Tag Archives: brokers

Specialization: What’s Next for Agents

Many brokers take a generalized approach to their business. In a competitive field, the thinking goes, it’s best to be able to cover as many industries as possible. However, this line of thinking may be doing more harm than good, as specializing can in fact greatly improve business as a broker. Specializing within one industry may provide a number of benefits for a broker’s sales and marketing tactics, such as internal development of expertise on certain products and gaining a reputation for niche knowledge.

Sales and marketing

Clients increasingly expect tailored services across industries, and businesses are responding. A 2016 McKinsey survey found 46% of businesses surveyed said most accounts are managed by individuals focused on a specific industry. By 2021, respondents said they expect that number to climb to 66%.

When insurance agencies or independent brokers specialize, they’re able to market specifically to what needs exist, based on first-hand observations, and tailor sales tactics to what they know to be most important to the industry. Catering to clients’ needs in this way builds key relationships.

For example, if a broker specializes in insuring cannabis businesses, people will get to know the broker by face and name at industry events, and the broker will become ingrained in the industry.

Product expertise

In addition to gaining more clients through word-of-mouth recommendations, insurance professionals who specialize in a given industry will be able to develop product expertise. Knowing the ins and outs of an industry is essential to speak with authority.

This establishes credibility, and speeds up workflow and productivity. Doing something for the first time takes time, but, by the 10th time around, you’re able to do almost anything more quickly. And the more quickly you move — from getting new business and renewal applications completed to building relationships with specific carriers and underwriters — the more clients you can work into your roster.

See also: Agents, Brokers Are Dead? Not So Fast!  

Insuring a manufacturer is different than insuring restaurants, which is different than insuring the cannabis industry. Brokers learn that a cannabis distributor needs fire coverage and theft coverage, while a manufacturer needs stronger protection against physical damages to equipment and employee injuries on the job.

Finding a niche

If a particular business operates largely in the region where you live, you may want to specialize there. Or, if you find yourself better able to connect with clients in certain industries, you can put yourself in contact with those people more often. Different industries have different events, people and methods of operation. You are likely to enjoy certain types of events more than others, whether those are meetups, large networking events or smaller gatherings.

If, in addition to talking about insurance, you enjoy talking about tech, small business or law, you can combine outside interests with your work in insurance. You’ll be able to cultivate relationships by showing you’re interested in potential clients’ fields. You’ll be able to make those human connections that people value so much.

Find a niche, and you’ll be able to talk about the latest news, particular pain points and exciting developments that clients are looking forward to implementing. Potential clients will remember you for being able to talk about more than just insurance policies and not rushing to the sale.

See also: How to Keep Humanity in Online Sales  

Operating as a specialist as opposed to a generalist gives independent brokers and agencies opportunities to improve business. Streamlining marketing techniques, gaining product expertise and finding a niche, you’ll become an expert, develop stronger client relationships, improve workflow and build your client base.

Do Consumers Trust Their Agents?

I just read this article, which includes this:

“According to an Accenture study, only 27% of consumers consider insurers to be trustworthy. And Deloitte found that only 11% of people have strong trust in insurance agents and brokers.”

I’ve seen studies like this over the years. What is usually missing from these statistics is the Q&A related to the insurer or agent OF the consumer. If you ask consumers if THEIR insurance agent is trustworthy, the numbers are almost always WAY higher than those above.

The same is often true of politicians…when the question just refers to “politicians,” polls imply that they are universally despised, But ask people what they think of a politician they voted for and the statistics are completely different.

As has been said, “Torture numbers, and they’ll confess to anything.”

The driving force behind insurance policy evolution is litigation and regulation where the difference in coverage, according to the courts, can be the tense of a verb or a punctuation mark.

See also: Insurtech and the Law of Large Numbers  

Berkshire just came out with a policy called “THREE” that combines property, business income, general liability, auto, professional liability, workers’ compensation and cyber liability (I’m probably forgetting something) insurance…IN THREE PAGES. And it’s going to be clear to business owners what is or isn’t covered?

Inarguably, the most important “customer experience” is the one that takes place at claim time. Insurance policies are complex, legal contracts whose terms and conditions have often been interpreted over decades. And the reality is that virtually no consumers read them…. Far too many insurance practitioners don’t even read them. I doubt that reducing dozens of pages to two to three pages will change that metric. When it comes to making contracts understandable, less is not necessarily more.

