The change is VAST but SLOW enough that a lot of agents won’t notice.
As President & CEO of Acrisure, Greg Williams operates the 9th largest agency in the US – and at an eye-popping 80% growth rate, I’m sure he’ll quickly exceed the $1.5 billion in revenue Acrisure can boast today.
But, being large hasn’t made Greg complacent. As you listen to Greg’s insightful comments about the future of the industry, you’ll see why. He pays very close attention to the changes and pressures on the industry – and is committed to meeting those pressures strategically.
Listen to this discussion to learn:
- How agents absolutely must distinguish themselves in what many consider to be an increasingly commoditized insurance world (and, why agents who ‘hide their head in the sand’ will be hurt by not acting).
- How insurtech is going to continue to change consumer behavior – and what agents must do to respond. (Pay close attention to Greg’s comments on the ‘compression of the industry value chain’).
- What the near and mid-term future looks like for the independent agent – and what to pay attention to now.
Please don’t miss this conversation with one of the insurance industry’s most respected leaders and game-changers. This is an important conversation!
Note from Michael: I often talk and write about the ‘big trends & forces’ that are changing the world that agents live and work in. Today’s podcast gives me the chance to ‘interview one of those forces’ – or at least, to interview one of the industry leaders that’s driving one of the forces we all must pay attention to.
What are other agents & brokers doing to thrive? What are the biggest trends affecting the retail insurance agent & broker? What are the most important strategies and tactics you need to grow faster? Find out here in the Connected Insurance Podcast, where Michael Jans discusses the biggest issues affecting the independent insurance agent and broker with the industries leading figures.
One More Thing! What do you think? How will you and your peers use this to grow your agency or brokerage? Share your thoughts in the comment section below, subscribe to get updates delivered to you, and *please share this if you found it informative.
Michael: Greg Williams. Thank you so much for joining us. How are you today?
Greg: Terrific, Michael. Happy to be here.
Michael: I think to some extent, I do want to dive into your brain to talk about what you’re doing at Acrisure, but I am interviewing Greg, the man. Why don’t we start with a short bio of your background because you’ve got an interesting career in history before you even became engaged with Acrisure. A little thumbnail sketch, if you would, about what you’ve done?
Greg: Sure. Acrisure would be the third business that I started. It came out of the banking industry in 80s, so talk about the three lifetimes ago. It feels like three lifetimes ago. In the banking industry, in the 80s, I was really looking to do something entrepreneurial and build a business. I started a business in the telecom industry in 1990, a very unique opportunity that was still to this day maybe the best business that I’ve seen in terms of business opportunity.
Here are some things here that are consistent with the insurance broker space, but it was a business, or an industry, or an opportunity, I should say, that had a high recurring revenue, nice profit margins, low CapEx requirements. It’s what drew me from banking into the entrepreneurial life, if you will. I started that in ’90, sold it ’93. It was a legislatively created opportunity that I knew was legislatively going to be taking away at some point. It was a get in and build fast and get out.
I did that; started ’90, sold it ’93. 1993, started investment banking company and for 12 years was running around the US and Europe doing a lot of M&A activity in a lot of different industries, working primarily with private equity funds. I did that from ’93 to 2005. In 2005, started Acrisure with another gentleman who, basically, had insurance background, I had a financial background. We got together with a thesis that we could go out and build something in the industry that was unique and different from a model perspective in terms of how to build a business through M&A with a different approach that we thought would be compelling and of interest to the marketplace.
That was how we got started. I have a financial background. Now, for the last 12 years, 13 years now, really in the insurance brokerage space and now reinsurance brokerage, and having a lot of fun doing what we’re doing.
Michael: Well, you identified recurring revenue in this industry. From a private equity point of view, that’s where the gold is, isn’t it?
