapting. I think the other thing too, from just a business standpoint is, and we're not uncovering or slaying any dragons here or uncovering any massive secrets, but the understanding that it's okay to have employees that don't work in the office. 

I think that was a big revelation for people. Agencies that I talk to today, most of them were like, "We could get in the office, but my team really enjoys not being in the office. We do better with that. Or we have a hybrid system now, whatever." So I think that realization was also there. And I think it's like Paul Revere riding through telling people that the British are coming. 

We're not immune to these other things. And other things are going to come to us and we're going to have to hunker down and deal with them. And I think that having the right partners and having the right reliance, and there were a lot of people that they realized that all their eggs on one basket from a niche standpoint was really a problem. You've heard the term there are riches and the niches. And I believe that. I do think that it's better to be a specialist than a generalist in your business and in your agency, but there are a lot of people that really suffered because maybe their niche was hospitality or other things that they were greatly affected by COVID. 

So kind of understanding, "Hey, I need to kind of maybe add to my repertoire here and have a little bit more, I think was another valuable lesson from a business standpoint that people had."

Tony Caldwell: I look at this in really three buckets, capital, management and geography. The first one's less obvious, I think, to agency owners, because we're a low capitalization business, not like some industries and luckily agencies, their income flows continued. People kept buying insurance, the whole economy didn't crater. And so their cashflow didn't stop. But you have to have capital to make it through emergencies and transitioning kinds of things. 

One of the things that I see a lot, especially in smaller agencies, is they don't have the capital. They don't have any working capital. And so a lesson there is, "Hey, set some money aside for a rainy day because there may not be PPP loans next time." So that's a lesson that I want to make sure everybody takes away from this. 

I mean, you need working capital. And the other thing you talked about management, if you managed by taking attendance, you were in real trouble because nobody showed up anymore. Now, what do I do? You have to trust people. That's a cultural issue which I think a lot of people have actually struggled with over the last couple of years and still come out of this one, "Maybe I don't trust my people."

But then geography, I think, is another lesson that we've learned. You were talking about niches and riches, my view is that what this did was [inaudible 00:36:30] everybody up from geography and meant you can operate anywhere. If that's the truth, well, then you can niche more deeply, right? Because you can have a niche that's super, super narrow, but with big broad geography. So what that means to me is, and this is where I want to take us next is okay, in the next few years, if you believe that, if you believe that, now I do, but if you believe it, well okay, that means that your growth path going forward isn't limited to ... I forgot the 10 you mentioned in Ohio. 

I mean, but you're not limited to just that 10, the whole United States at least, same legal geography is your oyster. So what are the things that agents need to be doing as they move out in '21? And '22 appears by all accounts to be an incredible growth period in our economy. So with lessons learned from COVID, what do agents need to do besides mining their tech stack over the next 18 to 36 months to start killing it and preparing for the bigger future? 

Nicholas Ayers: Well, this is a great question and a great discussion point. I think the first thing, and it really boils down to this, is you need to know what your own strategy is for marketing. So I think it's very easy from the agency owner side to see what other agency owners are doing and try to just copy tactics, but what works for somebody tactically in one part of the world isn't going to work for you and you don't know all the variables that they have in place. 

So you really needed to find what your strategy is and that it really boils down to who are you trying to do business with? Identifying who your target market is and who the customer is. You have to identify those people. You have to understand them deeply, and you have to know how to reach them. 

So I think the easy thing for agents to do is just go, "Well, I'm going to go do a bunch of Google ads. I'm going to go write some blogs. I'm going to go do events. I'm going to go to ..." And those might be all well and good, but you also might be finding that you're going to burn a lot of time and money wasting your time and money on things that shouldn't tactically be in your strategy. 

Everything boils down to what is the strategy? Strategy first. And even more than that, but above that is ... And this is how I break things down. What are the goals? We need to write or we need to do X. We need X. I need to start getting more plumbers on the books. I need to get more contractors. I need to get more people in X niche. So that's the goal. 

Then you figure out, "Okay, well, what's the strategy to get to those people? because just because a strategy worked for so-and-so in that field doesn't mean it's going to work here. So I need to figure out what the strategy is. And then the tactics that go underneath that strategy."

So for some people it's content production, and content is anything, whether it's podcasts locally or geographically centered, whether it is written articles, whether they are ads, whether they are promos, whether they're sales letters, whether they're email campaigns. There's a lot that you can do from a tactic standpoint on the marketing, as long as it fits within the strategy of what you're trying to accomplish, that's going to help you reach the goal. 

So goals, strategy, tactics, that's how those things should be thought out. And then you have to identify them. So for me, if I was trying to get more high net worth clients and I wanted to get out of kind of the commoditized personal line space, and I wanted to start focusing on high net worth individuals.

What I do there's going to be different than in other categories. I might create more awareness type articles and value pieces that are really meant to educate and provide value to those clients and really showing what the differentiation is between a policy with X carrier versus their standard market carrier that they have. It's creating specific brand interruption or disruptive type marketing tactics to get in front of those people, knowing I can leverage platforms to disrupt those people with the message. 

