Michael Jans: Hello everybody. This is Michael Jans with Agency Revolution. We make it easy to automate your systems, engage your customers and grow your agency or brokerage.
I want to welcome you to this episode of the connected insurance podcast, where we examine the trends, innovations, challenges and solutions to the biggest problems facing retail, agents, and brokers.
I am thrilled to introduce to you my friend Spencer Houldin as today’s guest. I first got to know Spencer when I had the privilege of keynoting a conference for ACT with Ron Berg.
Since then I’ve had the opportunity to get to know Spencer as one of the more forward-thinking leaders in our industry. He’s the president of Ericson Insurance. He has over 25 years of experience as a personal insurance advisor.
He’s licensed in the majority of states. He’s testified on Capital Hill in front of both houses of Congress. He has appeared on TV for Fox, CNBC, CNN and so forth.
Within the industry, he has provided consistent leadership.
He was the president of the Independent Insurance Agents of Connecticut, the youngest president in the association’s 106-year history. He’s currently the chair of the National Association, the Independent Insurance Agents and Brokers of America.
For those of you who are brokers, I want to encourage you to listen very carefully because you’re listening to a fellow broker who, I think, has a very clear sense of the direction of the industry, the trends that are affecting the industry and what we need to do to thrive.
Without further ado, I’ll introduce you to my friend Spencer Houldin, thank you. Spencer, it’s a privilege to have you here. Thanks so much for joining us.
Spencer Houldin: Michael thanks for the honor and the opportunity to share views and appreciate all you do for the industry.
Michael: I think everybody knows when I say The Big I. I’m talking about the Independent Insurance Agents and Brokers of America. You’ve been, as they say, working your way up the chairs for a few years.
You’re relatively new in that seat. You’ve been in a position of leadership in the industry for a long, long time so I thank you for that.
To a large extend– Actually if you don’t mind, I’m going to ask you to, if you can give us a 10 or 15 seconds summary of Spencer as agent as well as Spencer as in your official capacity as chair because you’re also an active agent.
Tell us a little bit about what you do there to give some perspective to people.
Spencer: I am actually fairly young to hold that position of The Big I chair, in fact, the youngest we think in the history of Association. I’m in my late 40s, second generation agency owner out of Connecticut.
Believe it or not, our agency is 90% of our revenue comes from personal lines, which is unusual. I have a specific focus on personal insurance to high net worth individuals.
My brother and I own the agency and then as it relates to The Big I, I went through the Connecticut chairs then onto the National Board a decade ago. I’ve been going through the executive committee chairs for the past six years.
I’ll tell you it’s an honor, but it’s also fascinating as I travel around the country from state convention to state convention to hear the opinions of different agents and what their concerns are.
Present and future and how what’s on their mind changes from different areas of the country. It’s been fascinating.
Michael: You have a unique perspective, I think, that you gained as being chairperson of one of the national associations. It’s mostly from that position that I’m going to dive into your brain because I’m more than curious what you’re hearing in the field.
Let me start with the first question. There is an opinion that the independent agency system is shrinking and that there are fewer independent agents today than there were five years ago. True or not true?
Spencer: True that that’s the opinion, false that that’s the reality. Every two years, The Big I hires a outside firm called Zeldis Research in cooperation with insurance carriers, to conduct surveys of independent agents, to try to get some trends in the industry.
We just released, a couple weeks ago actually, we’ve released the results of the 2016 study. We have independent agencies pegged right now at about 38,000 and believe it or not, if I go back to 2006, 10 years ago we were at 37,500.
We have stayed relatively flat. Now, most people think with the mergers and acquisitions that how could you have the same number of agencies because we all look around us and we see the consolidation?
But the reality is we have a lot of startups, especially with direct riders who decide representing one company, this is not going to work out in the future and they make the move to the independent agency system.
We have a lot of millennials that are opening up in their basement and using technology to do great things. It’s actually the independent agency system is holding its own and I think when we talk about this through technology, I think its thriving.
Michael: It’s interesting. To give you a sense of how long Michael has been in the industry. When I got involved, Spencer, I think, the general estimate was that there were roughly 80,000 independent insurance agencies. We know that there can be disruptive forces and we know that the trends can cause contraction.
