Spencer Houldin is chairman of the nation’s largest and oldest agents’ association, the Independent Insurance Agents and Brokers of America (Big “I”). He is also co-president of the family run Ericson Insurance Advisors, an 80-year old agency serving the greater New York City and Litchfield County, Conn., region. His father William Houldin, who took over the agency in 1963 after the death of its founder, retired in 2005, leaving the agency in the hands of his sons, Peter, Scott and Spencer. Spencer has 25 years of experience as a personal insurance advisor and leads Ericson’s high-net-worth personal insurance division.
As chairman of the Big “I”, Houldin appreciates how many agencies are small startups that are looking for different help from the association than firms like his established business might expect. In this edited interview with Insurance Journal’s Andrea Wells, he discusses the meaning of independence in an age of private equity, how his agency developed its high-net-worth specialty, the future for different distribution channels, and the role of the association in meeting the needs of today’s agencies.
Wells: Let’s talk about independent, because it does seem that the term independent has changed. There are agencies now that are owned by carriers and by banks. They’re owned by private equity investors. What does being independent mean to you?
Houldin: Independent means that we have choice and that we can deliver to the consumer a customized solution at a very competitive price. When you look at the three different channels of selling insurance, you have your direct writers, your 800 numbers. There is a consumer that’s interested in that, but there really isn’t any counsel. There really isn’t any consumer advice that’s given to those people.
Then you have your captive agents, who only sell one product and that’s for that insurance company. While they provide the counsel, they don’t have any choice in anything but what they have.
The real power, especially as technology is allowing an independent agent to give a higher level of service on off-hours, is the independent agent that not only can give the 24-7 service but also can have many, many solutions in their arsenal. I think this will be the direction of the future for the consumer.
I’m really scared about the captive agent, that they’re going to be squeezed out, and we’re going to have direct writers and we’re going to have independent agents.
But it’s a really exciting time to be an independent agent.
Wells: What are your goals for your chairmanship?
Houldin: It’s really important that we focus on the value proposition to our end-user today and for tomorrow. Of course, we have mergers and acquisitions that are taking place at a rapid pace, but we also have a lot of startups.
Our Agency Universe Study that came out late last year showed the number of independent agencies in the country actually has stayed fairly flat over the past decade. Despite the myth that mergers and acquisitions are making the independent agent system decrease in numbers, it’s actually not true, because we have a lot of people that are starting up in small offices. We need to capture them as members.
We have started a very significant initiative on membership recruitment. We started with two states, South Carolina and New Jersey, at the beginning of this year. They’re our beta testers. New Jersey has already acquired eight new members, and they all tend to be the startup types.
It’s important that we address the needs of all of our members but especially the startup types. The world is changing at a faster pace than we’ve ever seen. Why somebody belongs to a trade association 20 years ago is different than why they belong today, so trying to identify what does the member need from us so that we can stay relevant.
We’re in the process now, as an executive committee and as a board, looking at the future needs of the independent agency system so that we can meet those needs and stay relevant.
Wells: A younger agency or a smaller agency might have different needs or goals. How do you address those?
Houldin: We do have markets. We have Big “I” Markets, which is a Big “I” initiative, where we have contracted with insurance companies that a smaller agency may not have the volume to be able to get an appointment on their own. But they can access many markets through Big “I” Markets. Using the power of 22,000 independent agencies that are members, we’re able to bring market access to those younger and startup agencies.
Also, our resources, whether education, or errors and omissions products. We have a bank, InsurBanc, designed specifically to loan money to startups. We have a ton of tools for that startup agency to help them get off the ground.
Wells: Over your agency’s 80-something year history, you have evolved into a specialist agency. How much of your business today is in the high-net-worth market?
Houldin: About 10 years ago, we sold our benefits division, so we only sell property and casualty. At that time, we were about 60 percent personal lines from a revenue standpoint, 40 percent commercial — again, all property and casualty. Today, we’re about 80 percent personal insurance, 20 percent commercial insurance.
We decided that there is a segment of the population that wants a different client experience. While price is always going to be important, there is a customer intimacy, there is a customer experience, that can be a very powerful value proposition.
We decided to go after that consumer who really wants amazing advice. For instance, when they have a car accident, we’ll have a rental car delivered to their house. Just like somebody’s willing to spend a thousand dollars a night on a hotel room for a different experience, that’s the consumer that we decided to go after.
Revenue-wise, it’s just gone through the roof. On finding those, that’s been a difficult thing over a decade, how you get to the high-net-worth individual. The good news is that rich people talk to rich people. Although it takes a while, word of mouth is how it has spread.
Wells: How would you describe the market for high-net-worth? I know there’s a limited amount of business and rates have been dropping in the soft market, yet you have seen some new entrants. Is the competition steep?
Houldin: It’s always steep, but we love competition because it only makes us stronger. Certainly with the consolidation of ACE, Chubb and Fireman’s Fund into the new Chubb, we’ve lost some markets in the high-net-worth space. But as you mentioned, there are some entrants.
What’s more of an opportunity for us is there is a ton of business that is with direct writers that technically is high-net-worth or affluent business. We have a saying, “get rich, never switch.” People will go and buy a what I will call vanilla contract, when they’re in their 20s, and they’ll just never change because they either are intimidated by the product to begin with or they just don’t know any better.
The opportunity is actually getting to the individuals that haven’t seen or been taught, “Why would I go with a company like Chubb or AIG Private Client Group or PURE or Cincinnati? Why is their contract better? Why is their claims service better? Why do they fit our needs better?”
Wells: Technology is changing very rapidly. Your own agency has developed something new. Talk about InsureScope.
Houldin: InsureScope is an effort to bring the digital world to the independent agency system and the high-net-worth. There is a segment of the population, especially emerging wealth, who want to do business online but also want the advice. InsureScope is a way for somebody to engage with us in a digital fashion. We will communicate to them with a highly customized solution, but it won’t be voice-to-voice as much as it will be digital-to-digital, 24-7.
We’re experimenting with it. We’re learning a lot. We’re really excited about the launch. We’ve gotten great response, and we’ll continue to learn and evolve the product over the coming years.
Wells: What about the area of talent, hiring younger people. Is that something that your agency has invested in?
Houldin: It definitely is a crisis in the independent agency system to bring on the next generation. There are plenty of resources to help train them and the Big “I” certainly has developed many resources.
What’s difficult is, depending on where you are, that how you source some of it changes. If you’re in a college town, for instance, that’s a much different strategy than if you’re where Ericson Insurance is, which is in a town of 2,500 people in the hills of Connecticut.
Our past two hires have been young adults who are phenomenal individuals but do not have insurance experience. For two years, we’ve been teaching them insurance and they’ve both turned into superstars.
There’s different ways to acquire talent, but it really can be geographic. What’s a shame is our industry is an incredibly great industry, but it’s not sexy. Young people have no idea what an independent agent does, and I don’t think we do a good job of telling our story.
Anybody that’s in the business looks back and says, “Best decision of my life was to become an independent agent,” for reasons that I’ve stated. It just gives you independence of your schedule, it’s a very financially rewarding industry, and it gives you an opportunity to help people. I think it’s overlooked by young people, and that’s a huge mistake.
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