So tactics are the last thing that you should think about, really what you should be thinking about is what's the goal and what's the overall strategy, whether it's content, whether it's paid action, whether it is in person, whether ... There's all kinds of different things you can do strategically, and it doesn't just have to be one or the other. It could be multiple things. I think that's what you should be doing. 

I do agree with you that territories are open now, people who were apprehensive about doing business three states away in 2019, I don't think they're that apprehensive anymore, or as apprehensive. The reliance for the agency on the corner that I could walk into, I can shake their hands and I can have an hour-long conversation, while it's nice, I don't think is what, by and large, the majority of the country is looking for. 

I think it's still works in certain situations, don't get me wrong, but I think that we have opened up the flood gates and we can now strategically enter in new markets and new places that we're going from a marketing standpoint. 

Tony Caldwell: I think they'll be interesting to see. There'll be a lot of agencies who figured this out and they're going to grow a lot. And then one of the other things that's going to happen though, and it's already happening. You see these statistics reading the newspaper, magazines. I don't care, television. Everyone's talking about the fact that retirements are at an unprecedented level.

People who thought they would work another five or 10 years are saying, "You know what? I'm out." That's happening in every state and in every industry. We were challenged before COVID in an independent agency industry with facing a big exodus. There was something like 70% of the people employed in the business which includes agency owners, producers, CSRs, and everybody else age-eligible for return over the next five years. 

So we aren't really seeing that yet, but I think we will. I mean, I think as people come back to the office and go, "Gosh, it was more fun at home in my shorts," or whatever the case is, we're going to see more of that which means for people who are not leaving more opportunity. Some people be prepared for that. So if you think about that, you think about the fact that there's a lot of turmoil in the business. And you think about Baron Roswell's comment in the 19th century, "Buy when there's blood in the streets." 

In other words, when there's turmoil and people are getting killed or whatever, there's opportunity, tech stack, strategy tactics, is there something else that agencies that really want to grow in this period of time need to think about? I mean, is it an acquisition, is it converting people from other industries to insurance? What are you seeing in your work and in your association work that makes sense to you for people who are really ambitious, aggressive want to move quickly?

Nicholas Ayers: Well, I think because you mentioned it, acquisitions. I think acquisitions are good for the seller, not good for the buyer right now. I think money is very cheap and that's good but you're going to ... I think it's more of a frothy market. You can tell me if you agree or disagree, but I think it's more of a frothy market. So you're probably going to pay a little bit more.

Tony Caldwell: Agency for transacting for 15X EBITDA on 5X on revenue, which is probably not sustainable for the average local independent agency. I mean, I think you've got to have a data play or something else to make those numbers work.

Nicholas Ayers: So I think from a growth standpoint, what do agency owners need to do? I think where you can consolidate, I think it's good. I think to your point, we are and we've been seeing it for a number of years. It's not like it's run up on us, but we have an industry force that is on average is a little bit older. 

So they may be looking for an exit plan, knowing that money is a little easier to get right now. So I think that if you want to consolidate or merge, I think that's not a bad strategy, as long as ... It's like picking a spouse, pick the right one. I think that that's another great way to think about it. I think-

Tony Caldwell: Just to interject here, I was just thinking this, one of the things I don't see anybody doing that looks like you is employing people who look like me to work when I want to. And almost everybody that I talked to that looks like me, nobody wants to really quit. They just want to get rid of the pain in the ass piece of- [crosstalk 00:45:10], right?

Nicholas Ayers: Sure.

Tony Caldwell: But they don't want to learn how to automate it themselves. They want somebody like you to tell them how to do it. But I was having lunch with a friend today who's been talking about retirement for the last few years and he's in the construction business. And the future for construction is really, really up in the air with pricing and everything else. 

So he's thinking about bugging out and yet what's he going to do with himself? So it seems to me that there's an opportunity and COVID has taught us what the opportunity is, frankly, with communications changing to not let this huge number of talented experienced people leave the workforce and actually grow the business that way. I don't know if you've thought about that. 

Nicholas Ayers: No, I think to your earlier point, I think it's a lot of opportunity for people who are trying to grow their staff or their agencies. I think that there are ... And this is where you find these kind of unique opportunities. So, to your point, you can find somebody who's well tenured in the industry. They don't require a lot of training, and they're productive in whatever role they're in and you can tailor a position for them. 

I think that the agency owners, they get maybe a little more creative but think about their agency, culture or management style a little bit differently and a little less rigid or dogmatic. I think we'll be able to pick some of those people up. I think we're going to see more people leaving the industry than we will joining the industry, but I think it's going to be somewhat of a pendulum for a little while. There's a vacuum that's being created and we have to fill it and we have to get smarter about it, whether it's in the industry or outside the industry.

Tony Caldwell: So what's the number one thing that we're not really prepared for the next four or five years in the business, what would you say that is? If you said, "It's one thing and boy, this industry is really woefully unprepared for it," what would you say to that?

