Uncaptive Agency: The Future of Insurance, Ep. 9

The insurance business has many opportunities to leverage technology to automate processes, increase efficiency, and enhance the customer’s experience. Several companies are disrupting the business with new technologies that address common insurance pain points.

AVYST disrupted the insurance industry by automating the early stages of qualifying and understanding a prospect’s insurance needs. This is done by replacing cumbersome forms with a responsive Artificial intelligence-led conversation that gathers only the information that is really necessary.

Join me as I talk about the possibilities of Disrupting the Insurance Business with Marc Still, CEO of AVYST.

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TC: Hey everybody, it's Tony Caldwell. Welcome back to another episode of Uncaptive Agency: The Future of Insurance. Today, my guest is Marc Still. 

Marc is a fascinating guy who's involved in a whole bunch of things related to the insurance business. First of all, he owns an insurance agency. And secondly, he is the CEO of a company called AVYST, which has a goal to disrupt the way insurance agents do business. Good news! He's not interested in disrupting insurance agencies or insurance agents, he's interested in really helping us be more effective, more efficient - save time, effort, money and do a better job for a client. So we'll talk a little bit about that as we go along.

Marc also has a software company that is tangentially involved in the marijuana business, which is exploding exponentially. In fact, Marc, as we're sitting here today, it's Thursday, the fifth of November, and I think another half a dozen states legalized marijuana on Tuesday during the national elections. So anyway, welcome.

MS: Thank you. I might start off by saying, five years ago, I was telling people that I wanted to be a disruptor. And then the more I got to know the business, the more I realized that I just needed to be an enabler of really talented, wonderful folks in the independent sector that really are a huge benefit for their industry insured customer base. 

TC: Hmm, that's interesting. You have an interesting background. Before you got into insurance, you were in risk arbitrage on Wall Street, or working for a Wall Street firm and then got into merchant banking. So you've got a lot of experience in doing deals. Is that how you got into the insurance agency business? Or did you come in a different door?

MS: These days I call myself a “recovering investment banker”. And about nine years ago, my business partner for many years, a brilliant guy named Paul Vorhees - we've been business partners for 25 years, I started Bear Stearns, and he started Salomon Brothers - we were in Dallas and we met a young lady whose name is Gail Jordan, who we now co-own the agency with. And that's how we got into the business, we started an agency where we were essentially backing Gail. And now Gail is running our development team at AVYST, and she is very, very specifically building what we internally call the avatar interview, which is the first special key line that we're focused on.

TC: In the insurance agency business, you asked the question: “there's got to be a better way”, which really led to AVYST, which from what you just said, is a way to interview clients or prospects, and much faster than usual, get them to the place where you can deliver quotes and proposals and things like that. So just, if you don't mind, just take a minute and talk to us about the AVYST process.

MS: When we first started out in this business, we were like every other kind of small independent getting started, so we created what we thought was a very different way to go to market to get prospects. And our strategy paid off. so we went from getting, you know, four referrals a day or four referrals a week to sometimes getting, up to 44 referrals a day. And what we found is that our CSR and our producers were completely overwhelmed, and that the process to gather information at the point of sale was a horrible process.

And as we looked around at who in the industry was able to solve the problem, we couldn't find anybody that could solve the problem - that's where AVYST came into being almost five years ago. 

TC: Okay, so what AVYST does is automate that conversation that an insurance professional has with a prospect about their insurance needs. Is that what it does? Essentially?

MS: Yes. AVYST turns filling forms out into a rules-based conversation that's guided by our artificial intelligence, which ultimately creates an interview where you will get 100% of the necessary data, and hopefully no more than 2% or 3% of data that doesn't matter.

And you do that by just asking questions in real-time. And as you get an answer, the system then prompts additional questions based on the answers that the prospect or customers are giving at that moment.

TC: You hit the nail right on the head! That not only makes a better customer experience, and make the process more efficient, it also puts CSRS and producers in a place where they don't have to have 10 years in the business to know what to ask. I'm getting excited because when I started in the business a long time ago, I'd go out and see somebody and come back with about a third of the information that I needed. And then my CSR or my partner would go, “Well, you forgot to ask these 15 questions, go back and ask that” and then I’d come back now I had most of it, but I sometimes had to go back a third time. 