Greg: Well, you know what? It’s interesting. When I looked at the industry in 2004 for the first time, it was really a situation where I said, “There’s going to be a day that private equity comes banging on this door.” The reason is just not very many industries have the high recurring revenue, the nice profit margins, the low CapEx requirements. It’s just the financial fundamentals are such that it’s appealing for all those reasons to a lot of people. Those are the things that frankly drew me to it back in 2004, 2005 as well.
Michael: Recurring revenue is obviously a common theme in the world that I just came from in software. Private equity does seem to find that really attractive. It’s interesting that an industry that’s been around for so many hundreds of years also has similarities in the business model that make it so attractive to investors.
One of the things that I do want to dive into is that, on one hand, Greg, Acrisure is not the only private equity firm in the property and casualty space. It would seem that there are a lot of buyers and that it is dramatically more. The number of private equity firms that are competing for M&A, to some extent, it’s 10X what it was when I first got into the industry. Why do you think that is? What’s different about the world now that makes it so attractive than it was, let’s say, before you got into it?
Greg: First of all, I think it’s important to, I want to say, correct the narrative here. Acrisure is not a private equity company. We’re an operating company. We’ve built the business over the last 13 years. We’re the 9th or 10th largest insurance broker.
Michael: I had the feeling I think in my last communication with you, I said, “The 12th largest,” and I had the feeling, “That’s probably old news now.” That’s got to be six months ago.
Greg: We’re almost 1.5 billion in revenue and used some private equity capital to help scale. In 2013, I brought in a private equity group and used their capital to help us scale the business, but in 2016 we did a management buy-out. As we stand here today, we own 83% of the business. We, the people, work in the business everyday. We have outside investors that own 17%, but we own the majority and then we control the board. We’re not controlled by outside investors.
Greg: If you look at private companies with size and scale, we’re about the only one out there that has the dynamics that I just described where we own the majority of the business and we control it as opposed to a private equity fund. There is confusion in the marketplace as to whether we are private equity controlled or private equity owned.
Michael: A little bit yes.
Greg: We’re neither. Having said that, to your question, Michael, if you look at just in the world where there are places that you can invest, and smart investors will seek out opportunities regardless of where they are and what industry and so forth. The dynamics of the industry, the demand for the product is rather static and that insurance is not going away. It’s a need that there’s going to always be a great deal of demand for.
The combination of demand, and there’s a whole debate about whether it’s a commodity or people really differentiate themselves and offer services and advise that others don’t, in which we believe. It’s something in our case that we do.
Michael: I didn’t want you to skip over that one. Let’s just zero in on that one for a moment. What do you think? Are we fighting the perception that insurance is a commodity in the marketplace?
Greg: You know what, I think there is an element of that. Frankly, I think the insurance industry, to some extent, has been it’s own worst enemy in that we haven’t probably done a really good job of defining what product and services really are available and the depth of that in many ways. When I say that, I’m not casting aspersions on any one firm or one company, it’s really the industry as a whole, has been viewed as a bit of a commodity product.
Those that have been successful, organically growing the business, not just through M&A, have certainly done a good job of differentiating themselves. The world is going to change, is changing. It’s one of those you either grasp where it’s going and what’s going on in the marketplace, if you do, you’ll succeed. I won’t say you’ll have wild success, but you’ll wildly succeed compared to others that are not going to embrace the change that’s going on in the industry.
I think the changes are vast. It’s happening slow enough that people aren’t noticing it, but the changes are going to be fast if you look at the next 3, 4, 5, certainly 10 years. Over the next five years, I think we’re going to trade differently and what the marketplace looks like will be different as well.
Michael: Greg, you just gave me a writer downer and I’m going to read it back to you. You can tell me, is this a Mr. Greg William’s quote? That the changes are vast but they’re slow enough that people don’t notice it.
Greg: Yes, that’s accurate.
Michael: Okay. Well let’s see. That strikes me, perhaps, as a very, very dangerous position for an industry to be in.
