IIAI 2016 Winter Viewpoint

WINTER 2016 • VOLUME 34 • ISSUE 1 INDEPENDENT INSURANCE AGENTS OF IOWA

MILLENNIALS THE NEXT GENERATION OF INDEPENDENT AGENTS

PRESIDENT’S REPORT The Future Of The Association As you read this issue you will see that one of the strategic planning goals of your Association is to attract more young people to work in this industry.

Independent Insurance Agents of Iowa 4000 Westown Parkway West Des Moines, Iowa 50266 (515) 223-6060 • FAX (515) 222-0610 800-272-9312 (In-State only)

Advertising Editors Melissa Meiners & Nicole Peffers

BOARD OF DIRECTORS President Jerry Mease - Winterset

President-Elect

Jerry Mease Page 5

NATIONAL DIRECTOR’S REPORT Recruiting New Talent One of the most pressing and well-documented challenges facing the insurance industry is the exodus of human capital.

Dean Brooks, CPCU, CLU Page 7

ADVERTISERS

The Hartford

Eldon Hunsicker - Ottumwa

Treasurer Terry Friedman, CPCU - Dubuque

National Director Dean Brooks, CPCU, CLU West Des Moines

Directors

In This Issue

We would like to thank our advertisers for their support.

This magazine would not be possible without them.

THANK YOU!

Page 10

GenYGap: The Hartford Poll Finds Industries That Drive U.S. Economy Are Failing To Attract Millennials Page 12

Tim English, CIC - Dyersville John Dalton - Council Bluffs Steve Madsen - Marshalltown David Rowley, CPCU, CIC, AU - Spirit Lake Scott Wirtz - Emmetsburg Luke Horak - Washington Lottie Miller, CPCU, CIC, AAI, CISR, CPIW, AAM, CRIS - Cedar Rapids Chris Gentry - Ollie

28 Amerisafe

Past President

24 Integrity Insurance

If You Work In Insurance, This Should Be The Only Article You Read On The Future Of Social Media

By Ryan Hanley

Scott Morningstar, CPCU - Lisbon

26 Iowa Mutual Insurance Co.

Page 15

IIAI OFFICE STAFF

6 Merchants Bonding Co.

Chief Executive Officer

6 M.J. Kelly Company

Bob Skow, CPCU, CAE bob@iiaiowa.org

18 Partners Mutual Insurance

Internal Perpetuation Selling To The Next Generation

By Brian H. Burke, ASA and Everett W. Shaw, ASA

Director of Membership Operations & Education Melissa Meiners melissa@iiaiowa.org • Ext. 15

Technology & Communications Coordinator Nicole Peffers nicole@iiaiowa.org • Ext. 17

Membership Services Coordinator Marilyn Paul, CPCU, AIT, AAM, CPIW marilyn@iiaiowa.org • Ext. 11

Membership Services Coordinator Brenda Kluger, CIC, CISR, CIIP, CRM brenda@iiaiowa.org • Ext. 14

Membership Services Coordinator Megan Kincy, AINS, AIS megan@iiaiowa.org • Ext. 16

Office & Education Assistant Cindy Grim cindy@iiaiowa.org • Ext. 12

8 ARM Associated Risk Managers 30 Big “I” Professional Liability 20 Burns & Wilcox 4 EMC Insurance Co. 2 The IMT Group

Representative Dawn Pettengill Receives Presidential Citation for Legislative Work Page 13

6 Pekin Insurance

Page 21

14 SECURA Insurance Co.

2016 Young Agents Conference

19 West Bend

Page 25

9 Western National Insurance

Update Your Google My Business Account

By Steve Anderson, CIC Page 27

Are You Helping Prepare The Next Generation Of Independent Agents?

By Bob Skow, CPCU, CAE Page 29

MISSION STATEMENT: The Independent Insurance Agents of Iowa will be an ­unrelenting advocate of the business, professional and p ­ olitical interests of its members; doing so by working in the p ­ ublic’s best interest and with the highest e ­ thical standards.

Viewpoint is a publication of the Independent Insurance Agents of Iowa. Viewpoint is published quarterly: Winter, Spring, Summer and Fall. Viewpoint is mailed to Iowa insurance agents, Iowa Home Office Executives, Affiliate members, and other state associations and organizations.

Work with an insurance company that’s right in your own backyard — EMC Insurance Companies. With a fully staffed office in Des Moines, EMC offers more than 100 years of experience in commercial insurance, plus local people who understand you and your markets. Local responsive service is just one reason agents in your area Count on EMC ®.

JOHN SCHUMACHER, CPCU Resident Vice President EMC Des Moines Branch

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president’s REPORT

The Future of the

ASSOCIATION A

by Jerry Mease

s you read this issue you will see that one of the strategic planning goals of your Association is to attract more young people to work in this industry.

I am not sure at this point what it will look like. But we need to recruit them, work with them and then encourage them to participate and be engaged in the future of our Association. Each of us have vested interest in helping the independent agency system be passed on to the next generation.

As I reflect back I am convinced now more than ever this is a great way to make a living. But the next generation will respond differently than we did.

Their idea of being successful will be different. There is such a change in the way they communicate and their time demands with work and family have taken on a whole new meaning.

Our challenge is to help them realize being an independent agent is a great career choice.

We are dedicated to the success of our organization and look forward to working with you to help secure our future. Together we can be sure the next generation is prepared to lead and grow the American agency system.

