The spring months usher in a time of growth and change and often serve as a catalyst for organizing and reevaluating personal lives and careers. For the insurance industry, the season can bring a fresh wave of opportunities for producers to do some spring cleaning of sorts by taking a look at their goals and making sure their professional and personal priorities are still in alignment with their agency.
Insurance agency merger and acquisition (M&A) activity also is a motivator for producers to reassess their opportunities. Agency M&A transactions reached the highest annual total in 2019 with 649 transactions, according to OPTIS Partners, and the pace was anticipated to continue prior to the novel coronavirus pandemic. For the purposes of dealing with what we know today, we’ll base the following on the assumption that activity will return to a high pace once the outbreak is under control and the financial sector has returned to a more normal level.
M&A activity has far-reaching implications for producers, impacting everything from earning potential to corporate culture to leadership. When changes occur, they provide an opportunity for producers to evaluate their options and determine whether moving from a traditional corporate model to an entrepreneurial model is a better fit for them.
For those insurance producers with an entrepreneurial spirit, the traditional model can seem restrictive with minimal freedom, tight noncompetes, and lack of equity and ownership opportunities. While the corporate model may offer the perceived safety of a large organizational culture, the entrepreneurial model provides producers the freedom to determine their own level of success unhindered by corporate goalsetting. And, if the agency is not built to sell, it provides a level of stability others cannot.
‘Although there is no one-size-fits-all approach to success, there are aspects of an insurance agency every producer needs to consider to help them determine how to achieve their version of success.’
A clean sweep evaluation of options not only should include the consideration of compensation, but also should include corporate values, culture, leadership transparency, and access to world-class tools, which also are important factors when making the decision between models.
An effective review involves the following touch points.
Aligning Financial Goals
The corporate model typically does not allow for equity ownership in your book of business that is as significant as the entrepreneurial model. Stock ownership or a similar plan is also minimal in comparison.
Often, producers will consider the stability of the corporate model as a good trade-off for the perceived unknown nature of the entrepreneurial model. However, when agencies are purchased, new ownership often creates demands on producers to focus heavily on new business with fewer commissions. Renewal commissions can be decreased as well and even eliminated.
For those who find the customer relationship to be the best part of their work, it can be demoralizing, which does not have a positive impact on earning potential.
The entrepreneurial model, on the other hand, provides equity interest ownership, stock or similar options, better retirement compensation, and the freedom to direct your own path.
Misconceptions about the entrepreneurial model may make producers hesitant to consider this option. One of the biggest misconceptions is that it will end up costing the producer more.
In the corporate model, agencies generally take care of office functions such as accounting, payroll, technology, market access, and other tools and resources. With the right agency, however, producers in the entrepreneurial model have nearly all of these same office functions taken care of with the added benefit of retaining complete control of the goals and expenditures. When assessing opportunities to join a new agency, producers should analyze whether misconceptions like this have played a role in determining their next move.
Striking the Right Work-Life Balance
Over 30% of workers say they are willing to get less financial compensation to have a better work-life balance, according to a recent Joblist study. For producers who want to determine when work and personal time occurs, they should seek out an agency that provides a working environment that better fits their desired lifestyle.
When diving deeper into career options, producers should assess four primary priorities — work, family, health and well-being — and consider how their current agency aligns with a healthy balance of these priorities.
Analyzing Leadership Style and Culture
Cultural alignment is important to consider when determining whether another agency might be a better fit. According to a Glassdoor survey, 56% of respondents ranked a strong workplace culture as more important than compensation, and 73% of respondents indicated they would not apply to a company unless its values aligned with their own personal values.
Although a lack of alignment with culture can initially seem like a minor inconvenience, it will ultimately stunt long-term growth within an agency. This can easily cause high turnover, loss of productivity and decreased motivation. For commission-based producers, a loss in productivity means a major loss in income.
‘For those insurance producers with an entrepreneurial spirit, the traditional model can seem restrictive with minimal freedom, tight noncompetes, and lack of equity and ownership opportunities.’
Assessing the Impact of M&A
After a merger or acquisition, pressure can ramp up to increase new business as buyers seek a quick return on their investment.
In contrast, producers in an entrepreneurial model often build increasing equity interest into their book of business and have stock or similar ownership options tied to longevity. This type of agency is simply not built to sell in the same way others are, which provides stability.
Producers should assess the security of their future in the event of a merger or acquisition and factor this potential uncertainty into their career review.
Having the Freedom to Leave
Traditional corporate agency models have restrictive noncompete agreements that make it difficult for producers to pursue the best options for their lives. Noncompetes limit the freedom of producers to leave without steep and sometimes painful penalties.
Producers who want to control their own destinies should consider an entrepreneurial model agency that will work with them should they decide to make a change.
Although there is no one-size-fits-all approach to success, there are aspects of an insurance agency every producer needs to consider to help them determine how to achieve their version of success.
Before becoming stagnant in a role at an agency, every producer should take the time to conduct a bit of spring cleaning in their career and make a fresh assessment of their options, specifically focusing on their priorities and what matters most in their lives.
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