There have been a lot of mergers and acquisitions in the last few years, but I can agree with what you say. Anecdotally, we get phone calls from a lot of small startups and a lot of millennials who are running agencies today. Sometimes I wonder if they’re going to give some of the established agencies a run for their money.
Spencer: Well, I think so, especially when you look at the demographics of our old traditional agencies. They don’t have the skill sets to adopt the technology of today and to your point I will add, if you go back 10 years before 2006 to 1996, there were 44,000.
We went through a period from ’96 to ’06 where we steadily declined by 1,000 to 2,000 agencies a year, but then it held its own. But I agree with you, one other thing we saw in this study is that smaller agencies which have revenue of 150,000 or less actually grew.
Larger agencies over five million of revenue grew and then everybody in the middle shrunk. We’re seeing a lot of startups and they’re very successful.
Michael: Right. I think there some of them come prepackaged with skills that everybody should have. In other words comfort with technology, comfort with communication and marketing technologies.
What we’ve noticed is that we get calls from them and we don’t require a long educational phase. Whereas often when we’re speaking with a more established, more mature agency, it’s a longer sales cycle that requires more education because they are less familiar with what technology can do.
Maybe that’s a sign of hope but I want everybody to embrace the ability to scale through technology, not just the young upstarts.
That gets me to the next issue which is there is a changing demographic in our space and one of those changes, it’s almost a little bit frightening. The independent agent on the whole is aging, set aside the young upstarts, but there are a lot of older agency principals.
In some cases it appears that there really is a failure to bring in the younger generation, bring in the millennials who it would seem are so necessary to make connections with the large millennial population.
Maybe at least, if not necessarily important, to use the technologies that help them reach that millennial generation. Did the study shed any light on that?
Spencer: The study did show that the average age of a principal, health study actually shrunk a little bit for the first time in a long time. In the mid 60s, we had been seeing this demographic of age increase.
But we have seen an adoption, if we want to talk about social media and marketing, we’ve seen an adoption of social media increase pretty heavily. In fact in 2014, when we ran the research, 48% of independent agents were using some form of social media and that jumped to 56% which is a meaningful jump in 24 months.
Now with that said, and I certainly don’t mean to make a joke of this, but I just find it extremely comical, 31% of us are still advertising in the Yellow Pages.
I don’t know about you Michael, but I don’t even own the yellow pages and my kids don’t even know what the yellow pages are but one third of us are still using that as a form of marketing, the good news is that’s down from 42%.
I went immediately and looked up, I found the yellow pages and I looked up who in my area were advertising in the size of the ads and people are still spending significant marketing dollars on the yellow pages, so we have a long way to go.
Michael: That’s fascinating. Spencer, years ago my most downloaded report of all time was 21 Ways To Write a Killer Yellow Pages ad I think it’s been a few years since [laugh] hey, it’s really good solid content you could apply it to anything.
But I don’t think anybody’s asked for that ad for a long time, the yellow pages and our town. Of course I’m from a relatively small town here Bend, Oregon. Maybe you used to be able to use it for a doorstop but I think the door would just go right over it now.
Spencer: Right exactly then, it’s true.
Michael: There was a day when I was traveling around the country. When I checked into a hotel, the first thing I do is I pull out the yellow pages and I’d see who are my guys.
Because I could tell who is using my style of advertising in the yellow pages and I could look at it and say, “Oh cool, I got a couple of clients here,” because they’re using my ad, probably not so much anymore.
Spencer: And that’s the challenge Michael, is we are still, the independent agency force is still predominantly male, pale, stale and older.
Nobody’s going to argue that, it’s a fact and trying to adopt people to learn new technology from the marketing perspective is very difficult. Especially when you get established and you’re so busy running your business and you have an established book of business.
You don’t have time to try to figure out how Facebook works or how Google Plus works or LinkedIn. You’re just relying on your old techniques of the yellow pages. It’s a little bit of a crisis point in my mind.
Michael: That’s a crisis point. So again from your perspective, you travel around the country, you get intelligence briefings in your roll there at The Big I.
How do you think the system is doing, is the independent agency today surviving are they thriving, and what are they doing, the ones that are winning, what are they doing to win?