You know, I'm not stupid. But I look that way to the prospect, right? What you're saying is that someone starting off in the business could literally never make that kind of boneheaded mistakes again.

MS: AVYST almost educates them on the fly! Here’s something I found when I went to talk to kids coming out of college. I went to the University of Colorado at Denver, which had a specialty in risk management and insurance - it was a four-year business degree. And when I talked to those kids about what they wanted to do, none of them wanted to work at an agency, because they all thought that they spent four years being trained for something better. And they also didn't want to go anywhere where people still had fax machines. 

In this industry, up until this point, a brand new person coming into the industry as a CSR or a producer will look at it and say, “I'm gonna spend five to nine years developing enough expertise where I really know what I'm doing every day”. What the AVYST interview has always sought to do is to give that brand new producer or CSR that capability in a matter of weeks or months instead of years.

TC: That's exciting! So we're talking about the future of insurance distribution, the future of the insurance agency. And there's a lot of disagreement about the future because it's a “crystal ball” exercise, everybody has a different view. But one thing there's universal agreement about, and that is that the industry is facing a huge talent gap, because so many people who look like you and me, are likely to be exiting over the next five years. In fact, some people estimate that as much as 70% of the industries’ people are going to be leaving in the next decade. That's an enormous challenge, not just for agencies that are starting in business, but agencies that want to stay in business, and agencies are getting acquired… this is creating a huge talent problem. 

And again to your point: five years, at a minimum, is what I always used to say. I felt like it took me five years before I became halfway competent as a commercial insurance provider. And you think that this technology that you're developing can cut that down to, what, 60 days, 90 days, a year?

MS: I think within 60 to 90 days, you can have someone ready. They obviously would have to have a license to get started. But that is the base level knowledge that they need to get started. As an example: one of the CSRS in our agency, who doesn't know very much about commercial and knows nothing about cannabis, can actually use our tool with a live client to talk to a cannabis owner. I did it as a pure experiment, and she was able to get all the way through the interview.

It's actually built so it's got “cheat notes”. On every question, as they go through, if there's an insurance term that they don't understand, they just click on a box, and it pulls up that definition in less than a second. And in the case of the cannabis industry, if they don't understand some specific cannabis term, those definitions are also built-in. So as they go through the system, they never have to stop and ask the office manager, “So what does this mean? What does that mean?” And so what we do is we give them the confidence that they're going to look smart from the very first time they talk to someone who's in a business they may or may not understand yet.

TC: Tell me how this was working pre-COVID when conversations with producers typically took place face to face? Is your technology mobile-enabled? Do they work off an iPad? Or how does it typically get done?

MS: Pre COVID, in many cases people would fill out those forms, and if they didn't know the answers to some things, the CSR or some other admin person would fill it out. They'd hand that person the piece of paper, fill it out, and then convert it to PDF or do something else to share it. Well, now, you can't hand it to anybody, because they're not there. They're home and you’re home.

We have users that said they would never use this because they like to do it the way they did it, where they pass the paper around the office… but they can't do that now. What they can do is fill out as much as they want to fill out, and then share that with whoever they want to share within the Office, so they can all work on it and get all the forms filled out. And at the end of that, they can then digitally send that to one or two or three, or however many carriers or MGAs or wholesalers. And they can do that all electronically.

TC: So how does the information get into your product? Is it is it verbal? Or does it get typed still?

MS: It still gets typed in the forms wizard, and it still gets typed into the interview. But in the interview, a lot of that information gets auto-populated: for example, we have API's with Google and other services that I can't name because of NDA. But we can gather a bunch of information and never have to ask those questions.

TC: Okay, so you're actually getting information in the background, much as some carriers are doing as they're running rating systems on their websites? 

MS: Exactly.

TC: This is pretty interesting. A lot of people in our business are really frightened, whether they admit it or not, about technology. There's a feeling that technology is somehow going to disrupt the business, and by disruption, I mean something different than what you're talking about. In other words, many people feel technology's going to put them out of business, and that the people who are writing insurance on the internet are going to take their market share away. Yet what I hear you describing is a technology that actually enables agents to be successful faster, but also to be successful much, much more efficiently.