Nicholas Ayers: Oh man, do I only get to pick one?

Tony Caldwell: Well the top one, yeah.

Nicholas Ayers: It goes back to everybody is so accustomed to doing things a certain way outside of the industry in their normal lives that the insurance industry by and large is so far behind. I think for such a massive industry, profitable industry, competitive industry, an industry that cost a lot of money to advertise in the most, because there's a demand there. I think that we're very woefully behind when it comes to that. 

And there's too many failure points amongst things. As an agent, I have to rely on my tech stack, but I also have to rely on my carriers. My carriers don't want to play with my tech stack and my carriers don't want to play with anybody. So I think that's where we're being underserved is by a lot of times our carrier partners. 

Tony Caldwell: And what can we do about that? 

Nicholas Ayers: Well, that's an interesting question. So I talk to agents and here's the scenario. They'll say, "So-and-so carrier just cut our commissions again and were really upset about it." And my response is, "Stop writing with that carrier. Don't write with them, in fact, take it a step further and why don't you and everybody else get their books of business out of them, out of that carrier?" And it's not until agents make that decision to exercise the power that they wield, that they're going to keep getting what they got. 

I think that that's what agents need to do. I have to be careful and I don't want to say like, "Okay, everybody let's raise the flag and the banner and let's go boycott XYZ carrier." I don't want to do for a number of reasons. But I do think it's an important mindset that as a business owner, you have the power, you have the control. 

If you don't like the way that someone's doing that, then the language that they speak is money. So you have the power as an agency force to infect change if you'll stick to your guns, if you'll stick to your principles and you'll be serious about it. The problem is a lot of agents, they don't want to do that. 

If they can take 8% versus not getting anything, they'll do it because ... And it's a mindset problem, really, than anything. So agents need to stand their ground. They need to tell the carriers in force what they want. 

Tony Caldwell: It's a really good point and what underlies that, it seems to me, is that you're done a really good job of managing your business. You really understand your book of business. You understand your cost structures. If a carrier cuts your commission let's say from 10% to 8%, they didn't cut you 2%, it's 20% and most agencies don't make 20% of the bottom line. So to accept that is to go ahead and accept that you're going to be losing money from here on out. So you have to be running your business, managing the business, really scrutinizing your P&L's and understanding your cost structures in order to understand what's actually happening to you. 

One of my pet, things I guess, is that particularly smaller agency owners would benefit by learning, devoting time to really managing their business, moving from salespeople to really business managers. And that's hard to do. I mean, that's not your background. Most of us got in this business and own agencies because we're good salespeople. So learning how to manage that business, it takes work and effort. But if you don't do it in the future, as other people accelerate using lower costs technologies like Better, you're going to be at a big disadvantage and you may not know it until it's too late to do anything about it. 

Nicholas Ayers: Yep. No, absolutely. 100%.

Tony Caldwell: So, all right. This has been a fascinating conversation. I'm just curious if there's any thing that I didn't ask you that you'd like to talk about about the future of the distribution business?

Nicholas Ayers: I think we covered it. I mean, we can have a conversation for the next four hours, and I don't think anybody wants that on distribution and what the future of the industry holds and what we think of where things are going. I'll say this, I remain very optimistic about our channel. I remain optimistic about and knowing and believing that there's going to be agents that are going to continue to push the edge, continue to champion different things and push the industry forward. I think that we're in good hands. We talked a little bit about maybe a demographic that's starting to age out of the industry. I do think that there's a number of younger people coming in and I think that it's going to be in good hands. So I would say fear not.

Tony Caldwell: Well, I love your optimism and I'm right there with you 100%. And back to acquisitions and whether or not you want to be a buyer or seller, you can pick your poison there. But one thing you have to admit is that these businesses that people are building are worth an enormous amount of money [crosstalk 00:52:38] historical norms. 

And that's likely to continue for a while because even though interest rates are going to climb undoubtedly over the next couple of years, they're not going to go so high that it really impacts [inaudible 00:52:49] very much. So if 30 years ago an agency well-run was worth one and a half to two times revenue. Now they're worth a lot more. And one of the things that really demands though, is that you invest in that business and pay closer attention to it because the stakes are a lot higher. 

So that's worth, I think, thinking about and remembering as you're making investments in your tech stack or whatever. Anyway, good points. Well hey, it's been a fun conversation. Thanks so much for joining me. If you guys want to get a hold of Nicholas, what's the best way to do it out there? I mean, you gave the website address for the association, but I mean you personally [crosstalk 00:53:35].

Nicholas Ayers: I'll give you two ways. Best way is to connect with me on social. I would say follow me at your own risk. But connect with me on social, I'm on all the major platforms. Search me by name, otherwise, shoot me an email, nick@betteragency.io. That's probably the best way to get a hold of me. I'm a firm believer in inbox zero. I can't stand it when I have an unread email. So chances are I'll get to that pretty quickly. 

Tony Caldwell: Okay. Great. Well, I hope that folks will reach out to you and best wishes as you keep building Better. 

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 tonyaldwell.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

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