[Transcript] Ely Kaplansky – President & CEO of Kaplansky Insurance Agencies, and Chairman of the MAIA

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Michael Jans: Ely Kaplansky, thank you so much for joining us today. How are you?

Ely Kaplansky: I’m doing great, thank you. Pleasure to be with you.

Michael: All right. Ely, we’ve known each other for quite a while. This is in our first rodeo. Obviously, you’ve been at the top of my list as agents to admire and I’m not saying that just to swell your head. You’ve done some things uniquely and you made some decisions early on, which I think probably have affected your career for– I’m embarrassed to say I don’t know how many years, but some decades.

What I’d like to do in this conversation is walk through what some of those fundamental decisions were and then break it down and identify what some of the key strategies are that got you from close to zero to where you are now. First thing I’ll ask you, Ely is a real quick thumbnail, just very, very brief, how did you get into this industry and when did you do that?

Ely: Okay. To tell you, it wasn’t close to zero, it was zero.

Michael: [laughs] Okay.

Ely: I have to admit I have a little bit of an unusual story. When I was in the middle school and high school, I was really bored with school. I think I always wanted to get out there and work. I worked since I was 11 years old, I think.

I got into insurance industry by mistake [chuckles] as everybody does, unless it’s a family business. I have a friend that work at an insurance agency, part-time after school. He was a few years older than me. He got me a job, working in the agency business part-time and I did that. Then the summertime came around and they offered me a full-time job and he taught me how to write auto insurance and I was actually doing that at that point.

Then in my senior year, I had about two months of high school left and that agency had an opening and they offered me a full-time time job and I took it. I said, “Well, I can always go back and finish two months of high school.” Well, it never got around to that. I ended up working for that agency for probably a couple of years and then I got out of the business. Believe it or not, it’s like 19 years old. Don’t ask me how this happened, but started an advertising agency, fundraising and advertising, did that for about a year and that was my first failure. Failure is my friend. I learned way more from failure than I do from success.

Anyway, I got another opportunity to work for an insurance agency and I did that for about a year and while working for that agency I was probably like 20, 21. I was working for that agency and it turns out they were doing some things that I certainly considered to be unethical so I said, “I can just open up down the street from them, start my own agency and run the business the way it should be run.”

Michael: Fair enough.

Ely: Of course I had no idea what I was doing, but I was licensed. I had been licensed for a few years. I had $2,000 in the bank. I needed a loan for 4,000 which my parents co-signed for, and I took the $6,000, rented a storefront and sat there very lonely for a few years but went out there pounding the pavement and it took me a long time before I could really get any kind of company contracts.

One thing led to another and here I am today. It really took about 10 years for the agency to really have any kind of real markets and to be competitive and things just went from there. That’s really how I got my start.

Michael: Okay, let me ask you a question, Ely. I think the audience is going to be curious about the path from A to B. If that’s A, and today is B, so to speak, can you give us a very brief description of what the agency looks like today? Then we’re going to break down what the path was to get there.

Ely: Well, today we’re doing about 80 million in premium, roughly about 75 employees and we have 14 locations. We represent probably 35 companies as an agent and do business with over 200 on a brokerage basis. We’re a generalist. We are a little bit more personal lines, actually, we’re about 65%, 70% personal lines and very little life and health. We’ve just, we’re working on affiliation and that’s never been a thing but we do a lot of commercial lines, even though it’s only about a third of our business because we do a lot of small commercial and then we do have a separate division that does handle large commercial accounts. Our model is not really below after that business, most of our large accounts we have acquired through acquisition. Sorry about that.

Michael: That’s okay. [laughs] People should know that these podcasts are created in real life so I’m okay with that.

Ely: That’s right. [crosstalk]

Michael: Yoshi my Australian shepherd is snoring right next to me and hopefully, that’s not coming across.

Ely: Where were we?

Michael: The agency is obviously quite successful and this is a presumption may be wrong but probably the largest privately-owned agency in Massachusetts now.

Ely: Yes, it is, and not just privately-owned but individually-owned just I own 100% of the stock. That’s a little bit unusual.