Spencer: It’s a great question and I truly mean this. I had never been as excited as I am now about the future of the system.
Because technology is going to become the great equalizer with the direct riders in the 800 numbers. According to the results, 70% of the agents that were interviewed saw an increase in their revenue from 14 to 16 and another 15% were flat.
I think the ones that are shrinking are just because maybe they’re letting their agency, whether they’re collecting the commission but they’re really on the downside and not trying to grow it.
The agency system is growing and we’re grabbing market share for sure, but I think the consumer of today and tomorrow obviously looking for that 24-7 service that we’ve always had trouble delivering. But there’s so many tools out there now.
Not only with third parties but companies service centers where it won’t be long before the mobile apps and the companies service centers, it’ll just be commonplace that 24-7 service from independent agent is very, very doable.
I think that is what’s going to make us thrive in the future because that’s where we’ve been a disadvantage with some of the other distribution channels.
Michael: Earlier this year I spoke with one of the researchers at Deloitte, Sam Friedman, who has been very active in our industry for many, many, many years.
His report indicated that he was particularly addressing the small business owner. His report indicated that according to their research, 60% of our channels customers don’t feel that they get anything from the agent after the agent gets paid.
It strikes me that that’s a really vulnerable position for our channel to be in.
Spencer: I agree with you and I think it’s probably a very accurate number. I think we have to do a better job of being advisors. We have to transform our agencies from being transactional people but actually making the changes.
Somehow find to allow the companies to do that work, we need to become advisors with touch points.
We have a young man here at my firm, who has designed and we’ve been working on it for a couple months and we’re going to roll it out when it’s ready. Maybe another 30 days, but it’s a automated we know questionnaire that asks certain life events like marriage, kids going to school.
He’s been beta testing it with some of his clients. We’ve sent out maybe 30 of them. We had one client that filled out this beta survey for us that we responded to.
He said, “I’m so glad you sent that because I was about to leave you for GEICO because I just didn’t see the value in you, but when you sent this, I now know that you ask the question that you care.”
So that’s where we have to get to, we have to get to the point that they see our value as advisors.
Michael: And technology can help us do that.
Michael: When you go around the country talking to agents and brokers, it’s been my sense and I’m curious if you’re feeling the same thing. It seems to be a sense of anxiety, that they know that there’s a great deal of change.
They’re reading about emerging digital competitors in trade magazines and probably online. Over the years GEICO and Progressive Direct, they’ve done a pretty good job growing their share of market share and overall just in general.
Of course we know the consumer behavior has change dramatically hence making their yellow pages ad pretty much in most cases a waste of resource. What is it that you think– what are they saying to you? What are agents fearing and what are they anxious about the future, about?
Spencer: Well, it’s funny, from a competition standpoint, and I don’t really understand this but the biggest thing I’m hearing is they’re worried about direct purchase through insurance companies.
Even independent agency companies that are going to go direct or have gone direct and compete directly against the independent agent. Maybe I’m wrong in this but I don’t see that as much as the threat as the emerging technologies of all the capital that is coming in to try to be a disruptor in our industry.
We don’t need to name names but there are dozens of startups right now trying to find a better way to sell insurance to a consumer and that scares me.
The driverless car and that technology scares me because I don’t know how insurance is either going to be needed or there’s talk of maybe the manufacturer will sell insurance as part of the sale of the car. To me that’s the scary part of the unknown.
It’s not that we’re going to have competition from our insurance companies because I think we’ve proven that if we showed the value proposition, if you work hard and show the consumer why you exist and what you bring to the table, then they’re not going to want to buy direct from the insurance company, even if it costs a little bit more to do business with the pen agent, people will see the value if you show it to him.
So 36% of the agents in the Zeldis study actually said that their biggest fear is direct purchase, where only 13% said the driverless car was and 16% said usage-based insurance was.
I don’t agree with that, I think what scares me is the unknown of the future, good or bad, I just don’t know.
Michael: What do you think the future does hold for the independent agency system?
Spencer: Well, nobody found a better mousetrap be a lot of people have tried it. I would be very scared if I was a captive agent with only one carrier and I was married to that one carrier, I don’t think that that model can change.