One of the concerns that many agents have is commission cuts: you know they have been taking place now for a long time, but they've actually accelerated over the last couple of years. And so there's obviously a pressure on agents to get more efficient and to reduce their costs, because their gross revenue is going to take a hit. So they don't have to produce more business - they have got to do it cheaper. Have you done any cost studies to look at what the capability of something like your product gives the agent in terms of driving costs down?

MS: Our first studies showed about 75% savings in terms of time. So then you can take it on an agency basis and say, “I can reduce overhead, I don't need as many people because I'm getting more work done faster.” Or you can say “I need to do more top-line business using the same people, but I need to actually grow the business.”

TC: 75% is huge! The typical Insurance Agency spends 50 to 60% of its revenue on people, and typically 25% of revenue represents the customer service function. A lot of those people are doing things that apparently you can now do with your software.

Does that mean that if I have customer service folks that are, say, doing cross-marketing, account rounding activities, that kind of thing, that I could drive that part of the cost from 25% to seven or eight?

MS: I should have been more specific. This is at the point of sale. 

TC: You get four producers for the cost of one, is that correct?

MS: Correct. Imagine that you can ask 100% of the questions that need to be asked on the first phone call. We found at our agency that you're going to touch that client somewhere between three and six times. Because just like you said earlier, “Oh, I didn't get all the information, I got to call them back”, or “I got all the information. But the quote that I thought that I was going to get came in 15% higher, and so I had to go back to another carrier”. Right? So I had to go. And they've got seven other questions. So every time you touch that customer, it costs money, every time you pick up the phone, every time he's been waiting on hold. And then you're going to have the same number of touches, probably going back to an underwriter. So by the time you write that business, you've touched that piece of paper 10 times. So if you touch that piece of paper once, two things happen: one, I take that average touch from four to 1.2; and two, the customer experience is better. 

And I mean way better, especially if you look at personal lines where you're going to compete against State Farm. Right? They got one set of questions they ask you, and at the end, they don't say, “let me get back to you in a day or two with some quotes”, they say, “do you want the premium super package? Or do you want to pay by the quarter? Do you want to pay by the year”, and they can begin in the conversation and actually sell insurance.

TC: So just to clarify, your technology works both in personal and commercial insurance as well as standard insurance. 

MS: Correct. Yeah.

TC: Let's use this experience that you have had over the last few years in the product that you've developed to kind of segue into a discussion about technology and its capabilities for insurance in general. A lot of agents out there looking at the next three to five years have seen that technology's coming, and they think it's scary. And then COVID hit, and either they're adapting to it, or it's accelerating their thinking about, “I got to get the heck out of this business because I don't want to do this.”

Yet one of the things that technology is increasingly becoming is easy. So, you know, 15-20 years ago, adding technology to your business meant you had to do a lot of work, a lot of learning, manuals. In fact, I remember 15 years ago, getting a new agency management software program meant we had to put in three days in training just to fill out applications and I said to my partner, “screw it, I'm not doing that. I'm just going to be paper.” It was so confusing and hard. Right? Now technology's easy.

How do you think that changes adoption rates? Are agents going to rapidly embrace tools like the one you've created? Or is it going to be a slog for another few years trying to get people to try things? How do you see the future of all this?

MS: Well, I think you make a really cogent point as relates to the influence of COVID. I believe that COVID forced an enormous paradigm shift upon the independent agent industry, because much to your point, lots and lots of people in this industry have hair the same color that you and I have, and they're leaving. Their willingness to try something new was an enormous push, and as a result, when there was better technology, they didn't care - but now they have to have it.

As I talk to people around the country, companies big and small are downsizing their physical office footprint, period. It's even forced folks who would have been very traditional, “gotta have a nice office”, and now suddenly they're thinking, “Wait a minute, I've been paying, you know, 38 bucks a foot for this office space, and I'm doing as much or more business with everybody working from home.” And you think about the cost of that overhead.