Greg: I think it is. I’ll give you just a sample of what I’m talking about so it won’t be nebulous here. If you look at the marketplace, there’s a lot of discussion in the world around value chain and value chain compression. If you look at the retail client is paying us, the retail broker in terms of premiums or they’re placing premiums with us. We turn around and place those premiums with wholesalers, MGAs, MGUs, insurance companies and the like. Insurance companies are turning around and taking some of that risk and laying off some of that risk to reinsurance companies so reinsurance broker. Then, ultimately, there’s the underwriting capital, the capital markets that are underpinning the entire industry. If you look at that value chain–
Michael: Well described by the way. That’s a comprehensive description of the value chain. All right, so then what?
Greg: If you look at that value chain, there’s a lot of things, or if you look at InsureTech, there’s a lot of those people that are in that chain or companies that are in that chain that are looking to leapfrog others and get closer to, frankly, the thing that we as a retail broker are looking at. We have the client relationships, so everyone’s trying to get closer to that client relationship. InsureTech investment is the way that they’re doing that or attempting to do it.
In other cases, it’s just going to be simply where you can place business in that chain is going to be different than what it is today. That’s the change that I say that the change is going to be vast, but it’s not being recognized necessarily today or the recognition of it will take time. It’s two things. It’s really, do you have size and scale or do you have data?
If you’ve got some size and scale and data, the information about your clients and the premium and workplace and the lines of business and all of the various components, exposure or loss data, et cetera, all the things that are going to be important, that are important to the end of the chain. When I say the end of the chain, the insurance and reinsurance companies, and the capital markets, that’s the information and that’s the gold nugget, if you will, of the things that they’re looking for. If you have it, you’ll have opportunities to place business with markets that you otherwise would not.
I think that’s where the change is going to take place. If you’re positioned for it and understand that it’s coming, you’re in a great place. If you’re not positioned for it and don’t understand that that’s happening, over time, not today, not even maybe over the next couple of years, but certainly if you think of five years from now, 10 years from now, the market and where we’re placing premium as a retail primarily P&C business, it is going to change as time goes on, and there’ll be opportunity to differentiate yourselves because of that.
Michael: Okay. If you’re open to exploring that for a moment, I think right now I’m talking to the CEO of essentially the 9th largest retail insurance agency in the United States. Obviously, you are looking at that future and navigating some strategy to be prepared for it. What does that future look like in practical terms, do you think?
Greg: For us, it’s anticipating this. A while ago, we started building a proprietary technology. It started literally over now almost two years ago. We started building a capability to really take a deep dive into our business and understand words place in terms of the marketplace. Then based on an in-depth, granular, analytical view of our business, understanding where in the marketplace could we take that premium and those clients, and make sure that they’re getting the maximum amount of value for their insurance spend, is what it’s all about. Representing our clients in the most robust, deeply thoughtful way that we can, is really the goal.
The data and the mining of the information, it really allows us to do that. Then it’s the same data that allows us to then go to the marketplace and represent our clients in markets that they weren’t being represented in before. As an example, would we, a year ago, have been in a position to where we could have a conversation with either a carrier or reinsurance company on a detailed level in terms of, again, representing clients’ best interests and having the opportunity from an economic perspective to benefit ourselves as well as the client? The answer is no. We wouldn’t have been, whereas today, we’re well positioned to do that because of the level of information and the data that we have about markets and clients, both, where we can bring all of that together in a way that it’s a win for everyone.
Michael: All right. I want to stay on this topic, but I want to look at it from a different perspective. Let’s fast forward to this point, whenever. Next month, or next year, or three years from now where there’s a real transformation of the relationship then, using this data, ultimately, the person who is most effective, or most affected, or certainly one of those most affected is the customer. Ultimately, if we’re not satisfying the customer then there’s serious trouble.
The customer has a growing number of choices. As you mentioned, InsureTech is probably offering up a portfolio of choices now and in the very near future. Fast forward, and let’s say we create the retail agency of our dreams. What’s that customer experience? How have we changed the way the customer experiences their relationship with the retail agent?