Michael: Okay, very good. Obviously, there’s a relatively big gap between A, starting and B, where we are now. In addition to your work as the owner of the insurance agency, you also are pretty active in the community and you’re active in the industry, you’re now the president of the Big “I” in Massachusetts, right?

Ely: The chairman.

Michael: Chairman?

Ely: I am the Chairman, yes. This year I’ve been on the board now for 10 years and worked my way up through to this position and it’s been very informative, very exciting. I’ve gotten way more out of it than I put into it and I’ve met some great people so it’s something I’ve really enjoyed being involved with.

Michael: All right, here’s my sequence because of that role, and just because of your experience in the industry before we’re done, I would like to get your perspective on how you think the future looks and how agents should probably strategically respond to the different trends and forces. For now, what I’d like to do is walk through, going back to the early days when you did make some strategic decisions.

One of my observations, Ely is that you began to function very early on as an entrepreneur more than as an insurance agent, or as I sometimes like to call it an insurerpreneur. On one hand, I’ve talked about that for 25 years to insurance agents and a number have embraced that concept.

Unfortunately, far fewer have executed on that concept, even frankly, among agents that have worked with fairly closely it seems at times to be very difficult not to get swept up into the whirlwind of being an agent, and of course, being a producer and be responsible for personal production, you took a different tack. Can you take us back to what it was like? You were a young man back then and you made a strategic decision about whether or not you’re going to be writing insurance policies.

Ely: Well, yes. The thing about the insurance business that I liked is the business, not selling insurance policies. I had to do that for many years, but it wasn’t what it was all about for me. For me, it was about creating a business and I felt like whether I was selling widgets or insurance, I still would run it as a business. I don’t think I’ve sold an insurance policy for 35 years probably that I’ve been in the business.

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Michael: Okay, you were young. I’m curious where you got that insight that you felt that you could grow the agency more by working on the business and not working so much in the business.

Ely: Where it came from I’ve always been entrepreneurial during that, for instance, I’ve owned at least five other businesses actually more and quite frankly none of them succeeded.

[laughter]

Ely: For a while I was in the car rental and leasing business. We had a partner with a towing business and those were services that we provide to our insurance clients so there was a crossover with that but they actually ended up growing on their own they were originally designed.

Same thing, I purchased the travel agency to try to provide those services to our insurance clients and I’ve also owned three restaurants and I put that under the heading of, “the things we do for love,” because my wife that’s her passion. She’s run three restaurants which I’ve partnered with and if anybody wants to invest in her next restaurant please let me know because I won’t be-

Michael: You’ll step out of the way. [laughs]

Ely: -yes, absolutely. Anyway, over the years I realized that this is what I do, this is what I do best, I’ve abandoned all those other ventures and concentrated again on growing this business. Early on I started opening up additional locations from scratch. I think I had four locations at one point and then we operated that way for a while. Then I want to say it was around 1980, I had an opportunity to buy a local agency down the street.

I wasn’t looking to buy an agency, but one of my employees knew the owner and he was selling and we did that. That was 1980. August 1st, we’re closing on our 30th acquisition. That’s the real secret behind our success is growth by acquisition but at the same time, we pay very, very close attention to organic growth. We have goals and so you got to pay attention [crosstalk].

Michael: I wanted to zero in on that because I don’t want people to get the impression because, Ely you’ve got a great reputation as being a private acquirer of other agencies. I know better. While I know that that has been remarkably, substantially important to the growth of the agency, you are also a best practices agency. You follow the Reagan best practices, it’s my understanding that in terms of your margins, your EBITDA, you’re at the top 5%.

I wanted to stress the fact that while acquisition has been important, your focus really has also been on quality management and organic growth.

Ely: Absolutely, and if we’re going to grow, we need to retain our customers. Our single largest source of new businesses is still referrals as much as we do so much marketing and online websites and radio advertising, referrals and account rounding is our largest source of business. We’ve got to make sure we’re doing a good job for our clients and we’re going to make sure we’re keeping our employees happy in order to do that.

It’s all a challenge for sure but that’s something that like I say it’s very easy to get caught up in the acquisition process but you just have to really pay attention to the day to day business and the organic growth and particularly with direct writers taking up the market share.

