In California at least, non-competes (an agreement by which parties are bound not to compete) are basically unenforceable. It's generally considered that everyone has a right to make a living. Of course, when clients follow an agent who departs an agency, there is still always the issue of "trade secrets." Has that agent illegally taken confidential client information and/or a client list prior to departure? Even when innocent, agents often fear being subjected to legal hassles should clients decide to continue doing business with them after the split. But technology and social media has changed all that. I'm no attorney, but whether you are an agent or an agency owner, here's something worth checking out with your own legal counsel...
While chatting at an early morning business breakfast with two attorneys and a stock broker (no, this is not a set up for a joke), the stock broker asked me what was new in the insurance world. I've never been one to pass up a marketing opportunity so I begin describing our tech-based client services and how they not only WOW clients but give our brokers so much more to sell. "The goal is to develop multiple reasons why both clients and our team members won't want to leave." I explain. One of the attorneys responds, "Well, you're smart to do that since social media makes it so easy for people to leave these days." Since I'm not sure I'm clear about what he's referring to, I bring up the non-compete/trade secret issue. "Look," he jumps in, "all an agent has to do is invite his or her clients to connect with him on social media. Once they're connected, those relationships transcend the agency and belong to the agent. When the agent leaves, he posts a new status and shoots out as many updates as he wants about what he is doing. The business that follows belongs to the agent. Social media is an open marketplace."
Last year at a conference, I heard someone ask the owner of a "tech-agency" (a company that sells technology but is compensated through insurance commissions) whether the tech-agency would be buying books of insurance accounts to fuel their growth. The answer was a resounding "NO." The CEO explained their model was designed for insurance consumers that want the massive benefits of the agency's tech platform in exchange for their insurance commissions. "Why would we pay for customers who either don't understand or are not interested in our virtual business tools." he explained.
The things we can control in the world of insurance agency have changed. Gone are the days when an agent is sued for taking his rolodex when he quits his job. And agency stickiness no longer rests primarily on the producer's relationship with the clients. Think about it...with 25% of agency owners and many of their clients aging out in the next couple of years, it's a changing of the guard.
Consumers will transfer the insurance commissions they pay to next generation insurance agencies that deliver insurance with virtual services with virtual flexibility. Sales will be team to team (client team to agency team). There'll be no reason to intimidate producers to stay since agency value will be invested in a platform of irresistible solutions that producers will be thrilled about sharing with the world.
Lynne Wallace is the CEO and president of VANTREO Insurance Brokerage and co-founder of NDOI, the National Directory of Insurance.