Greg: Well, first it’s important to recognize, which I believe in this and most of your audience, maybe not all, but most of your audience will as well if they’re retail P&C driven in orientation, is that we have what everyone wants, which is the client relationship. That’s the whole underpinning of InsureTech investment, is how does somebody else get closer to our client? Recognizing that we have the one thing in the value chain that everybody wants is the client relationship, I think is important to know that that we do have that relationship that others want.
As you look at InsureTech investments is disintermediation from a technology standpoint. Are some of those things going to be successful? Sure. That’s likely to be the case. As you start looking at what do we offer in terms of a service, and when I say that an advisory service to clients, that’s the ultimate valuation or value creation element of that relationship. We’re bringing solutions and information to them they’re not just going to get through an online portal and going to some website that says, “Here’s your buying options.”
The whole point to the value chain and compression that will happen there and having information, the data as well as markets, is that what it does, it just broadens the scope of what’s available in terms of the universe of opportunities for a client, what’s available to them that they may not know about if they’re on an online portal for a certain carrier or a certain technology company. What the information does, and the power is in the data and in the information, is it gives us optionality that a client may not have today because we’re now better equipped to really take the client and understand the needs in a way in terms of the insurance spend and where those dollars can and what those dollars can purchase in terms of coverage, in terms of everything else.
We’re now in a place to really maximize that spend in terms of the value that it’s getting in the marketplace and the representation it has in the marketplace. That’s the key is if you’ve got the client relationship, if you have all the information and all the data, and not just about the client but about the markets, and the markets are embracing us in a way because of the information and the way we’re representing that client, I think that’s where optionality and value gets created in terms of that relationship.
It gets very sticky and very hard for maybe just someone with a website to disrupt. As you asked the question of the perfect retail broker, what does it look like? It’s the combination of technology and capabilities there that we have ourselves, information and data that we have about the client as well as the markets to best align where the maximization and optimization of spend is. Obviously, highly connected to the client, in terms of understanding what the business issues and the risks associated with the business really are. Again, very hard to do from an online portal.
Michael: Wouldn’t you say also just plain hard to do old school like pre technology when now agencies have thousands of customers? If you ask the average agency principal if they were walking down the ice cream aisle at the grocery store, they might go right by a client, and neither of them would recognize each other, whereas in the old day, that was what the industry was built upon.
Greg: Exactly, right. The relationship side of the business is important. Understanding that it has to be more than just a relationship today is also important as well. The relationship is key, but to continue to service and provide a real value to that relationship, I think it as the standard of entry, if you will, is getting more more difficult.
Michael: Okay. I just want to dig into that one for a moment. When you’re referring to the relationship side, it’s like the person-to-person, human-to-human, a little bit of an emotional connection, ideally, something that leads towards loyalty, right? I think you’re also saying the other side of the coin is having the data to know that customer and to know your book of business well enough that you can really drill down and provide superior service in markets. Am I getting that?
Greg: Yes, exactly. The data and the information about the client and the client’s needs and be able to take that to a market is greatly expanding. When I say that, it’s expanding by the month, where you can place that business is and the optionality around that, that’s what’s changing in our world, when I say our world, it’s the retail P&C world. That’s where the market’s most changing.
When you look at that value chain, from client all the way down to capital markets and all of the mouths being fed in between, all of that is going to get compressed as time goes on as to where you’re placing business in that chain, that’s going to be the greatest change as time goes on, assuming you have an in depth understanding of the client represented by information and data. If you have that, you’ll have people that are open to talking to you that maybe haven’t been for 5 years ago, 10 years ago, a year ago.
That’s where you’re going to see a lot of change, and again, the value chain is going to get compressed as time goes on if you have certain components and elements. At the end of the day, who wins in that? The clients. The clients, ultimately, are the winners in that advancement and that improvement.
Michael: If we move forward in the calendar for a few years– We often talk about the client or the customer base as if there’s the great unwashed masses of 300 million Americans or whatever. It would seem that when we drill down to the customer moving forward, there are those who are really appropriate, optimal for what you’re talking about, then probably some who are just not, that maybe are more appropriate for other channels like Geico or Progressive Direct. What are your thoughts on that?