So I think that this business is going to become more and more technology-driven and that those who are adapting today are going to be really successful. And those who don't adapt, will either fail, or they'll be the agency that gets gobbled up by someone at low valuations. There's still a huge amount of private equity and, and private equity-backed firms that are buying - there's a deal every day or two, right? And some of those big agencies are selling for multiples of 10 to 13 times EBITDA, which is obviously a great price. If you're a seller, if you have a business with no technology, and it's sort of fallen off the wheels, you might get three times EBITDA. So it so if you want to make your business worth, you know, 400 times more, that means you will.. not four times, 400% more, sorry.

TC: I was really looking for your answer for growing 400 times! I got my pen and paper out right here.

MS: So if you want to create value, and you want to monetize that value, whether it's in a year or five years, and you don't use technology, it is not going to happen for you. 

TC: How is that playing out? Over the last, say, six months or so, as your sales teams are talking to agents, what's happening to your sales? Because that would be a good stand-in for how agents are thinking about what's happening right now, because of COVI. Is there more interest? Are you installing in more agencies? Is that accelerating? Or is it staying about the way it was, say, six months ago?

MS: It's accelerating a lot. You know, in Canada, I'd say kind of March, April, I think people were sort of just stunned. And by the time May rolled around, folks like Verta, who are great partners of ours (We've been in their orange technology partnership since they started, and it's been almost two years now,) we got a call from them in early May, as they were putting in programs to specifically help their customers during this COVID time. And as part of that, they asked us what we could offer to the Verta customer base, and so we gave them the forms wizard basically free of charge for four or five months, as just a way to try to help everyone as well. And so we were really pleased to be part of that and we clearly picked up lots of E forms wizard users, which we obviously think will turn into AVYST interview users down the road.

So it's been really good for our business to be candid, and I don't like to take advantage of events that are bad for mankind. But this is clearly going to force people to use technology. Because if you don't, you will not keep up.

TC: It's interesting, I was talking to Randy Schwantz just the other day. Randy is a longtime sales coach in the independent agency industry, written a number of books, probably the most famous of which is called The Wedge. And his point was, “look, this business that has been around for 100 plus years is going to continue for another hundred years, because people need the experience and expertise of human beings, I need to trust people. We don't want to do business with an algorithm, we don't want to do business with a faceless thing, we want to do business with a person”. 

I got a real insight a few years ago. A partner of mine, they have an auto club for commercial truckers, and they have big groups of people in their client base that either speak Punjabi, or Russian, or another language other than English. And so in their call centers, they've got lots of employees that speak those same languages. They said, “we do that because when people are really talking about super important things to their business or their life, things like contracts and stuff like that, they want to do it in their native tongue.”

It just points out again that people are people, and we're always going to want to deal with really important things with another person. So anyway, Randy's point is that producers aren't going anywhere. But what technology does, and he agrees with me on this, is to take the drudgery away. And I really sense that what you're trying to do is take the drudgery away, so that producers, customer service people, or whatever, can focus 100% of their attention on the person they're talking to, to solve problems, dig deep for what keeps them up at night, and then use the technology to create lots and lots of options for solutions. So that's kind of how you see the future of the business.

MS: Yes, I actually couldn't agree more. And then ultimately, you know, if you've got a $300,000 home, and a 2014 Honda, you can go to GEICO and spend 15 minutes and probably say, 15%, that's probably true. If your assets get any more complicated than that, like, “I've got this house, but we also have this rent house”, and with Airbnb exposure you can't go online and fill something out - you need someone to personally get your risk managed. That's why I think that the independent agent is necessary, and I see decades where people are going to need that expertise.

TC: You know, they may be able to get some more complicated questions answered.You've talked about artificial intelligence, and certainly, artificial intelligence is increasing in its ease of use and sophistication for what it can deliver as an answer to people. But it also strikes me that artificial intelligence is going to increasingly give agents options to present to people that maybe they didn't have the time, or the ability to create for themselves.