On a different note, at a recent meeting I attended, a very interesting thought was presented. Will there be a need for auto insurance in the future?

The technology for driver-less cars has already been produced; the only problem is how to implement it.

“Each of us have vested interest

in helping the independent agency system be passed on to the next generation”

I do a lot of driving these days and I look forward to the day I set my destination and just lean back and relax while the car navigates its way.

Will I need car insurance? I won’t be driving. Or will product liability be taking over?

As always there will be lots of changes in the future. Perpetuation, changing products we can offer clients, driver-less vehicles, legislation, court decisions, all of these will impact us as we move forward. Rest assured the Big “I” will be there looking out for our business interests. 2016 will present its share of challenges, but no question about it independent agents will be able to handle it!

WINTER 2016 |

|5

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national director’s REPORT

Recruiting

NEW TALENT O

by Dean Brooks, CPCU, CLU

ne of the most pressing and well-documented challenges facing the insurance industry is the exodus of human capital.

More directly stated, a lot of “boomers” with significant knowledge and experience are heading out the door, and the succeeding generations are not coming into the business in numbers adequate to offset the loss. While this has been an ongoing problem for insurance companies and agencies alike, it has reached crisis proportion for independent agencies. Currently, in a typical independent agency, the owners are on average 57 years of age. A concomitant problem is that over half of all independent agency owners do not have a documented and sustainable perpetuation plan in place, which significantly impacts talent retention. It does not take much foresight to realize there will be dramatic changes in independent agency demographics during the next ten to fifteen years. Recruiting new talent to the agency system is a significant challenge. Retaining this talent and then also transitioning those who are capable and willing into an ownership role through a viable perpetuation plan is an even bigger challenge. An IIABA member survey conducted last year overwhelmingly indicated that recruitment and talent development were problems for agencies and they would utilize some form of assistance in this area.

The Hartford study featured else-

where in this issue tells us only 4% of millennials look at insurance as a desirable career option. Much has been written about the millennials as the “self-absorbed” generation, the generation who growing up got a ribbon just for showing up. But after you cut through the superfluity of generational analysis, I’m not sure how much of the information is particularly helpful for recruiting. It is rather old news that insurance in general and agency sales in particular are not considered by many as attractive career choices.

Shortly after I got into this business in 1972, I read a CPCU survey that ranked insurance somewhere around 55th out of 60 possible occupations in terms of desirability. This is not a phenomenon unique to the U.S. A 2010 study by the Certified Insurance Institute in London found that 83% of college students would not consider insurance as a

profession and ranked it 20th out of 21 occupations in terms of desirability.

Apparently, not much has changed in that regard in at least forty plus years.

It appears this has less to do with generational differences and more to do with enduring public perception.

The Hartford study also noted that millennials are looking for jobs that offer a competitive salary and benefits, a flexible work schedule, and leadership opportunities.

I would make the somewhat tongue-in-cheek observation that pretty much all of my boomer contemporaries also value those same characteristics. Let’s face it, most of us boomers got into the agency business by accident. But most importantly, we stayed by choice once we discovered what a great business this can be for those willing to work.

The independent

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agency distribution model offers abundant opportunities that have appeal across all generational lines. Want a competitive salary and flexible work schedule? We have the opportunity to run our own business with virtually no limit on our income other than how hard we want to work, plus we have the satisfaction of helping individuals and businesses with one of their most important and financially significant buying decisions, and we’re there to help them recover when a loss occurs.

Looking for leadership opportunities?

We have the opportunity to give back as volunteer leaders in community activities, churches, civic organizations and local government. Independent agencies are truly a bedrock business in virtually every community, small and large, in Iowa.

IIABA currently is evaluating what it can do to help member agencies from a national perspective. The survey mentioned earlier also found a wide range

of existing efforts to attract new talent available on a state-by-state basis, as well as a wide range of HR services; however, there is no coordination of recruitment efforts nationally. Building consensus and collaboration among the national and state associations, along with our company partners, would leverage existing recruitment and HR resources. Our company partners certainly could do more in coordination with IIABA to recruit sales talent for independent agencies. Another option under consideration is development of an online portal for coordinating access to HR resources, training programs for agency personnel, compensation plan analysis and other related areas as demand dictates. Training for agency principals could focus on such things as effective mentoring, building a realistic path to ownership, leadership development and similar areas. Much of this training could be delivered via on-demand webinars to save expenses.

“Building consensus and collaboration among the national and state associations, along with our company partners, would leverage existing recruitment and HR resources” How this could all be implemented is still an evolving topic of discussion.

I’m always interested to hear what would be helpful to you in the area of talent recruitment and development.

What could IIABA do to help you?

As always, if you have any comments or questions about your National Association, feel free to contact me at Miller, Fidler & Hinke Insurance Agency. My direct number is 515-868-0484 and email is dbrooks@mfhins.com

Why ARM? Is an ARM membership right for your agency? Here are some of the benefits our members enjoy: • Complete independence: Retain your name, your contracts and control of your business.

• Exclusive programs and products: Tap into hundreds of storefronts, thousands of salespeople and a network of expertise from pre-screened members with solid reputations.

• Strong partnerships: Take advantage of ARM Partners, the unique business relationship between ARM and Arthur J. Gallagher & Co. that provides ARM agencies with preferred, streamlined access to the resources and business divisions of one of the world’s largest insurance brokers.