Clients selection is often the golden nugget of good marketing. When we approach the marketplace moving forward, who do you think is the optimal? How would you describe? What are the characteristics of the optimal client for our channel?
Greg: It’s interesting and it won’t surprise you that my answer will be something that looks very similar to our business. The small to middle market, that is the basis. Majority of our business is small to middle market commercial business clients, that’s predominantly– The US marketplace is certainly most represented by that SME. That’s where I think the greatest amount of opportunity will come to in terms of the things I’m talking about, as far as change in the market and change in where business is placed and just the, again, the value chain and what that looks like going forward. That’s who is going to get impacted the most by having options they’ve never had before.
If you look at the personal lines client, the home and auto, there’s going to be, as you said, the Geicos and others, there’s going to be options that they have as well. Its my view, time will tell, but my view, that’s probably where the InsureTech movement has the most impact is more of the personal lines than the commercial lines. I think that’s where the impact is going to be seen.
Do we have personal lines client? Sure. We work hard to make sure that they have the maximum amount of optionality and we’re a good advisor to them, et cetera. That’s where you’ll probably see disintermediation and disruption. My guess it’s going to be more the personal lines on that side and in the commercial lines, and even the small commercial lines, I think that’s still where that relationship, the client relationship and owning that, is going to be very significant in terms of the viability of whatever business you have going forward.
Michael: Got it. All right. I think this is a good segue to, if you would, share what you want to about the vision of Acrisure, what you’re trying to accomplish, and what that looks like, what the future of your company ideally looks like.
Greg: We’re just tremendously excited about what we’ve done. The future, frankly, looks even brighter than the past. We’re at about 1.5 billion of revenues as we sit here today. The company itself is 83% plus owned by the people that work in the business every day. We’ve done a lot of M&A activities, 92 deals last year, we’ll do about 110 deals this year, so a lot of new partners. It’s a very different model in that the company is owned by the people that work in it every day.
Outside financial parties do have capital invested and they own 17%. We control the board, we’re not a company that’s controlled by them. We have permanence of our model, which, as you may know, we don’t brand Acrisure. We’re doing a lot of M&As where the brand of the companies we’re partnering with, those brands are retained, ownership interest is retained. It’s in Acrisure, not in their own company.
As we continue to grow, we’re also creating a lot of wealth for the right people as we continue to grow. There’s permanence of model. People have been attracted to that, find it as a friendlier way to perpetuate their ownership interest, maintaining very good relationships with their employees because we’re not changing or disrupting the companies that we partner with. They’re retaining brand, they’re retaining the way they pay their people, et cetera.
What we found is this has been, not just a model that’s been attractive to the US, but we’re now growing internationally in a fairly significant way.
Michael: I did not know that. Where are you?
Greg: 4% of our revenue right now is outside of North America. I think that’s probably 10% by the end of next year, 2019.
Greg: We’re excited about that. What we found is the reasons that people in the US want to do a deal with us are the very same reasons internationally. For all those reasons, we we are taking advantage of bringing something to the marketplace that’s different. As a result of that, those that have reached out to us, they’ve made it known that, “Look, if you come to places like the UK and other parts of the globe, we have an opportunity to grow there and so we are.”
The likely scenario is, by the end of next year, end of 2019, I think we’re probably a $2 billion company as we’ll grow about 60% this year, last year was 60% as well. For a sizable company, we continue to grow at a pretty accelerated pace. Again, the appeal of what we have to offer is permanence of home, not disrupting brand names and companies, not changing relationships with employees, and yet we have all of the resources and services and technology et cetera, that you’d expect a 1.5 billion company has.
We offer all of that, we just do it in a way where there’s optionality as to whether they use those services or not. They opt in or opt out as they see fit. We’re really trying to support the local entrepreneurs and maintain that entrepreneurial culture locally. Just add all the resources that a big company can bring, just do it in a way that doesn’t disrupt their day to day lives and they use whatever resources they’re looking for.