By the way, there is no such thing as “fine print” in regulated insurance policies.

Common Mistakes at Small Agencies

First, my heart is with small agencies and their owners. They have a tough time wearing so many hats. Delegation only works when other people are around to wear the hats. Agencies everywhere are pressured by carriers to write more business, but small agencies have limited resources when the owner is the key producer, the HR expert, the IT expert, the accounting expert and the chief bottle washer.

I appreciate how personal small agencies are with clients. That is important to clients and often is a key reason the owners are even in the industry. This reason, among others, creates an interesting and often rewarding life for agency owners.

I appreciate small agencies so much, I even made a promise to a mentor 25 years ago that, as I succeeded, I would not forget my roots by leaving behind small agencies as my practice grew.

Sometimes small agencies are challenging entities with which to work. The situation is commonly this:

  1. Like all small businesses and small accounts, they usually need more help but will not pay for it. They will not even ask for assistance, and often, if they are willing to ask and are willing to pay, they do not know for what to ask.
  2. When these small agencies need help due to an E&O claim or another kind of legal situation or they need a valuation of their agency for a sale, merger or estate purposes, their data, their accounting methods and their contracts are so often missing or so disorganized that simply making sense of their situation is a huge challenge in and of itself. Quite often the situation borders on a fiasco trying to find a time to occur.

See also: Expanding Into Small Commercial  

Here are some examples specific to accounting:

  • Their accountant does not know anything about insurance agency accounting. Their ignorance has made a hash of the agency’s records by trying to fit the square peg of agency accounting methods and systems into regular accounting methods.
  • The accountant not knowing agency accounting has encouraged the agency owners to withdraw too much cash, causing a working capital shortage or worse, a trust account shortage.
  • The agency has not maintained its accounting entries. When a valuation or audit is completed, or even when it is time to convert data from one system to another, and the accounting entries are poor to nonexistent, two outcomes are certain: 1) The owner is about to spend a lot of money to fix them; 2) The owner will look like a fool.
  • When the data is a mess but the agency owner tells the appraiser, the attorney, the IRS or the judge: “Just trust me when I tell you what the numbers really are,” the silence will be deafening. To many readers, this reads like a ludicrous statement, and it is, but this is verbatim what I have heard agency owners say numerous times. Another version is, “Don’t pay attention to my financials. They are wrong. Here, I’ll tell you what the right numbers are.” I cannot begin to write how many times I have heard agency owners speak some version of these lines. What is even more incredible is that they actually think, firmly believe, the other party is going to trust them! They actually get upset if the other party does not just take their word. They have no idea how bad they appear when they make these statements.
  • The agency has been creative in how it pays people, including ex-owners. This appears when they buy the agency and want to deduct the price by paying the owner to do nothing. That is not exactly acceptable. The same usually goes for making producers independent contractors because your buddy advised it was a good way to save money.

Examples from the E&O world include:

    • “If I license everyone, it will cost me more, and my staff will migrate to bigger agencies paying more.” That does not go well in a deposition.
    • “If I do not have procedures, then the plaintiff cannot accuse me of not following procedures! I win.” The agency does not really win because the result is the agency is painted as incompetent.
    • “We do not input data because it takes too much time.” Really?
    • “We do not check policies because it takes too much time.” Seriously?
    • Etc.

The Accounting Solution

The solution is to do the work. The reality is that doing the accounting and operating procedures correctly actually saves time in the long run. My estimate, based on the improvements I’ve seen with my clients, is that approximately a 20% time savings is achieved.

Hire an accountant who knows insurance agency accounting or hire someone to educate your accountant on insurance agency accounting. I have done this successfully many times, and, for constructive people, it is a blessing. Everyone sleeps better knowing they are doing the job right.

Do not dig your grave deeper. When you learn that you or your accountant has been doing the agency’s accounting ineptly or fraudulently and someone points this out, do not try to explain the problem away. Absolutely do not attack the messenger. Be constructive.

Spend the time and money to purchase a better agency management system and then learn to use it. Some system’s trainers are not worth $2, and you may have to find third-party trainers. My most successful agencies, in this aspect, almost always use third-party trainers.