• Robust communications platform: Access products, resources and expertise across the entire ARM network.

• Local and regional support: Join forces with agencies in your state to develop and foster programs that fit your needs through low-cost regional membership.

• Increased return of value: Improve your access to markets, industry knowledge and business strategies that can deliver a significant return. Access select programs, such as premium financing, flood and RPS specialty markets that offer enhanced revenue opportunities only to members.

• Your voice in the association: Help shape the organization by attending meetings, serving on committees and participating in network events.

ARM is targeting successful independent retail agencies in your area, with $1,000,000 or more in agency revenue, whose books are driven primarily by commercial P&C business. If this describes your agency, and you’d like to find out more, visit www.ARMIweb.com or contact Scott Spangler, ARM Executive Director, at scott.spangler@armiweb.com or 630.285.4324.

15ARM28271B

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We can help with both.

With friendly underwriters who listen, and a full complement of products to serve your small-to-mid-size commercial insurance needs (including enhanced BOP, surety, and packaged coverages), Western National is your one-stop shop for getting business done. The proof is in the partnership.

A GenerAtion of LeAders The Hartford’s 2015 Millennial Leadership Survey found Millennials (ages 18-34) are leading today and want to lead tomorrow.

80% of Millennials are leaders todAy.

69% of Millennials aspire to be leaders in the next five yeArs.

77% of Millennials who consider themselves a leader today also aspire to be a leader tomorrow.

miLLenniALs’ work wish List: Arts & entertainment

40%

Education

36%

Technology

36%

Health care

31%

industries with Lower AppeAL:

7%

4%

Construction, Retail & Manufacturing

Insurance

3%

Arts & entertainment

men were more likely than women to want to lead in sports & politics.

oLder miLLenniALs (ages 26-34) were more likely to want to lead in business in five years than younger Millennials (ages 18-25).

Wholesaling & Utilities

industries in demAnd: no. 1 for women:

women were more likely than men to want to lead in hobbies & non-profits/community.

no. 1 for men:

technology

younGer miLLenniALs were more likely to want to lead in social media in the future.

A GenerAtion of LeAders, con’t

AttrActinG miLLenniALs: To attract Gen Y employees, Millennials advised companies to promote that they provide:

46%

44%

43%

A variety of career opportunities

Competitive salaries

Flexible work schedules

40%

33%

Competitive benefits, e.g. health, life & disability insurance

Leadership opportunities

BecominG the Boss When asked about the types of training they want from their employer, Millennials said:

Leadership skills

60%

Technical skills

54%

Financial skills

47%

Personal development skills

38%

Career planning

34%

Written & oral communications

28%

thehArtford.com/tomorrow prepare. protect. prevail. with the hartford.® The Hartford® is The Hartford Financial Services Group, Inc. and its subsidiaries including issuing company Hartford Life and Accident Insurance Company. Home Office is Hartford, CT. The Hartford conducts research to better understand the behaviors and attitudes of consumers. Our research includes The Hartford’s 2015 Millennial Leadership Survey – a national omnibus survey of 797 U.S. consumers, ages 18-34, who have at a minimum attended some college. ORC International’s Millennial Generational CARAVAN® Omnibus conducted the online survey in August 2015.

5059zz NS 11/15 © 2015 The Hartford Financial Services Group, Inc. All rights reserved.

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The Hartford Poll Finds Industries That Drive U.S. Economy Are Failing To Attract Millennials

The Hartford released new research that shows key industries driving the U.S. economy, including retail, construction and manufacturing, are failing to attract a giant generation of leaders — the 80 million Millennials (ages 18-34) in the United States.

“The results reveal a quiet crisis — a generation of leaders who aren’t interested in many businesses that drive our nation’s economy,” said The Hartford’s Millennial Workplace Expert Lindsey Pollak. “Millennials can help close this leadership gap by widening their career searches and exploring jobs, salaries and benefits before writing off whole sectors of the U.S. job market.”

A vast majority of Millennials (80 percent) consider themselves as leaders today and want to be leaders in the next five years (69 percent), according to The Hartford’s 2015 Millennial Leadership Survey.1 However, only 7 percent of young leaders in the third annual survey said they are interested in working in construction, retail or manufacturing.

Other industries that rated low on the Gen Y work wish list are insurance, which four percent of Millennials said they’re drawn to, and wholesaling and utilities at 3 percent each.

“At The Hartford, we are working hard to make sure Millennials know that insurance offers a variety of career paths such as tech, big data and marketing, as well as flexible work and leadership development,” said Susan Johnson, head of diversity and inclusion at The Hartford. “We don’t want to miss out on the future leaders simply because of misconceptions about the industry.”

Arts and entertainment topped the Millennials’ work wish list, with 40 percent of Gen Y survey participants saying they want to work in this industry. Second on the list was educa-

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tion at 36 percent, and technology at 36 percent.

The top way to recruit Gen Y employees is providing a variety of Career opportunities, according to 46 percent of the survey participants in the national poll. Additional recruiting tips from Millennials include offering: • Flexible work schedules (43 percent) • Benefits, such as health, life, and disability insurance (40 percent); and • Career advancement and leadership opportunities (33 percent).

“Year over year, our research shows that the right benefits play a pivotal role in attracting and retaining employees,” said Mike Concannon, Executive Vice President of The Hartford’s Group Benefits business. “We are committed to working with our brokers to help our employer clients hire and develop the next generation of decision-makers, while ensuring these young leaders understand the role that benefits can play in protecting their leadership potential.”

