Broker Words—November 2023

I’ve never been a big fan of Pac 2 football (or the other 10 teams who thus far have found suitors…or maybe “foster families”). How ironic that, after decades of football tomfoolery, the conference soon to be only a bridge team seems to be having a last-dance resurgence. No worries…my former conference of allegiance, the Big 8/Big 12, seems like it’s edging toward gridiron irrelevance regardless of how many new teams jump in. And Nostradamus isn’t even sure what’s going to happen to the ACC…

Look, you can throw as many Horned Frogs and Bearcats into the playoffs as you want, but we all know in our hearts that, for now at least, the SEC or the Big 10 (or Big 10+2, or Big 14, or soon to be Big 18) are going to provide the team that snags the Natty for the foreseeable future. And now they’re just hoovering up all the teams who might even have a puncher’s chance. Okay, I know in the last 20 years Clempsin grabbed a couple, and Florida State 10 years ago, but prior to that it was clear back to 2005 and Texas. But in the 20 years prior, all “Power Five” conferences had multiple national championships as did two independents (Miami and Notre Dame) and a team from the WAC (BYU).

Not gonna mention the past difficulty in transferring schools because that will screw up my analogy by prematurely introducing an element of “captivity.” Now there’s a Transporter (or DeLorean if you prefer) to whisk a player away to another school if he gets his knickers in a knot over playing time. Or if he gets an offer from a school projected to get more TV exposure. Or a lucrative Name, Image and Likeness deal. Hold on…I may be getting a bit “into the weeds” here…

The insurance business too is just a bit different from what it was when I originally sauntered in around 1983. I’m not anywhere near bright enough to explain all the root causes, but between carrier acquisitions, marketing group mergers, aggregators buying up brokerage shops, and passionate producers aging out of the industry, in many ways the brokerage side of the insurance business looks about as invitingly attractive as my mirror does compared to my high school graduation picture (especially if you can ignore the 70s porn star mustache).

Add to this InsureTech advances, AI, and a slew of automated underwriting tools and it makes me worry about our industry’s moral compass and our foundational duty to help consumers and their families mitigate the most trying and often heartbreaking times in their lives. I’m talking about a wife and her children being able to stay in their home…not being sure that if Karen wants the winery, then there’s enough cash to get Brandon to be content with the deal. Don’t mistake me—there’s nothing wrong with being successful and becoming wealthy, and there’s nothing wrong with sound estate planning. Many clients like these you likely often grew from proverbial acorns.

But it’s different from ensuring that the kids can go to college if they so choose. That they can still have dogs and play sports or take music and dance lessons.

And it’s different from being able to help clients plan for just a comfortable retirement. Especially if the breadwinner(s) might be in less than preferred health.

As far as we all can tell there will always be insurance products and consumers to buy them. But the genesis of the brokerage business was generally the impaired risk case. Oversimplified no doubt, independent carriers and wholesalers found a profitable and much needed niche by serving those who were declined or priced out of the “career” shops. Which was all hunky-dory until they applied the same underwriting and actuarial insight to price products more affordably for those who weren’t sub-standard. The brokerage business became so lucrative that career carriers worked to develop brokerage departments and products to compete…with varying degrees of friction in the boardrooms I imagine. But over the past two decades or so, for likely myriad reasons but certainly profitability being one, independent brokerage companies were acquired by other companies. Still other companies just shut down and sold their assets when they couldn’t compete for one reason or another. Regardless, there are markedly fewer companies selling life insurance today. Heck, there are only a handful of DI or LTCI companies left.

So, in my imagined altruistic Catch 22, fewer carriers, fewer producers, AI, automated underwriting providing potentially more “kick outs” and a larger than ever prospect pool, how does an agent’s own view of the viability of his or her agency navigate maintaining a favorable carrier status, and being able to afford a lake house and nice vacations, while still pursuing a desire to serve those who need his or her solutions the most?

Fewer producers means more “white whales” per agent in theory, which could lead to less attention to only marginally profitable (if at all) or even developmental (read young, just starting out, new families, etc.) prospects. More potential prospects per agent combined with company pressure combined with automation means potentially less time spent on medically questionable prospects. Why take time trying to help a fat old guy like me when two houses down is the guy with a “13.1” sticker in the back window of his nice SUV? To the best of my knowledge there is still a thing called a “placement ratio.”

Today there are still very skilled underwriters, well staffed underwriting departments and dedicated medical directors (like our very own Dr. Bob Goldstone!). And your cheat code for this currently still theoretical Kobayashi Maru is still the talented and dedicated staff at your BGA—truly the lifeblood of the brokerage business! Fat guys who mostly follow their doctor’s advice can still get life insurance. But as more and more shops are sold, or merged and consolidated, I have to wonder about the long term efficacy—especially shops where the founders retire with no familial or emotionally invested successors in positions of significant influence.

Are mergers and acquisitions leading our industry to a thankfully still distant point where the number of significant brokerage players on the carrier level dwindle to nearer the number of recognized reinsurers? What is the 10 year timeline on the brokerage shops being aggregated? And will Hal 9000 increasingly tell BGAs and underwriters alike, “I’m sorry Dave, I’m afraid I can’t do that.” Is it really possible that the industry is prime to begin a descent on the slippery slope back to an overarching risk mentality of “Send me your active, your cognizant, your healthy masses yearning for an open pickleball court?”

After all is said and done, change is inevitable. I just hope the insurance industry ultimately mirrors the NCAA in one particularly crucial area…and thus I can scheme a way to get showered with a boatload of sweet NIL cash. [SPH]