Massachusetts it’s been a challenge. We were the last state that the direct writers weren’t in and the last five to 10 years they’ve come in and taken up a lot of our market share. Basically, what we’re seeing, and we’re seeing this at our association level number of agents in our association each year is dropping-

Michael: Well, it’s because, Elly buying them but I suppose there’s also a large–

Ely: -and it’s not just me. What we’re seeing is fewer and larger agencies but the number of desktops isn’t changing a whole lot. When we buy an agency, we keep the staff, we keep the location depending on size. The number of people in the industry is not changing a lot but certainly the number of agencies and that trend is no question that’s going to continue and I see it at my end. Obviously the big players, the private equity companies, internationals there isn’t a week or two goes by that somebody’s not calling me looking to acquire.

Michael: Okay, well as long as we’re on this subject and acquisition is important, that environment has changed dramatically since not just since you and I have been in the industry, but frankly, pretty dramatically in the last let’s say five years.

An upcoming podcast guest of mine is the founder of one of those large private equity firms that’s buying a lot of agencies. How do you think that affects the life and the job of being an agency principal today? Valuations are up in the pace of acquisition is I think the highest it’s ever been.

Ely: Well, it is. There’s no question about it and it’s a combination of the private equity money being there and I think that’s driven somewhat by interest rates. I think we’re going to see rates go up and we’ll see what happens to valuations and to the demand but I think the other factor is that the average age of agency owners is up there pretty good so there’s a combination.

Michael: Yes, lots of people are ready to sell. Let’s say, Elly was starting now. Let’s say it’s not 2018, but it’s a few decades ago. If you were in this environment now with probably less resource and perhaps less of a brand as a trusted acquisition partner, what would you do? I’m asking on behalf of my listeners, what counsel would you give agencies who have to compete against private equity and are challenged in doing that?

Ely: Well, are you talking about actually starting a new agency?

Michael: Well, okay. At least I was thinking the smaller agency or the younger agents wants to grow and wants to grow by acquisition. Let’s start with that one.

Ely: Well, okay. Again, the smaller agencies if they’re not family businesses, chances are that they’re going to sell and depending on the size, we’ve found a niche in terms of the size of agencies that we acquire. We’ve acquired agencies as small as actually in terms of income say like 300,000 in income up to maybe a million to in income and we’ve found that niche and we’re very competitive in that arena and we do look at larger agencies.

We’ve made offers on agencies in the $3 to $4 million range but now we’re competing with these major players who have extremely deep pockets and we find it hard to compete for acquisitions with the larger agencies but we do a real good job with these smaller agencies. Many of them are retirements and in some cases, the sellers do stay on with us and we’ve had some success with that. More often we have not had success with seller staying on.

My favorite thing when somebody asked me about keeping a seller on is that sellers do not make good employees. I’m not sure that I would and if they think they want to stay on, they want to produce– but for us it really works because they’re certain type of lifestyle and freedom and particularly in these smaller agencies.

If it’s a retirement situation, then it’s simple, they’ll stay on as a consultant for a period of time but with no major commitments. Again, I’ve seen, of course, some of the aggregators in our area one of the biggest ones is the Renaissance Group, Bruce Cochran and they’ve done a terrific job for allowing small agencies fighting product and services, of course, the same group is one of the largest in the country.

That is one way that that smaller agents can go. In starting an agency today, I think would be very, very challenging. Most of the startups that we see tend to be in the tech world and we’re all still waiting to see where all that is going to go. We know it’s happening but my feeling about the independent agency system which obviously I’m a major supporter, is that a lot of these agencies really have to wake up and realize that you go out, you write a piece of business, you’ve got…

Michael: All right, we’re back and in full disclosure to the audience. We lost our connection we have no idea why. My question to Ely is if you’re a smaller agency and wanted to grow by acquisition, what would you do about that today when there is some fairly substantial and challenging competition for the acquisition of agencies?

Ely: Well, I have to say I think it is harder for a smaller agency to acquire same thing like I said when we start looking at agencies that are doing $3, $4 million in income. It’s very difficult for us to compete, but smaller agencies there are a number of agencies like myself out there do acquisitions on a regular basis. It’s hard for an individual of small agency to compete.

