A Moment of Truth for Agency Roll-Ups?

Agent and Brokers Commentary: October 2023

Person smiling at houses

When Chunka Mui and I researched 2,500 corporate disasters to look for the patterns that led to failure, we found that one of the seven strategies most commonly associated with major write-offs or bankruptcy was the roll-up. 

While we conducted our research more than 15 years ago, for our 2008 book "Billion Dollar Lessons," the work springs to mind because insurance agencies have been rolled up for years now by Acrisure, Hub and others. The make-or-break point likely isn't far off. 

The basic problem with roll-ups is that acquirers are tempted to overstate the potential cost savings while underestimating the costs, including those that come from managing the complexity of a sprawling empire that began as a host of idiosyncratic little businesses. 

The main example we explored in "Billion Dollar Lessons" was the Loewen Group, which went from a single funeral home in Canada to more than 1,100 throughout North America in a little more than a decade and employed more than 15,000 people -- then collapsed and filed for bankruptcy. 

Loewen projected major savings from having funeral homes in a metropolitan area share undertakers and hearses, as well as from the efficiencies that were supposed to come from standardizing back-office systems, but few of those savings materialized. Sharing undertakers, hearses and drivers was complicated, and those in charge of business operations resisted change or even quit. Funeral homes were typically operated by families (not unlike many small insurance agencies), and there was no incentive for an older generation to stick around after they cashed out through a sale, especially given that the giant corporate acquirer would have no loyalty to the next generation of the family. Loewen often found itself scrambling just to keep an acquired funeral home operating.

Meanwhile, the funeral homes lost much of the hometown appeal that had made many of them mainstays in a community for decades. The small businesses earned goodwill by sponsoring kids' sports teams and participating in local events. Often, the owners had kids who went to school with the children of clients. But nobody thrilled to the sight of a Loewen corporate logo on a funeral home's front lawn, so business sometimes drifted away.

For good measure, roll-ups typically happen so quickly that the growing pains can be frightful. Scale is the whole rationale for a roll-up, and a growth-at-all-costs mentality can lead to ignoring little problems with acquisitions and integration that become major problems after they've accumulated and festered. Management can become overwhelming, and some management may not be up to the task -- Raymond Loewen did great with one funeral home in one town in Canada, but operating 1,100 in a whole variety of towns and cities throughout North America was far more than he could handle. 

Now, there is reason to think that the insurance agency roll-ups can dodge many of the problems that we documented for Loewen and others in "Billion Dollar Lessons." In particular, the source of the funding for the insurance roll-ups makes a lot more sense. 

Loewen and the others in our research typically were publicly traded. As they grew, investors got excited about the growth prospects, and the stock price soared. That gave the acquirer a currency it could use to buy lots more companies -- but only as long as exponential growth continued. As soon as growth slowed even a bit, the stock crashed. Investors began focusing on the bottom line, not the top line, and management suddenly had to seamlessly integrate all the purchases. Disaster almost always awaited. 

By contrast, the insurance agency roll-ups are largely happening via private equity, which is much more patient money than stock market money is. The pressure to expand too rapidly is more muted. Private equity money is also smarter money, so it insists on more professional management than, say, Bernie Ebbers, who started his career operating a motel, could provide after he bought 60 telecommunications companies, eventually including MCI, and presided over a scandal and then the collapse of WorldCom. 

The insurance agency roll-ups will still face many of the integration problems that other roll-ups must confront, including how to introduce a corporate brand without losing the appeal of a boutique, local one. And the roll-ups are big enough now that I'd say we're getting to a point where we'll going to see, one way or the other, just how successful they can be. 

That question serves as the starting point for this month's interview, with an old friend, Mark Breading, a partner with Strategy Meets Action, who has been tracking the world of agents and brokers for decades. I hope you'll dig in.



An MGA is saving $65 million a year by reducing from 25 to two the number of clicks required to issue each policy.


The chance to grow or sell an agency can present itself quickly. Here are five steps to take to be ready when opportunity comes knocking.


Drawing on AI and machine learning, modern content management systems drive intelligence into processes and decision-making. 


Process intelligence tools let operations leaders “see” digital products being built, enabling use of statistical process control techniques.


ML-based lead allocation revolutionizes insurance lead distribution, ensuring optimal matches for agents and boosting conversion rates.


Value creation through tighter integration.

Paul Carroll

Profile picture for user PaulCarroll

Paul Carroll

Paul Carroll is the editor-in-chief of Insurance Thought Leadership.

He is also co-author of A Brief History of a Perfect Future: Inventing the Future We Can Proudly Leave Our Kids by 2050 and Billion Dollar Lessons: What You Can Learn From the Most Inexcusable Business Failures of the Last 25 Years and the author of a best-seller on IBM, published in 1993.

Carroll spent 17 years at the Wall Street Journal as an editor and reporter; he was nominated twice for the Pulitzer Prize. He later was a finalist for a National Magazine Award.


Read More