I had an interesting experience about five years ago. So IBM created Watson, which is pretty famous. Watson is just an artificial intelligence engine that you can program so it comes up with really interesting and creative solutions. At this conference, they told Watson, “Hey, we want you to take on avocados and peanut butter and oil and a whole bunch of food ingredients and make cocktails out of them, and make them taste like martinis or whatever”. And it was really bizarre to be drinking this stuff in a glass that doesn't look like anything you've ever seen before in your life. And it tastes just like something that you didn't expect. And the point is that Watson is able to take information and recombine it in ways that no one could have ever envisioned. 

So I'm thinking, “Hey, I'm talking to you, you're my insurance client. I'm having an interview with you. I'm asking all these right questions, but in the background, artificial intelligence is slicing and dicing insurance policy forms in a way that is completely unique to your situation”. And that's a wonderful thing for the consumer, but somebody they trust has to make sure it's still okay. And that's a human being.

MS: Yeah. One of the guys that's on our advisory board is a guy named Dave Anthony, and he created Call of Duty, so he's known as the trillionaire gamer. He thinks that by combining AI with augmented reality you can actually, ultimately create characters that can speak to someone about whatever it is they're selling. He invested in AVYST because he thought that we were at a very unique place, and he wanted to be involved with us because he sees insurance as a place where augmented reality could ultimately be very impactful (which I believe it will.)

But going back to your first point: ultimately, you got to start talking to someone to understand what their needs are. I can't just get your social security numbers and figure out what you ought to buy for insurance - I've got to be able to talk to you about everything that's in your world.

TC: Right. It's interesting that you bring up augmented reality. I've done a lot of experimentation with augmented reality, and it's fascinating to sit across a virtual desk with another human being who's just an avatar, and after a minute or two you forget that this is all electrons, and you're really having a conversation with somebody. To me that means that I can sit across the desk, or the table from somebody anywhere in the world just as easily as I can here in Oklahoma City. And if I have a fabulous interviewing system that asks all the questions that ever need to be asked, and is using AI to prompt you, here's another question that you really ought to ask as a consequence of that: as an insurance agent, or an insurance agency owner, now my market place is the entire United States, for example, not just my home state. And in every industry, I have capabilities to write business in that industry, even though I've never done it before. And I can do it seamlessly and easily and in a way that the prospect really has confidence that the product I ultimately deliver to them is real.

And so what does that reduce me to? And what I think it reduces me to is the capability of establishing the relationship in the first place, that unique chemical thing that happens between two human beings where we like each other, and we create a bond of trust, which is just reinforced by the transaction and the questions and all those things. So it's interesting, I think technology is going to be fabulous, personally. But I think what it really does shines a light on are these intrinsic human skills that the talented agent, comes with naturally, but also gets trained to improve.

MS: Yeah, I think you make really, really great points. I do believe that this paradigm shift that's taking place doesn’t pose a threat to the independent agent in the next decade. You know, when I first started looking at this business 10 years ago, there were folks out there saying, “within a decade, all of the independent agents are going to be gone because of all the things you just talked about” but ultimately, I think when somebody is insuring their business or if they've got lots of assets, they want to have a relationship with who's ever helping them protect that. And I think that personal interaction has been key to that. It'll be really useful.

It has been intersting to see how different life gets when you're not meeting your agent for a gin and tonic to talk about your insurance needs, you're going to a zoom meeting with them or some other such thing. And does that change that relationship? It probably does for guys like you and me, right? Because my friends are my friends. To me it’s almost sort of a joke that I'm the CEO of a technology company - I'm a salesman. That's what I am. And I do this now because I've built great relationships with really great people. I don't know if I could meet somebody brand new over the phone and have that same kind of interaction and that same kind of relationship.

But I think the generation after us is going to be used to doing that. And they still might want to be able to look somebody in the eye, even if it's across the zoom, to say, “does this guy really looking after my best interest? Do I really trust this guy with my home? And my cars and my boats and my wife's wedding ring? And do I really trust this? I'm really getting good advice here.” And I can really look at them in the eye, like I've done all my life.

TC: I think that's already happening. I mean, I have friends all over the world that I've met online, and zoom or its equivalent technologies are just making those things better. And talking to them online didn't change anything. So it is a little bit like virtual reality, once you enter a virtual reality world, your brain within about 60-120 seconds thinks it's real. It's going to be interesting to see what it does to business models.