That’s what distinguishes us and differentiates us and why we’re growing the way that we are. Maybe, to your question earlier, I think people think that we’re either private equity controlled, or that we’re even a private equity fund. We’re neither. That’s been a big part of the appeal as well.
Michael: In a moment, Greg, I’m going to ask you to share how people can make contact, not necessarily with you, I know you’re incredibly busy, but with Acrisure and to find out more about it. I want to ask you one last question before I do that.
If you could deliver a message to the industry, and obviously, not everybody is quite ready to even have a conversation with you, right? There are obviously, thousands and thousands of agents, who, for whatever reason, their time and their career, their age, whatever personal choices, they want to push forward with obviously, the independent model and maintain their own equity for now. If you could deliver a message because you’ve created a fairly dramatic picture about the future, how the future is different than today. If you were going to deliver a message that you think mattered, that really meant something to the industry today, what would you want to say?
Greg: Wow, that’s a big question.
Michael: Just tell me the most important thing in the world right now, okay.
Greg: Yes, one that I could go on for a while. In just a matter of a few minutes that we have, is that change is coming. You’ve got to be prepared for it. This is an industry that, for the most part, you referenced earlier, for the most part, has been unchanged for the last couple hundred years. What the business looks like, how we attract and retain clients, the training relationships that exist, all that has been the same for the last couple hundred years.
I do think that’s going to change going forward. I think there’s a cost and a barrier to retaining clients that’s going to get more difficult as time goes on. I’m not saying that to alarm anybody. At the end of the day, the business and the relationships and all those things, if you’re an independent agency or even a single proprietor out there with your own client relationships, fundamentally, the business isn’t going to change overnight. I do think over time, and again, I define that as the next five years, for sure, the world’s going to get a bit different in terms of how business is placed, who you can place business with, if you have the right tools, the right capabilities, the right resources, technologies, et cetera.
I think the competitive profile, the competitive landscape does change over time. It is coming and it’s not to suggest the independent broker is in peril, quite the opposite. I think the independent agent is in a great place as it relates to, they have the client relationship. If you’re smart and thoughtful about how you take that relationship and align yourself with the right people, the right resources, the right technologies, et cetera, I think you’d be prepared to be successful for a long, long, long time. It’s those that stick their head in the sand and say, “Look, the world’s going to stay the same, it’s not going to change,” and so forth. Those are the folks that are going to probably struggle as you think about 5 and 10 years from now. I think the world is going to change enough that you won’t have the luxury of doing that.
Michael: Bill Gates said something along those lines. I think he said, “We underestimate how much the world is going to change in 10 years, but overestimate how much it’s going to change in two or three years.” I think you are painting the picture of a world where, at some point, agents wake up and the world has just radically shifted. I think you’re saying now is the time to get ready.
Greg: Well, I think it’s time to get ready. Again, I would say I really agree with a quote or the thought process is that 10 years from now, the insurance brokerage space is significantly different. Is that going to happen over the next year or two? Probably not. 10 years from now, it’s going to be significantly different in the 10 years, it might even short circuit that to five.
Michael: Maybe even five. Okay.
Greg: Yes, but 10 years for sure, I think we’ll start seeing some of those changes occur in the next five years, even.
Michael: All right. Greg, if our listeners want to learn more about Acrisure or engage in a conversation, how should they do that?
Greg: The easiest is obviously going to be an email. There’s a gentleman that works for us in Business Development group, Kyle Miller. It’s a nice, easy name. Kyle can be reached at firstname.lastname@example.org.
Michael: Got it, email@example.com.
Greg: Yes, K-M-I-L-L-E-R @acrisure.com.
Michael: Very good. All right. Greg, it’s been a pleasure having a conversation with you. I really appreciate taking time out of your busy schedule. Thanks so much.
Greg: Michael, thank you.