As a leading provider of group benefits, The Hartford protects the lives and incomes of more than 12 million working Americans. For more than three years, The Hartford has partnered with Pollak to help Millennials, the largest generation in the U.S. workforce today, make informed benefit choices.

The Hartford’s 2015 Millennial Leadership Survey is a national omnibus sur-

1

vey conducted weekly among a sample of 1,000 U.S. consumers, ages 18-34, who had “some college education or higher.” Interviewing was conducted on behalf of The Hartford using ORC International’s Generational Millennial CARAVAN® Omnibus in August 2015.

Representative

DAWN PETTENGILL

Receives Presidential Citation for Legislative work

B

ig “I� awards Representative Dawn Pettengill of Mt. Auburn, IA the Presidential Citation for her legislative work. She chairs the Joint Rules Committee and the Sub-committee on Insurance Legislation. Independent Insurance Agents of Iowa (IIAI) has had a great working relationship with Representative Pettengill and she is always willing to work through complicated insurance issues.

IIAI thanks Representative Pettengill for her leadership on small business issues and for being a great champion for independent agents. Here she is receiving her award from IIAI CEO Bob Skow.

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When you partner with SECURA, you’re family.

Watch: secura.net/partners

Ryan Hanley

Author, Speaker, Geek

I

recently had the pleasure of attending a local lunch-and-learn presentation on the current state of insurance in relation to technology and how independent insurance agents will compete with direct writers in the future.

The presentation was very well done and I took some excellent ideas away that I hope to implement in my work at Agency Nation. Presentations like these are type of collaborative discussions that our industry needs more of in order to be successful in the future business world. (http://www. iiabny.com) After the presentation I went back to my office but it was hard to concentrate on work. There were two specific conceptual ideas brought up during the presentation that had my brain

tweaked. I needed to get the thoughts down on paper. That is what this is.

But before we dig into the two ideas I want you to understand something about me, (since many of you reading this do not know me personally), so that you can hold a frame of reference throughout the article.

I am very passionate about the ideas I believe in and my personal vision of how independent insurance agents will succeed through technology.

When it comes to insurance, my vision quest is destroying the misconception that insurance is a commodity.

I believe technology will allow us to do that. Communication tools such as websites, social media and email, e-signatures, cloud-based servers, single sign-on‌these are all action initiatives that ACT, the Agents Council for Technology, is working on and all are vitally important to the success of the independent insurance agent.

Capturing the Connected Generation Passion for the value of insurance and the importance of the independent insurance agency is what allows me to consistently pour my heart out about an industry I adore and career I cherish. I affectionately refer to this as Bleeding on the Keys‌ This is why after eight years working for a family-owned independent insurance agency I made the hard decisions to leave and join TrustedChoice.com as their Vice President of Digital Marketing.

For me, the quest to help insurance agents capture the connected generation is the valuable work I can do at this point in my career.

I hope, with the preceding introduction, will help you understand why as a thirty-three year old former independent insurance agent and standard bearer of the insurance industry, I am in such vigorous disagreement with

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Have you ever heard these arguments or some variation of them?

I bet you have. When hear and read something that is expressing this viewpoint such as those above I cringe.

The problem is not that Millennials do not relate to Independent Agents…The real issue is that Independent Agents do not relate to Millennials.

the following two beliefs I’ve heard circulating throughout our industry: 1. The Millennial Generation does not value the service independent insurance agents provide and prefers to deal with direct writers.

2. The ability to provide online quotes is essential to competing with online direct writers.

Too many of us are sitting in our agencies ignoring the Internet, marketing as if it’s 1979, and selling with the same tired pitch we’ve always used.

Coverage this…Price that…Review once a year whatever…It’s all bullshit.

Coverage, price and service are simply the barrier to entry for attracting consumers. Connected Generation consumers know that technology allows us to provide great coverage, competition price and high-quality service with minimal effort.

Could it be that these are the prevailing ideas of Insurance Industry’s thought leaders?

I hope that I am wrong…But in case I’m not, let’s attack these two statements.

1. The Millennial Generation does not value the service independent insurance agents provide and prefers to deal with direct writers I’ve heard this statement packaged a couple different ways: “Millennials grew up with computers and want to buy through computers…”

“Millennials associate anything with an “Agent” as more work and more expensive…”

“Millennials have been marketed to their entire life and don’t respond to brand value…”

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Boomers want.

Actually I’d say that Millennials want a different type of relationship all together.

The reason your independent agency is struggling to attract Millennials is because you are either unaware, unable or unwilling to provide the type of relationship that Millennials seek. That my friend, is a YOU problem, (an US problem really), not a Millennials problem.

Some of you are saying, “We’re old school here.”

We’ve been successful doing business the same way for 30 years. “We work on referrals…”

Do you think technology is going away?

Do you think that technology is going to become any less integrated with our daily lives?

Please tell me you don’t believe the whole “The World is Swinging Back to 1950’s Cold Calling and Direct Mail Marketing” thing.

Let me answer both those questions for you: 1. No, technology is not going away and, 2. No, technology is going to become even more a part of everything we do.

What attracts the Connected Generation is experience they receive working with your agency.

The Customer Experience What Millennials want is the same thing that your Baby Boomer clients want, a relationship.