The E&O Solution

  1. Develop real procedures. The ROI using good procedures is awesome: 1) Productivity increases capacity with fewer people; 2) Sales increase
  2. Complete a real audit. Fear seems epidemic with small agencies that an audit will put them out of business, not because of the cost but because of what the audit will discover. Personally, I think it makes for more sense for the auditor to discover the issues than for a plaintiff attorney to do so.

The Contract Solution

Small agencies usually work with small attorneys, and many small attorneys are jacks of all trades and masters of none. They generally are not masters of insurance agency contract law.

Agencies of all sizes need legal advice specific to them. If you cannot find a true specialist, let me know because here are some options:

  1. I have trained many attorneys on insurance agency legal needs.
  2. I can refer you to attorneys who specialize in agencies, but they likely will be in a different state, and you do have to pay.

It is so important to use true legal experts. I have seen generalist attorneys write contracts so the agency did not own its own book of business, the buy/sell agreement valued the agency about 2,000% higher than it should have, the agency violated its own by-laws, the owners had to sell their shares for half of their worth, obvious IRS compliance problems were created and this is the first paragraph in a 100-page book specific to attorney incompetence.

Overall Solution

Go to conferences with more sophisticated agencies. When you go to conventions, hang out with more sophisticated (not just larger, because larger does not always mean sophisticated) agencies rather than commiserating with other small agencies. Don’t believe everything you hear, but dig for details from the best.

Make a mark with insurance companies. Be professional in your submissions. Tell a story. Do not just submit junk or a pile and cause the company to wade through a mess. Some companies open doors for small but professional agencies.

See also: 3 Ways to Boost Agency Productivity  


At the time of writing this article, my confession is that small agencies have worn me out. I am tired of fighting with agencies regarding what needs to be done with their accounting, their E&O, their carrier relations and so forth. Almost always, they do not know what they are doing, and many refuse to understand they are in a corner and do not have a choice. This is not fun.

What is fun is working with agencies of any size that are constructive and proactive. Most bigger and better agencies got bigger and better by being more constructive, listening better and not refusing to act just because the action was difficult emotionally. They surpassed the emotion and their emotional barriers. Doing so greatly advanced their fortunes, both their monetary fortunes and the quality of their lives.

I know that, for small agencies, time and money are always short. I do not know how to fix that in the short run, but I know how to fix it for the long run, and that is take the time to do your accounting, your data and your procedures correctly now. Bite the bullet. The ROI is high and, like in the old FRAM oil filter commercial, you can pay now or pay later, but you will pay, and, if you wait, the cost is likely triple or more what you’ll pay now. Is it time to change that filter?

You can find the article originally published here.

Finally, an Insurer Proud of Agents

The debate on insurance innovation has been dominated recently by comments generated as a result of the State Farm TV ad where this insurance giant celebrates the superiority of its thousands of human insurance agents compared with the AI-based chatbots.

Lemonade — a smart U.S. insurtech startup — has credited itself as the target of this ad, because its marketing story is that a chatbot is just as good – if not better – than any human insurance agent. It does appear that Lemonade’s platform does need to learn a bit more about how insurance works, as AIs have regularly paid out more in claims than they’ve collected in premiums.

Many comments on various social platforms have called the commercial, “the worst commercial I’ve seen,” creepy, freaky and hilarious. Many blame the insurance giant for releasing this “attack ad.” Even our friend Chunka Mui has written a well-articulated censure to this ad.

However, we love this ad. We hope this discussion will encourage two calls to action for insurance companies:

  1. Be proud of the way you do business
  2. Master the art of communication.

Be Proud of Your Business Model

Let us start with the first aspect. In the past years, technology arrogance and a sort of politically correct tech-speak have forced the storytelling of the largest insurers around the world to, on one side, shyly hide that real people generate the vast majority of their business and, on the other hand, celebrate any insurtech proof of concept as evidence of their innovation, even when it has an immaterial impact on profit.

It seems insurance companies have felt embarrassed by their agents, brokers and other distribution partners. Most of their innovation efforts have been on solutions that in some way challenge their greatest asset, the human agent and broker.

“The last agent is already born” is a slide title we have seen at industry conferences for the last 10 years, but as of today, all around the globe, the sale of P&C insurance continues to be dominated by agents and brokers (excluding a few exceptions like the retail auto business in the U.K.).

See also: Digital Survival Tools for Agents  

For life insurance, digital distribution accounts for less than 1% of global sales.