A lot of them are over with the aggregators as I think I said I don’t know if that got cut out. They can do it, they can do it but they have to be aggressive. Money is available, insurance companies will lend for acquisitions, they’re certainly bank and specialty banks that are out there that the insure bank and those guys.

Buying is one thing and operating as the other thing. Again, it’s running a business and I think if you’re primarily a producer, if you’re the main producer in the agency, it’s going to be difficult for you to go out and buy agencies because like I said then you’ve got to operate the thing and manage it. Unless you’ve got some really good people that can do that for you but I would think that’s challenging.

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Michael: Well, then let’s talk about probably something that’s on everybody’s mind regardless of size, which is getting to the next level through organic growth. There are a number of things, Ely that you’ve done that I think have been important strategically. I’m going to take these off one at a time and I’d like to get your response. One is that and by the way, the audience should know in full disclosure you and I have known each other for how many years? [crosstalk]

Ely: Let me put it this way. I think I used to use your yellow page ads when we first started– yes.

Michael: I’m not even sure you were purchasing my services back then. That does go back to the early 2000s or before so in any case.

Ely: I still have a collection of all your CDs.

Michael: Yes, okay. [laughs] You and thousands of agents around the country. The CDs and newsletters are probably all stacked up on the side of the desk. You have maximized contingencies, that’s been an important part of your strategy. Talk to us about how you did that.

Ely: Okay, that’s critical and that takes a lot of time to really analyze your books and maximize your contingencies, your income, additional bonuses that you can negotiate but quite frankly, that takes volume. Smaller agencies don’t earn on individual basis, just don’t have the kind of volume to do that. Basically, when we acquire agencies, we move books of business, we clean up books of business sometimes and we’re constantly looking at numbers and making sure that we’re meeting our growth goals because a lot of our contracts requires certain growth in order to be eligible for profit sharing.

Again, with a number of companies that we have, it’s a very a time-consuming thing. It’s very involved but even with a smaller agency, if we buy agencies and we see that they do not really pay attention to… they write business.

Most of them would like to write good business but that’s not always the case. One of the reasons it’s where it is, is because we earn a lot of income through other than commissions or fees, again, profit sharing bonuses. Again, we’re an unusual model. We have a relationship with one company where they have approximately 35% to 40% of our entire book of business. We are one of their largest agency in the country and that gives us the opportunity to maximize profitability for them and for us.

Again, not everybody can do it but you could do it on a smaller scale and again, keep repeating it. If you’re out there selling insurance all the time there are only so many hours in a day and it’s hard to do that.

Michael: Okay, in addition to maximizing your contingencies, I think you’ve also and again this might be the benefit of volume but you’ve negotiated other incentives and bonuses or commission overrides things like that with certain carriers, is that right?

Ely: We have, yes. Again, it takes volume but one of my favorite quotations is if you don’t ask, the answer is always no but it’s a two-way street. If you’re going to ask for additional incentive, and again you’re not asking for anything for free but if you’re asking for additional incentives you’ve got to earn them, but if you don’t ask, it’s not going to happen.

Michael: All right, so for the agent who’s perhaps, Ely where you were whenever 20, 25 years ago. They’re younger and they’re looking at the opportunities in this industry, clearly it’s a different environment. I’d like to break this down, what do you think is different about being an insurance agent today than it was, let’s say, in 1995?

Ely: Well, very clearly and this is really our model is that you have to be a hybrid now. You can’t just be that typical independent agent open from 9:00 to 5:00. You have to be able to provide services to clients really 24/7. You have to be able to have the right agency management systems. I know this of great place does websites of Agency Revolution. You need to have a great website and it has to be interactive.

We use CSR 24. We are in the process right now of outsourcing 24/7 texting and live calls. We’ve tried to create an environment where the client wants to come in and needs a hug or needs questions answered personally that we are here for them and that’s the 9:00 to 5:00 part. On the other hand, we have to be able to provide all those other services 24/7 and I think that goes for every independent agent.

