What is the key to perpetuation planning for insurance agencies?

In the insurance agency system, it’s no secret that right now many agencies are merging or being acquired, increasingly by private equity firms. For some, this is a blessing because they have not been able to keep up with technology, their intended legacy plan has not worked out, or the impending talent gap poses such a threat that what is valuable today may become unsustainable in the near future.

About eight years ago, Insurance Journal published an article on our company that looked into the distinctive qualities of the Insurance Office of America (IOA) model — qualities that set us apart and differ broadly from the traditional way of running an insurance agency. From the very beginning, the firm was built on a producer-focused model instead of a profit-focused model. Despite the buyouts, talent shortages, and weak or nonexistent perpetuation plans that plague many agencies, we have always been positioned to do well

However, it took being blindsided by a cancer diagnosis to open my eyes to the fact that every model can be taken to new levels. After a six-month dose of reality — and chemotherapy — both my body and IOA have a renewed emphasis on the future. That future is a very positive place to be, for me and for those I care about in my personal and business worlds, and it’s a place your agency can head toward even without the trauma of a health crisis.

Successful perpetuation is the cornerstone of agency longevity, but perpetuation is more than just saying, “Bill would make a great CEO someday” or “Beth knows a ton; she could step up in a heartbeat.” Bill and Beth might very well be excellent candidates in a perpetuation plan but not if they leave five years before it’s their time to shine. Agencies have got to implement a producer-focused model that develops and retains their core personnel, and that often comes down to making sure people have skin in the game.

Yet even the best models in the industry can face unexpected challenges. An illness helped push us to build a more comprehensive perpetuation plan that would protect our three main constituents: the agency; our people; and our clients.

Learning from the Unexpected

For me, staying in shape is important, so I play basketball with a group of guys half my age once a week. At nearly 40, I don’t have to win, but I certainly hate to lose, which means I come home pretty sore at times. After a tough Saturday morning game, I was stretching and working out some tight muscles when I discovered a lump. I was diagnosed with testicular cancer just three weeks after getting the all-clear in my annual physical, and I was completely blindsided.

Less than a year later, having been through surgery and chemotherapy, I’ve had my six-month scan, and I’m clean. Looking back on it, it’s something that I would not trade because there was growth and so many learning experiences that came from it that I don’t think a type A guy like myself could have learned any other way. It’s opened my eyes to appreciate the things I took for granted — my family, health, and work. It also helped me lead our agency to new and better levels that will benefit others, and that is gratifying.

Truth is, I’m not a control freak, but I was living in a world where I felt like I had things under control. Anyone who believes they have things lined up and in control is believing a lie.

My cancer diagnosis was a reality check: I might have been doing a great job at the things I had control over, but there are things we don’t run that can affect (or ruin) our lives and businesses. My diagnosis caused our firm to look at our perpetuation plan and take greater control over the things we could to promote our agency’s long-term viability and strength.

Some ask me if we were prepared. We were not as prepared as we are today. There were conversations about possibilities but not the formal plans we have now. In many ways, that experience has caused us to be better prepared for the next time we have something come up that we weren’t expecting. We have our flowchart for who we believe have the potential to be our next board members. It is planned out that, if something happens to me, our president, or our chairman, we know who moves into the roles. These are steps all agencies can take right now.

What Sets You Apart for the Future

Perpetuation was built in as a cornerstone of our model because more than just a personnel chart is needed to create an effective leadership-handoff plan. You’ve also got to keep your future leaders. That requires a compelling compensation program, appropriate technology investment to facilitate sales and client retention, and ownership opportunities for those who want to be more integrally involved in the success and future of the agency.

For example, when you look through the lens of what you would want as a customer service partner or a large producing agent — key players in perpetuation — you’d likely want to be compensated fairly. You wouldn’t want your commission cut in half year two, and you’d want to be paid the same for renewal business because retention is important. As we all know, it’s more profitable to retain a piece of business than it is to write a new one.

contact info

  • Insurance Source of Dallas
    888 S. Greenville Ave 140
    Richardson, TX 75081
  • Phone : (972) 907-1100
  • Fax : (972) 234-1804
  • Email : info@insdallas.com