I do think there’s always going to be that consumer that enjoys the 800-number experience, but all the surveys you see inside and outside the industry say that most consumers like to research insurance on the web or products on the web, but they like to buy local.
It’s how do you get those consumers from the internet into the local independent agency system. I by no means mean to have a commercial here, but I truly mean this when we look at the last six months of trustedchoice.com and the number of referrals that are going to independent agents and what we’re learning from it.
There’s something there. We have a way of doing this and we’re starting to see it but I think there’s so much on the horizon for independent agents that it’s going to be great.
Michael, you and I have both discussed this in other forums. We need to figure out the millennials. Not only as employees but we need to figure out that consumer and we’re going to understand that they are different.
If you decide to run your firm like you have for the last 40 years, you’re not going to make it, you’re going to be one of the 15% that isn’t growing. But boy, if you’re smart about this and you adopt the technology, you understand the next buying generation, I think things are going to be great.
Michael: Spencer, looking at the environment that we’re in, where there’s a great deal of change and some of that change is potentially threatening, and of course there are other changes that are really potentially quite inspiring.
What advice would you give to an independent agent who wants to grow and wants to have a secure future and make a difference in this industry?
Spencer: Well, I think that the number one piece of advice I would give is, listen to the next generation of employees and get out of their way. I actually wrote a chairman’s com for The Big I magazine on this subject a couple of months ago.
I referenced my father who when I came in the business in 1991, we didn’t have computers. We had a little computer parading but I introduced word processing.
Then I talked to him about the need to get an agency management system and it was going to be a $20 000 investment, which was huge. A lot of fathers would fight it, “We don’t need that, I’ve got my way.”
My father said, “I’m going to trust you that this is what we need to do and run with it.” Well, what happened was we did adopt technology and my father had zero interest in learning how to use it, and it basically led to his retirement because he didn’t want to learn how to use the computer.
All the credit belongs to him because he got out of the way, he realized that he has to let the next generation lead the way. That’s my advice is, take the younger people in your firm and talk to them about how they perceive the agency system and how they perceive the future.
They may not always get it right, but don’t think that your way of doing things the last 40 years is the right way, because it probably isn’t-
Michael: That’s the way we’ve always done it.
Spencer: -and let them run.
Michael: It’s so funny because I’ve told that story a number of times. Years ago I used to run the trade association on the West Coast and we would sponsor–or they were agency management, the bundle of the management system.
We’d get a few of them up on stage and the audience would be full of agents and people would be scratching their head in the back and looking at each other saying, “Do you have one of these things? Do you need one of these things?” That conversation went on for a while.
We see the same conversation happening right now, where agents are saying, “Do you need marketing automation or a communication platform? Are you doing that?” It feels very much like it felt 20 years ago or so with that conversation.
Spencer, first of all I want to thank you for the volunteer role that you play in the industry. I know that it’s great sacrifice of time. I’ve been in that part of that industry for a long time.
I started my career there, I know that it is a sacrifice of your time, you’re probably spending more time with The Big I than you are with your own agency.
Spencer: That’s a true statement by the way, but it’s an honor. It’s funny we’re talking about the challenges of the independent agent, we’ve faced the similar challenges with The Big I. Bringing our members, what do our members need today?
Because it’s very different to what they needed yesterday. It’s fine, I’m watching the whole industry transform very quickly and thus the association have to transform whether within and we’re doing it but it’s fascinating.
Michael: If others who are listening to this want to be more involved in the industry, what do you suggest that they do?
Spencer: I think the trade organization is a great start, user groups of agency management systems are a great place to get involved but The Big I, and again, I don’t mean to have a commercial for The Big I, but we have 52 programs.
Everything from invest bringing high school classes to ACT, which is focused on agency technology, and working with companies to make it better.
There’s something for everybody and we have a state association in all 50 states, and that’s a great place to get your feet wet on, getting involved with something that’s of interest to you.
Michael: Very good. We encourage the same, get involved and let’s fight for the industry. All right Spencer, this has been a great pleasure, it was a lot of fun, I really, really appreciate you taking the time out to join us, so thank you very much.
Spencer: No, thank you Michael, and thanks for being a thought leader in the industry and always bringing these subjects to the forefront, because we have to learn from each other for sure.