But Ryan, how can you say that when these people make insurance buying decisions based on conversations they’ve had on Facebook? I didn’t say that Millennials want the same type of relationship that Baby

To pretend like that is not the truth is like saying the sun won’t rise tomorrow.

Just because YOU don’t like technology doesn’t mean you’re prospects and clients don’t like technology.

Millennials want a relationship and they are going to seek out that relationship with whoever is willing to provide the relationship.

But here is the trick, as long as that relationship is provided on their terms.

So far direct writers are the only companies within the insurance industry willing to attempt to provide Millennials with the relationship they want. But there is hope, they stink at it.

This is the value in TrustedChoice®.

TrustedChoice.com is capturing the attention of Connected Generation

consumers, introducing them to the independent insurance agency system and then connecting these consumers to an actual independent agent.

2. The ability to provide Online Quotes is essential to competing with online direct writers Lately I’ve been reading a lot about online quote integration for independent agency websites with idea being today’s consumer wants to be able “shop” online for insurance themselves.

Go back and read the last two sentences of the third paragraph of this article. If that is too taxing a task, (I don’t blame you), here it is again: “When it comes to Insurance my vision quest is destroying the misconception that insurance is a commodity.

I believe technology will allow us to do that.”

Do you think that as independent agents we have any chance of competing with big-budget direct marketers if our value statement is “Come to our site where you can shop for your own quote?”

UPDATE: When I first wrote this section, the way in which independent insurance agents address online quoting was completely different. The platforms were awkward, clunky and provided limited and relatively inaccurate results. These platforms were not extending the value of the independent agency system.

used comparative rating to scream “PRICE” as loud as we could into the Internet. Then we’d hope someone comes running to buy insurance from us…

Crazy? A marketing strategy of yelling into air will have approximately the same results as playing the direct writers game of self-service online quote shopping.

The 2015 Model for “Get a Quote” This is part of the genius behind TrustedChoice.com (you may think I’m playing favorites by talking about TrustedChoice.com, seeing that I now work there. But there’s a reason I took the job. I believe in the model).

When a consumer visits TrustedChoice.com they have the option of “Find an Agent” or “Get a Quote.” If the consumer chooses “Find an Agent” they are taken directly to the directory of local agents who write the product they are looking for. Easy.

When an insurance consumer chooses “Get a Quote,” they are asked a series of questions. Based on the consumers answers to these questions and other factors such as product desired, the state they are in, etc, insurance carriers who’ve chosen to provide rating return a preliminary quote.

This is when the independent agent value proposition takes over. Instead of allowing consumers to bind online, TrustedChoice.com directs consumers to an independent agent to close the deal, verifying that the consumer has chosen the correct coverage and carrier to meet their need.

Today with the introduction of the TrustedChoice.com platform and easier, more seemless integration from comparative rating tools such as EZLinks and ITC we can now provide the consumers who desire online rating a more valuable experience.

I hated the way we used comparative rating was first available to independent insurance agents. We

When this article was first published I was pretty aggressive against online rating. I’m sure some of you reading

this have some form of do-it-yourself-online quote system that you pay some amount of money for and you’re completely offended by everything I wrote at that time. So let’s skin this cat a different way.

As independent insurance agents how do we differentiate ourselves from direct writers? What is our value statement? What makes doing business with a human being a more advantageous insurance experience for the consumer than doing business with a computer?

At its simplest form…WE CARE! We care that our clients have proper coverage.

We care that our client’s service needs are met in a manner they appreciate.

We care that our clients receive the competitive price in the market.

We care that our client’s insurance carrier will respectfully and dutifully respond to a claim.

How do you establish that value when insurance consumers are quoting their own insurance through an online rater?

If your answer is “After they purchase a policy,” you are so sadly mistaken. At that point we’ve established ourselves as order takers…

Our opportunity to make a great first impression has come and gone.

Not me Compadre, I want to establish relationships of trust and respect with my insurance consumers.

Trusted Choice® is a big part of that.

Creating and maintaining a conversational and educational online presence is part of that. Understanding customer experience and not service is what separates the independent agency system is a part of that. Building relationships with carriers, wholesalers, MGA’s, vendors and peer insurance professionals is a part of that.

“Get a Quote” is only part of the solution.

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The Future of Insurance and Social Media

We are a relationship builders. That’s what we do, we build relationships with people, it just so happens that the service we proTrue, I didn’t always believe in online vide is insurance raters and I’ve always loved the (or risk transInternet. I believe so strongly in the fer for you old power of marketing, communication, school cats). relationship and trust building potenI know it to tial held within the online world of be true that so social media and digital marketing for many of you feel independent insurance agents that the same way. stopped selling insurance to help our That is why you industry. are so successThat’s why I do the work I do today. ful at selling I believe in the independent insurinsurance. That ance agent more than ever. is what social Insurance consumers need indepenmedia is all dent insurance agents more than ever. about, building relationships.

But the marketplace is changing Yes, these relationships are built and if we’re really as good of busithrough a computer, but they’re nessmen and women as we’d like certainly not meant to stay there. I others to believe we must be willing tried, if geographically feasible, to sit to change with that marketplace. face-to-face with every client I had and The thing is, we can’t think of ourI sold a decent amount of insurance to selves as insurance agents, I never did. people my first contact with is over the computer.

What I’m trying to say is great relationship builders, (YOU!), absolutely kill it on social media.