The small agents, those services and now the pricing is coming down on a lot of them, they’re available. Again, it takes time to go through the process, get everything set up but regardless of what size you are, if you’re not doing that, particularly as our population ages, I think if I’m not mistaken, it might have even been information you provided me once at one of your meetings that of the seven I think at the time, it’s probably greater now 70% of our insurance quote, quotation increase starts from a mobile device.

You’ve got to have an app, you’ve got to have all these things, you’ve got to look and feel like a direct writer, but the same time again, and this is the differentiation is you can still provide that personal service which you don’t get with with the bigger players.

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Michael: Often times, Ely when we– and when I look at the industry, I see agents who are perhaps millennial’s or Gen Xers, they’re willing to embrace new technologies, they were raised with technology and they’re very comfortable with it and often times we’ll see the older generation, the baby boomers, less comfortable, less willing to take a to test or experiment or have an adventure with technology.

You, however, obviously you’re a boomer, not a millennial, you seem to have at least I don’t know if it’s courage or a willingness or what, but you clearly have embraced technologies that have supported your scaling. How did that come about?

Ely: You have to take a risks. It takes money to spend money. Again, because I looked at so many agencies. I mentioned the number that I have bought. It’s four, five times as many that I looked at and haven’t bought. I’ve looked at a lot of agencies and I see how they operate. Everybody– nobody leaves money in the business. They take it out. It’s understandable but you’ve got to spend money.

We do a lot of radio advertising. When we started doing radio advertising for years, there was nothing but you got to stick with it. If you’re doing– and we still do. This is old fashioned but we still do postcard mailing.

Michael: Fair enough.

Ely: We set them up, we set them up for certain types of situations and we outsource it. We commit to a two-year program where a postcard goes out every quarter for two years. Usually, we don’t start seeing any business from it until at least the third or fourth.

Again, you have to take risks, you have to spend money, but a lot of small agents, they don’t want to do that because they’re making a comfortable living. They’re not– in many cases, they’re not working that hard. They don’t have this urge to grow. I– go ahead.

Michael: You’d said that you’ve looked at four, five times as many agencies that you have not purchased as those that you have purchased. You’ve had this really interesting seat or position in the industry where you have had an opportunity to look at the inside of a lot of agencies. Of course, as chairman of the big eye, you also have this perspective on what’s going on in the industry.

If you were going to discern the difference between those agencies that you’ve either purchased or not purchased that are, they’re growing, they’re healthy, they’re getting to the next level and those that are not, what do you see is the difference? What’s the difference in behavior and what’s the difference in the agency ownership’s behavior and attitude?

Ely: I think my answer may not be actually answering your question directly because when we look at agencies, one of the most– the two most important things we’re looking at is the book of business, the quality of the book of business, and the staffing because it’s very important to have the continuity even if the sellers don’t stay on, we want to make sure that there’s good staff and we keep for retention purposes.

We’ll look at the book of business and more often than not, our pricing is based on, if it’s a real good book of business, it’s quality book of business and we don’t have to clean it up, so to speak. We’ll pay a lot for that.

On the other hand, we look at agencies where the books are not good. We have bought both, believe me, but we’ve gotten very good at cleaning our books. If we’re going to buy a book on agencies where we have to clean the business up, our price is not going to be– it’s not going to be what a lot of sellers expect.

Sometimes it will be that we make an offer because it’s what I call a fixer upper and it’s just not something they’re looking to do. A lot of them is they’re just not that good of an agency. They don’t fit and some of them have ridiculous pricing.

Michael: Yes, okay. In your definition, what’s the difference between a good book of business and a bad book of business?

Ely: I would say that less ratios of 60% or less on average. Any number from 60% down, we’re comfortable with. 60 to 70 is borderline. We can clean that up, but 70s or higher on a three to five-year basis it gets a lot more challenging. We’re actually looking– we’re looking at an agency right now that’s been running about 80% for the last five years. It’s been about a– let’s see. What is it? It’s a good size agency but million dollars in income, not too bad. I would buy that agency, but I would pay half as much as what they think they can get because it needs a lot of work.

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Michael: When you look at an agency like that or any other agency, do you also look at their historical retention or policy per customer count?