It is great news to finally see a large insurer that is very proud of its agents. We love this communication because it is not hypocritical and gives a clear message both to customers and to agents: This is the way (through agents) we do business, and this is the reason why we do it this way.

We are not celebrating or encouraging “old school” thinking. We are firm believers in insurance innovation – and agree with Chunka that chatbot, machine learning and AI use cases are among the technologies that will have the greatest impact on the future of the insurance sector.

However, we are also pragmatic. We want to provide a view about insurtech that is different from the superficial mainstream. We think it is a pity to let the innovation cheerleaders – people raising their pom-poms at any PR released news but are not able to distinguish a loss ratio from a combined ratio – guide the debate about the future of the insurance sector.

The mantra of our activities in the insurance sector around the world is “all the players in the insurance arena will be insurtech,” meaning organizations where technology will prevail as the critical enabler for the achievement of their strategic goals. So, we believe insurtech is much more than digital distribution.

Our view is that insurtech is a superpower for insurers, a terrific enabler for performing the job of insurance in a better way: to assess, to manage and to transfer risks.

The world is full of opportunities for reinventing each step of the insurance value chain through technology and data usage. Moreover, an insurance company has a key opportunity to share these superpowers with its agents, brokers and distribution partners.

Many insurers already understand that not involving their distribution system in corporate innovation is a wasted opportunity, so these carriers have introduced technologies that can enhance the capabilities of their human intermediaries. Instead, we have seen only a few players communicating effectively and consistently to support their agents and brokers. Because of this, carrier innovations are frequently perceived as threats by agents and brokers.

Insurance companies don’t need to create this kind of barrier. Maintaining this conflict only pleases the innovation cheerleaders who not like and want to get rid of intermediaries.

Master the Art of Communication

Let’s move to the second call to action. The insurance sector has always experienced bad press and has never excelled at storytelling. The new generation of insurtech startups are demonstrating the power of a consistent and modern communication strategy. The startup that has started the discussion about this ad is the best example of this communication ability. From our perspective, Lemonade’s two years of case history must be studied in marketing courses at any university. There is a lot for the current industry to learn.

The company has pretended to be the good guys who will be the remedy for a broken business. This home insurance startup has positioned itself as champions of trust. Everyone remembers the company for the fixed percentage of premium it charges – the iconic slice of pizza – while all the rest is used to ensure they will always pay claims, and whatever is left goes to charities.

In today’s age of post-truth, only a few people go deeper, study and try to understand fully. Therefore, that slice of pizza celebrated by insurtech cheerleaders has flown tweet to tweet, article to article, conference to conference. Moreover, consistent and well-orchestrated communication has fed this mechanism.


What does “all the rest is used to ensure they will always pay claims” mean? In the long and wordy FAQs, the startup mentions the necessity to cover “internal reinsurance,” reinsurance costs and other expenses. Therefore, at the end, the maximum amount available for the charity giveback is 40% of premiums.

The terrific 40% giveback happens only in the theoretical scenario where there are zero claims within the peer group. In a scenario with claims at 40% of the premiums (40% loss ratio) or above, the giveback is zero. This means there is a giveback only if the loss ratio is lower than 40%.

See also: Important Perspective for Insurance Agents  

Insurance is a contract where someone promises to indemnify another against loss or damage from an uncertain event as long as a premium is paid to obtain the coverage. On average, the U.S. home insurance business line had a loss ratio of 74% in 2017 (an exceptionally high year; 46% has been the lowest loss ratio in the past five years). This means that 74 cents have been used to indemnify the policyholders for each dollar collected as premium.

In the age of post-truth, the Insurtech startup we talked about pretends to be the good guy that will fix a broken business model because it guarantees to pay – as claims or giveback – at least 40 cents for each dollar collected as premium within each peer group.

It seems clear to us that the insurance incumbents have more arguments for claiming they are the good guys, but they have only to develop consistent and modern communication storytelling.

Following are some suggestions on next steps that insurance companies can take:

  • Be proud of and support your agents, brokers and distribution partners
  • Encourage them to be part of your innovation initiatives
  • Develop a frictionless process to help the people who distribute your products better engage with policyholders
  • Learn how to tell a better story – about your company and your agents and brokers and distribution partners.

What ideas do you have for helping the industry to help agents and broker better protect their clients?