There’s one last thing I want to touch on with you, which is marijuana. Again, talking about the past in the future. I mean, five years ago, people who sold marijuana were criminals. Today, they're entrepreneurs, or rather, they were always entrepreneurs, they just happen to be legal entrepreneurs. So this is an exploding business. 

You and I both have some exposure to it - I'm chairman of a bank, and we have a burgeoning banking business for marijuana. And you're helping insurance agents that are trying to ensure marijuana-related businesses grow. I think that's interesting because it's exploding. So just touch for a second on some of the capabilities that you've developed with your technology to help agents help people who come to them with what has still a difficulty to ensure risk?

MS: Well, one, I think you're right, in terms of the growth and I wish I could tell you that I was smart enough to see all this coming. In September 2019, we started looking at specialty lines for the interview product. So we had looked at personal lines, obviously, and we built an enormous database to start to manage that data. So as we looked at the commercial side, at specialty lines, I picked cannabis and hemp, because it was not that big of an industry, so I could get my arms around it, having all the necessary data. I hired subject matter experts, programming experts, and then we hired some cannabis experts. While we were also building technology. And so it didn't just really rise to the top, automatically. 

By the way, the AVYSTinterview is written in codeless technology, which is the new hot thing. I'm glad it's a new hot thing, because that's how we started this process two and a half years ago, but it basically puts us into a position where our technology doesn't know if it's a marijuana flower or a hamburger or a chair: it is just rules that say “if it's this then it's that” to guide you through. So everything we do from an industry perspective can be done by AVYST. 

The other thing that I felt very strongly about cannabis, was that it was going to change dramatically. And so you got to be able to shift, and a shift means I got to go rewrite the code. That's not a solution. That's why our industry today is essentially stuck in legacy, because all the big players have to go rewrite the code, so we'll never rewrite the code, we'll just change the business rules.

So in March, when the world was coming apart, I kind of looked in the mirror one day and said,”You know, I'm going to take charge of my own destiny here, I'm going to really go develop this digital marketplace so that the marijuana and hemp industry has one place to go, where if I can force other players to be digital, we can have the most efficient commercial lines market for this one industry. And I can look at that, I can get my arms around it, and I can control it.”

And so that's how we started! And then I started putting more resources into it when COVID get started getting worse, because of my belief and then last Tuesday I got proven at least a little bit. I think the whole moral judgment in question is giving way to tax revenue for states and cities. And ultimately, I think that's why the federal government rolls over - because we all need the revenue. We're all using it anyway. So why don't we make this a product? That can't be any worse than buying lottery tickets, right? People are gonna make bets, you might as well get revenue out of the betting system. That's what the lottery system is all about. So I don't see that the cannabis market’s any different. And I think it's going to grow like a weed - all pun intended.

TC: Yeah, and obviously, your software, you've already set this up so agents can be immediately successful as experts in ensuring cannabis-related businesses. So just to throw that out there: over the last three to five years, I think this has been a big head-scratcher for agents, “how do I get this opportunity? What do I do with it?” Anyway, if somebody is interested in becoming a green agent, and I'm not talking about utilities here in their local area, they should get a hold of you.

MS: We've been working on this for over a year, and it'll be marketed in the marketplace as well as in the weeds. We are really going to get in the weeds and make sure we understand your risk. We think we'll launch this in more of a commercialized effort in early 2021. 

So, anyone that's interested in the sector, I'd love to talk to anybody, because I think we all have a lot to learn about this, because it's still the wild wild west out there as relates to cannabis.

TC: Well, hey, Marc, thank you for joining me today on Uncaptive Agent: The Future of Insurance, I think what I've learned is that there's a role for agents, but it's changing. And embracing technology makes it easier. And I'm super excited. And we'll talk more offline later, you know how your product can speed up the process of training, developing new talent in this business, which is going to be critical to every agent over the next decade. So again, thank you for being with me, and we'll talk soon.

MS: Great. It was a real honor to spend the morning with you. 

TC: 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.