Ely: We do. We do look at it but ultimately– what we also do is we get permission to talk to their companies. What we do is– we just did that on another agency recently. We represent the company and we spoke with them about this book of business. They said they just want to get off it. They don’t have any interest in staying on it.

Even though they know that I can clean it up, it was just they said they were things that they just weren’t comfortable with this book. We walked away from it because obviously, it’s not just about buying businesses, it’s buying good business and buying business that we can comfortably improve.

Basically it means getting rid of the substandard business. Any book that you look at, if you’re looking at a book with 80% loss ratios, that’s where my favorite Pareto principle comes in the 80-20 rule. Probably, 20% of that book is dragging it down. Sometimes it’s a little bit more than that, but in most cases, you might have 70% or 80% of the book that’s actually good, but its the 20% or 30% that’s dragging it down.

Again, if you can buy it right because you know you have to either move that business to companies– we have companies that write substandard business. They price it accordingly. Sometimes we just try to not renew some of the businesses. It’s involved.

It’s a lot of work but that’s what we do. The other thing I just want to mention again, our model is very different in another sense that we don’t have what we would call typical producers where they’re outbound and they’re soliciting business. We do a lot of marketing whether it’s radio and online and just direct mail. Basically, my job has always been inundating myself because I’m saying it’s to get the phone to ring. Now, it’s the leads and it’s internet. All of our account managers are producers. We have a processing department that does all the ground work, all the checking in policies, mailing them out.

We try to allow our staff to have time to just sell and service an account round. They don’t have to worry about all these other– all the piles on their desk, so to speak. Even for smaller agencies which say, “Well, I can’t afford a processing department.” That’s all– there are companies now that do that on an outsourced basis. We’re big fans of outsourcing. We use Wave. I don’t know if you’re familiar with them, retired insurance people.

For instance, we have one person that just does all of our commercial certificates. They live in Wisconsin or something like that. Incidentally, our accounting manager who’s been with us for four years, lives in Michigan. We’ve used– we’ve outsourced some of our accounting services. We’ve been very successful outsourcing for a lot of different things.

A big fan of that too. Smaller agencies can do that too very easily and it’s effective. I just looked at an agency that has six employees. Two of them are onsite and the other four are, I think they’re in China.

Michael: Really?

Ely: Yes.

Michael: Okay. There are a couple of ways to outsource. One is outsourcing through a third party vendor. The other one is using remote employees. Do you have remote employees? People who don’t work at the office but fundamentally work at home?

Ely: Like I said, one of our key people, our accounting manager lives in Michigan working for us for four years.

Michael: She’s an employee?

Ely: Absolutely.

Michael: Got it. Okay.

Ely: She comes in periodically. I have another employee that works three days in the office, two days at home. We have more and more people that are trying to do that. We try to accommodate them because the technology– for instance, we have an office on Cape Cod and Truro which is about two and a half hours from our home office. We have a Truro employee that is in our Home Office. She works strictly for that office and it’s all remote and nobody knows the difference.

Michael: Got It. Okay. How do you manage the productivity of an employee who works at home?

Ely: We have computer software that does a screenshot of every single screen– every single screenshot for every computer in our agency.

Michael: Interesting. Okay.

Ely: We also have access–

Michael: Yes.

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Ely: We can look at that. Big brother is watching kind of thing but we found out one time we had a manager in one of our branches, and this is not an exaggeration, he was spending half of his day playing games on the computer. We had all the screenshots to prove it. We had another situation where we had two employees that were next to each other in the same office, but they were emailing each other all day long talking about their boyfriends. That’s one way. The other way is the activity reports. We know how much– so we can monitor it.

Michael: Okay. I have two last questions for you. All right. First one, Ely, is there a number of things that you do to accelerate your organic growth that work really well? You get a lot of referrals, your retention is certainly respectable, your policy per customer count is high. What are the things that you do to make sure that those things happen?

Ely: Well, we have specific goals for each branch in relation to account rounding. We require each grant’s due to account round a certain number of accounts each month. We do track policies per client agency widening range worldwide. It’s interesting because we have some branches that are very much in a blue collar areas and we have some that are in a very wealthy communities. Clearly the policy count, average policies per client is much higher in the more affluent communities.