This is what Millennials (Connected Generation) want, a relationship, they just want to build it on the computer first.

Millennials still want to know that We look for the best independent agents and build there is a living, relationships that last the duration. We are committed breathing human to the independent agency system as the only means to being who gives deliver our products. Because of that, we work hand-inhand to help our agencies grow profitably. a crap about their insurance program on the other side of that computer lookFor information about becoming a Partners Mutual Insurance ing out for their Agent please contact Chuck Becker at 800.388.4764 ext. 3484. needs.

This is why we as independent insurance agents, should not rest on the success of

Our agents set us apart.

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online self-service quoting platforms.

We’re not building the relationship upfront that sets us apart from the machines. At TrustedChoice. com we pride ourselves on educating consumers first, (we’ve done this with over 1,200 articles on the site and more coming everyday).

You should tap into that resource, while at the same time building your own.

If done correctly, with diligence and dedication, an online social media presence can build the trust and respect necessary to establish a quality agent / client bond.

I promise.

The Rub I’m hoping that this article stirred up some emotions. It’s been three years since I published the original version of this post and funny thing is, not too much has changed.

We’re still fighting direct writers and independent agents are still questions the validity of digital marketing and social media as tool for attracting new business to their agency.

It’s time for this to change. I don’t want to update this article three years from today facing the same questions from agents.

The time for action is now.

Let’s hear your thoughts!

This is an extremely important topic facing our industry. The debate is crucial.

Thank you and good luck.

I am Ryan Hanley (http://ryanhanley. com/ryan-hanley/) P.S. If you’re looking to take this conversation deeper read 7 Ways to Fail at Content Marketing. (http://www. ryanhanley.com/7-ways-to-fail-atcontent-marketing/).

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INTERNAL PERPETUATION

3

SELLING TO THE NEXT GENERATION

considerations to reach your goal

By Brian H. Burke, ASA and Everett W. Shaw, ASA

I

n our many years of insurance-agency consulting work at BHBCo, we don’t know of another subject that has been considered so important for so long by so many – and yet has had so many instances of failure – as internal perpetuation.

To be clear, we should say that failure does not usually involve a full flameout, where a purchaseand-sale transaction takes place and the buyers then fail financially and default…although there are some of those. More often, failure takes the form of agency principals wanting to keep the agency private, independent, and successful, stating their intentions loudly to important constituents – staff, carriers, and key customers – and then failing to make it happen.

Normally, this ends in a sale to another firm and eventually a loss of identity. And sometimes dashed dreams and family traditions.

In a vibrant, free-enterprise economy, it is natural for some businesses to fail and others to be swallowed up by competitors. Many such stories are actually constructive in the long run. But in our judgment,

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those stories are too frequent – unnecessarily frequent – in the agency world. We say this because the independent insurance-agency business model is a really good one. When run right, agencies provide good protection and service for their customers, make good money for their owners, provide good jobs for their staff, provide profitable business for their carriers, and add energy to their communities. That’s why they are so valuable and why we have a never-ending sellers’ market for them. This is not the case of the neighborhood drugstore that could no longer compete with the national chains and had to sell for not much more than its inventory. Independent insurance agencies are dynamic businesses, which, it turns out, have been helped by technology, not made obsolete by it, as some short-sighted pundits predicted a couple decades ago.

Then why the difficulties with successful perpetuation? Why so many plans unfulfilled?

To advise agency principals on this subject, agency consultants need to be knowledgeable and experienced in three areas: people, finance and taxes. We’ll respond to the Why question in the context of these three.

People The first requirement here is desire. Owners have to truly want to perpetuate internally. Prospective owners, usually producers and key managers, have to truly want to be buyers and become responsible leaders. This is more than just intellectual wanting. This means learning what needs to be done and committing to doing it.

The single biggest reason that many perpetuation plans are unsuccessful is senior people (the sellers) hanging on too long. This is partly psychological – the Hamlet-like ambivalence, should I or shouldn’t I? – but from a consulting standpoint, it is also a matter of simple math. If perpetuators (the buyers) are going to take on the debt needed to make a purchase happen, they need to get going on that early enough for there to be sufficient time to pay it off and experience a period of being debt free.

We acknowledge that in the recent and current environment (2011-2015) the values of certain agencies have run up, and the big payday explains some of the outside sales that in previous years may have gone the internal-perpetuation route. That phenomenon is real but still the exception when we view the universe of agencies and do so with a broader timeframe.

On the buyer side of the People dimension, there are a lot of supposed perpetuators who would like to end up as principals as long as someone makes it all happen sort of free.

I’ll be willing to buy it, but first promise me the extra compensation to make sure that I have enough money after tax to meet the debt payments and with a margin of safety, so

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that this fussy business does not interfere with my time with the kids, my time at the Club, and my self-actualization time.

That is intellectual wanting, not commitment. We at BHBCo live in the real world and practice what we preach in our own firm, and we know that younger people usually don’t have a lot of spare money. They are paying mortgages, feeding babies, saving for college and the like. The point here, however, is that whatever can be done should be done, because without that evidence of commitment and sacrifice, the agency’s perpetuation plans will end up all words and no action.

Before moving on, let’s identify another culprit in the People category: carrier executives. This subject is really important and a full discussion goes way beyond the scope of this piece. But our story is not complete without its mention. For as long as we have been advising agencies, their carriers (particularly the standard-market P/C carriers) have been saying how important agency perpetuation is to them.