Agents Must Become ‘Discussion Partners’

The insurance industry is going through a revolution, and too many carriers, brokers, agents and team members are failing to keep up with the rapid pace of change.

Customers have grown accustomed to convenience, a plethora of information and unending choices in whatever they buy, and this applies to the purchase of insurance products and services, too. People expect it to be easy, efficient and understandable.

The insurance industry as a whole is miles behind in the race to deliver unrivaled service to customers. To keep up with the radical transformation, insurance professionals must earn the trust of existing clients and new prospects and become their gateway to everything related to insurance and financial services.

The path to this transformation is for the insurance agent or representative to become a “discussion partner” — a trusted advisor who guides customers toward optimum financial decisions by offering them every possible insurance and financial services product while disclosing exactly how his or her superior advice works.

See also: Important Perspective for Insurance Agents

The goal is to convert everyone into discussion partner clients who do not want to be sold or told; rather, they want a consultant who will advise them on the best products, protection and asset-accumulation guidance they need for their families.

Looking closely at the not-too-distant future, here are just a few ways the insurance industry will evolve:

  • There will be total transparency about coverages and pricing. Customers will know all the details when they purchase property and casualty products, financial services products, life insurance products and more, in much the same way financial services and securities are sold today.
  • There will be a convergence of distribution models. Local storefronts will welcome the use of the omnichannel experience, such as digital, after-hours 800-number call centers; claims service; and 24-hour customer self-service through technology or telephony.
  • Technology will streamline processes. The local storefront housing brokers/agents and their teams will still provide service and sales at the point of personal interaction, but they will also leverage the power of digital technology and call centers.
  • Collaboration will become commonplace. Open architecture — a financial institution’s ability to offer clients both proprietary and external products and services — in both technology and service will force the insurance industry not only to adapt but also to move quickly toward radical transformation.

The key to agents’ survival is that they must provide unrivaled service at the highest level. Nothing else will be acceptable if the local insurance provider is going to be a part of the consumer’s purchasing and reliance on service in the new world.

See also: Use Insurtech to Help, not Replace, Agents  

So how can carriers, brokers, agents and team members evolve to the “discussion partner” model of unrivaled service? Here are eight strategies for making the transition:

  1. Focus everything you do on the customer. The customer is at the apex and the center of every decision, every system and process. Agents must be hyper-focused on meeting our customers’ needs — everything they desire and have every right to expect. This begins with providing unrivaled service as a discussion partner.
  2. Create a team of experts. This is usually referred to as specialization, teaming or collaboration of experts. Agents must build a larger and stronger local team through hiring, mergers and acquisitions and strategic relationships.
  3. Collaborate with expertise partners. Not every broker or exclusive agent is going to have access to every market today. In the future, with open architecture, everyone will have a view into the competition’s coverages and rates. Until then, creating collaborative arrangements is important. If clients do need and want specialized products and services, referring them to someone else will not be prudent any more. Agents must have relationships with experts in many areas. Agents must be quarterback, sitting in on the coverage presentation and purchase. This means getting to know experts in various fields and working with them, although agents might not always make a commission. Build partnerships before you need them.
  4. Embrace and retool all technology. Agents need to assess current capabilities in the area of technology. Everything is moving at light speed due to artificial intelligence. The things once innovative are now commonplace. Agents need to embrace new technologies and use them to create a seamless experience for customers in the front room. Open architecture will introduce new technologies that discussion partner agencies must embrace as they move forward.
  5. Control every step of customer service and the purchasing process. This is the foundation for a successful business model in the future. Insurance professionals need to assume the role of the gateway to everything related to insurance and financial services and guide clients through every step of the process. Agents need to remind clients what they do for them and assure them that they are worrying about the details so the clients don’t have to.
  6. Help clients declutter. Insurance agents must be the only financial adviser their clients will ever need. Professionals don’t just refer clients over to other experts any more; they make everything easier. An agent’s job is to declutter clients’ paperwork, declutter how many people they are working with and make their lives easier. Life is complicated enough.
  7. Be open to change. The tsunami of change happening in the insurance industry is affecting everyone, from the carrier to the broker/agent to the local team member providing service to clients who have never needed it more.
  8. Agents should embrace change, not fear it. Yes, they will lose some clients to technology, such as robo-advisers. But we didn’t lose the entire banking industry because of the ATM. The typical client still wants someone to hold his or her hand through the maze of madness in this world.