We look at each branch individually and we have anywhere from 1.3 policies per client to 2.2 and anywhere in between. We also– and we’ve actually just– we’re in the process of replacing this person, but we have somebody whose only job is account rounding. They make outbound. We do campaigns of course with our agency revolution engine and we’re constantly doing that, but we actually have somebody who would make outbound calls to clients.

We hired a consultant a few years ago and basically, I don’t know how much money we’ve spent on him and how many months he was involved with us, but we basically walked away with seven words that he taught us and that’s what we live by. I noticed that blank. May I ask why? I noticed that we write your auto but we don’t have your homeowners. May I ask why?

Michael: Okay.

Ely: I notice that we have your home and auto but we don’t have your umbrella. May I ask why? You put the owners back on.

Michael: Yes.

Ely: That’s what we live by.

Michael: That’s worked well for you.

Ely: It’s like anything, some employees do it all the time. Others, you’ve got to be the one ahead and they still don’t do it. Overall, its if we are moving in the right direction.

Michael: All right. Here’s my last question for you Ely. Clearly, this is a different industry than it was back when you got into it. A different industry than it was 20 years ago and really discernibly a really different industry than it was five years ago. We’ve seen all of these trends and forces.

There’s a new generation, 83 million millennials that are rising up to take over the economy. We’ve got ensure tech that’s flooding into not just the industry in general, but into our property casualty distribution space. We’ve got new technologies, changes in consumer behavior. What do you think the future looks like for the Independent Insurance Agency system?

Ely: Well, I think and I don’t really like to even say this, but I think it’s going to go to some extent the way the travel business went. Many of the small travel agencies are gone, but the larger agencies that are still here are extremely successful. They’re very large and very successful.

Michael: Right.

Ely: The smaller agencies that again in the travel business that has done well have specialized, whether it’s cruises or– I think on the commercial side, the independent agent is certainly on mid to large commercial. There’s no way they’re going anywhere. I just don’t see it in the near future. Smaller commercial we’re starting to see to get more automated. We are actually looking into ourselves creating a website that is designed.

We’re working with one particular company that to direct business to that. It’s our agency’s business, but directing them to their website and to their staff who will actually write the business, but it will be our business. It’s just a matter of marketing that website online.

Again, there’s no question we’re going to see fewer agencies, larger agencies, much more sophisticated agencies. Commercial’s going to be stronger than the personal side but I think some of the niche agencies are going to do well. It’s changing. There’s no question about that.

Michael: All right. Any final words that you would want to say to the independent agent of today?

Ely: Well, it’s a great business to be in. I’d like to call it our little secret. How many businesses can you be in? Where if you’re a good agent, 85 to 90% or more of your customers are just going to renew every year. If we’ve looked at some really bad agencies, really bad, horrible service and their retention is still 70%. You can be the worst agent out there and 70% of your clients are going to come back every year.

The renewal was the key word there and retention and like I say, if you’re good, you are going to come back every year and that’s– there’s not a lot of businesses– I mean that model is– Amazon prime is that model now where they have people pay the $95 and that’s what we have. We’ve been doing it for way longer than Amazon has. It feels good to be in a business where you can really be there for people when they need you.

I will finish with this. I had a two and a half million dollar fire at my home two years ago. It’s been three years now since… I was out of my home for two years. Without insurance or without the right type of insurance, I would’ve been in big trouble. Fortunately, I mean, hopefully, I have the right type of insurance. Independent agents, we’re going to review, we’re not selling not just on price.

Price is a factor on but– We do something that’s important. The World would not revolve without us. Like I say, it’s a great business to be in and that’s my story and I’m sticking to it.

Michael: Well, Ely, as always, it was great to catch up with you and I’m grateful for your willingness to generously share your success and the secrets to what got you from A to B. Thank you so much for joining us today.

Ely: My pleasure. I just want to throw something back at you. Part of our success is due to you and your people on your organization. It’s been a pleasure working with you.

Michael: Thank you. That’s very generous of you. Thank you so much and enjoy your day.

Ely: You too. Take care.

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