There are some exceptions in which agency execs are very helpful, but too often the carriers’ actions, at the least, seem tone-deaf to the perpetuation needs of their agents, and in some cases seem outright hostile to the idea of continuity for other than the biggest agencies. We believe that many carriers will come to regret, or already regret, this strategy of systematically reducing the number of local firms, with their true local knowledge.

Finance The financial dimension of perpetuation planning involves valuation, cash flows, deal structuring and payment terms.

The subject of tax affects finance too, but it is treated separately below.

This article does not address agency valuation except to say this: Most sellers in a perpetuation plan want the transactions struck at fair market value. Even in close family situations that involve significant discounting or other such accommodations, most sellers want the analysis leading to the plan to be based on market value. That’s understandable, but there is one problem: Market values are based on the economics of actual purchase-and-sale transactions in which the buyers are other agencies that are usually able to bring about certain revenue synergies and expense synergies that are not available to inside buyers. And this is sometimes true on taxes as well, meaning that outside buyers of agency assets can often get tax deductions that inside buyers of stock (in the case of corporations) cannot. That is to say, without proper planning, perpetuation transactions at fair market value often cause financial strain right out of the blocks.

Besides just lowering the price, the way to deal with such issues is with prior planning. The most effective vehicle is to create ways for the younger buyers to earn equity, or the

“

Without proper planning perpetuation transactions at fair market value often cause financial strain right out of the blocks

”

appetite for insurance-agency transactions. You don’t want an eager, local, loan representative trying to help the young buyers, only to get the loan rejected at the last minute by a bank loan committee or board that does not understand the value of an agency’s intangible assets.

Taxes The tax part of perpetuation is a matter of becoming informed of what is realistically available to buyers in the way of shelters (meaning deal-caused tax deductions) and the tax treatment likely to be applied to the proceeds received by the seller(s), meaning the mix of capital gains and ordinary income, as affected by such things as the new Obamacare taxes and alternative minimum tax rules. From a planning perspective, the idea is to become informed about these subjects years before the final change-of-control transaction, because there are things the parties can do to manage the tax expense, which is just as important as managing any other expense that affects profits and cash flows.

Last-minute deals are almost always more costly tax-wise than they need to be. And the rules differ in some important ways between family and non-family transactions.

In our consulting on this subject, we frequently advise parties to do the best they can to manage the tax expense but not to get themselves tied into knots trying to eke out every last nickel. That time, effort and expense is often better devoted to the business of the agency. But those who are strongly driven by tax considerations might look into ESOPs in general; ESOPs for S corporations; and in family situations, a mixture of gifting, selling and deferred compensation.

equivalent, for several years leading up to the final transaction, when control is transferred. If by the time of the final transaction the buyer (or group of buyers) already owns, say, 30 percent of the value, then the cash flows of the agency need only to pay for 70 percent of the value, which becomes a much more manageable proposition. This has the potential to work to everyone’s satisfaction if there is enough time and creativity for the 30 percent equity position (in this example) to be earned through performance.

The remainder of the financial piece involves structuring the payment terms on promissory notes such that they fit the particular agency’s cash flows; structuring retention or earnout arrangements that fit the particular agency’s book of business; and finding the balance between purchase payments and post-sale compensation/benefits/perks for the seller(s). It’s sometimes said that perpetuation sellers don’t always get the best price but they often get the best deal, meaning custom-fit to their needs and preferences.

Perpetuation debt is often a combination of notes to the seller and notes to a commercial lender. On the latter, we strongly recommend using one with experience in and an

Conclusion There are great rewards, financial and otherwise, to be derived from keeping an insurance agency independent and private for several generations. But as with most things, there is no free lunch. Doing it successfully requires sincere commitment, frequent communication and lots of planning.

Brian H. Burke, ASA, and Everett W. Shaw, ASA, both of the insurance agency consulting firm B.H. Burke & Co. Inc., authored this article. A certified business appraiser, Burke is the founder and chairman of BHBCo., as well as a director of InsurBanc.

He is a frequent speaker and writer on business finance, ownership and management.

Shaw, also a certified business appraiser, is owner and president of BHBCo. Over the last decade he has conducted hundreds of valuations, has represented buyers and sellers in numerous transactions, and has been qualified as an expert witness.

Learn more about their firm by visiting BHBCO.com.

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Update Your Google My Business Account

A

key to mastering your Internet presence is to create and maintain a Google Business Page for each agency location. This is an essential search engine optimization step every agency should already have in place. It is a simple process.

If you have not taken this step, just go to Google My Business and follow the step by step instructions. Once you have completed the verification process, your agency has a higher possibility (there are no guarantees) of showing up in a Google Search results page.

For those agencies that have already completed this process, Google is now requiring that U.S. accounts periodically log into their Google My Business account and update any information necessary to prove that the account continues to be active. While Google has not provided specific guidelines, it appears you should log into your account at least once every six months.

If Google determines the account might be inactive, they will email the address on the account (make sure that address actually comes to a person in your agency) and provide a two-week notice of the pending unverification.

If the account status is changed, the agency listing will no longer be included in any search results.

By Steve Anderson, CIC It’s a good idea to keep an eye on the inbox associated with your Google My Business (Locations) account. It’s also a good idea to regularly log into Google My Business (Locations) to confirm that your agency information is current and accurate.

Simply follow these three easy steps:

Here is the notice from Google: In some cases, we may contact Google My Business users via email to confirm that they are still actively managing a business page. If a user is unresponsive to our attempts to contact him or her and has not logged into Google My Business for a significant length of time, then we may unverify pages in the account.

We’re doing this in order to continue to provide users with the best experience when they’re looking for local businesses like yours. If you find that a page in your account has been incorrectly unverified, please contact support to get assistance restoring verification.

Sign into your Google My Business account.

Review and update your information for each page.

Click the “Done editing” button.

Make sure to set a reminder or suspense item for every six months and repeat the process.

It is up to your agency to make sure your information is accurate. It is also a good time for you to update any keywords and descriptions contained in your listing.

Google is constantly trying to make sure the information they provide in a search result is as accurate as possible to enhance the user experience.

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Are You Helping Prepare the

NEXT GENERATION of Independent Agents?

L

et’s face it none of us are getting any younger! The average age of independent agency owners in Iowa is in the low 60’s. When I look at our membership I see a lot of gray hair.

It is critical to the American agency system that we prepare the next generation for ownership of independent agencies. We cannot and should not allow this business we’ve spent our lives building to wither away and die. So for starters, your Association will be focusing on how we can help members hire new people, mentor and make them strong over the next couple of years.

I believe more than any time in the independent agent system history we need the influence and vision of younger people. It’s time for more of the younger generation to help lead.

One of the strategic goals of our organization is to nourish this transition.

We are encouraging you to share what you have learned as we transition our industry to a youthful, diverse and dynamic future. The task will not be an easy one, but one we must tackle.

As we move into 2016, let’s embrace the young people who will lead us into the future; let’s give them a chance to grow and learn in this business.

The next Generation which is key to our collective future is referred to as “Millennials” or “Generation Y”. They were born between 1977 and 2000 and

by Bob Skow, CPCU, CAE

make-up 25% of the US population.

This generation of young professionals is swarming the labor force with unique ideas and work habits that define their generation. These “millennial” workers are notorious for their tech-savvy ways, their desire to be challenged by their job and for their love of a casual, social office environment. That being said, some of these millennial office traits can turn off employers, or the older gray haired guys like me and some of you. Experts tell us these millennial work habits can easily be broken, or adapted, to make for a more agreeable, employable young professional. It is often said… they text too much, they’re demanding, they’re casual, they show up late, but generational experts say

they also want feedback. However, through appropriate feedback they became excellent employees and leaders. Providing constructive feedback along with training are the keys experts explain when discussing Millennials.

In 2016 the Independent Agents of Iowa will focus on bringing more young agents to the forefront of our business. We encourage you, as an owner, to help educate and groom them for a career as an agent. Also, we hope you will send them to our annual Young Agents Conference, which is held in the month of May. The past track record of attendees of this conference is impressive as most go on to become very successful agents. Check it out on page 25 of this issue for information on this year’s Young Agents Conference. Dynamic speakers, topics and interaction with company marketing staff are always part of this great event. Data supports that when new people in the business get engaged with peers of a similar age and experience, good things happen and they are more likely to be successful. The small investment in sending them to Association events pays huge dividends over the years – our Rural Agents and Small Town Agency Conference and our Annual Convention should also be on the must do list for those in their early years in the business.

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As you thumb through this issue of Independent Insurance Agents of Iowa’s Viewpoint Magazine you will notice that most of our articles are devoted to employing and selling to Millennials. Take a few minutes to read carefully The Hartford survey data in this issue. Note that we have our work cut out for us; just 4% of Millennials want a career in insurance, compared to 40% who want to work in arts and entertainment! We are going to have to work hard to convince this next generation that we have something to offer them. Other interesting facts from the study include: • 80% of millennials consider themselves as leaders.

• 69% want to be leaders within the next five years.

• Millennials want jobs with a variety

Millennials want to work where they will be able to learn and interact with peers. With this in mind, IIAI will focus in 2016 on giving opportunities to Millennials to become engaged with the Association too. For us to be successful, we ask agency owners to provide opportunities for training and learning. A good start is sending your Millennials to the 2016 Young Agents Conference May 4th and 5th in West Des Moines.

If you have someone under age 40 working in the agency, this is a great event that will help pave the way to a successful future in our business.

MILLENNIALS of career opportunities, competitive salaries, flexible work schedules, competitive benefits and leadership opportunities.

• 60% said they want their employers to train them for leadership skills.

• 54% said they want training for technical skills.

What we do know is training opportunities are very important to Millennials according to experts.

Call your Big “I” Errors and Omissions Team!

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hen it comes to your agency professional liability insurance who can you trust more than the Big “I”?

First we have membership discounts with the three main markets for agents errors and omissions insurance, secondly we have a team of errors and omissions professionals to assist you and help answer your questions, and third we are the only market with actively puts your association clout to work passing liability laws which help make Iowa a great place to operate your agency! So if your coverage is not with us…call and get a quote! Marilyn Paul, CPCU, AIT, AAM, CPIW Brenda Kluger, CRM, CIC, CISR, CIIP and Megan Kincy, AIS, AINS along with CEO Bob Skow, CPCU, CAE are here to help you! 800-272-9312

Looking for E&O answers, agency resources or tips?

Check out the E&O Happens website – www.independentagent.com/eohappens Sign in with your Big “I” username and password to access the information

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| WINTER 2016

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