The one thing you need for successful succession planning

The one thing you need for successful succession planning | Insurance Business

The one thing you need for successful succession planning
It’s no secret that the insurance industry is aging. A significant number of agency owners don’t have a succession plan in place, instead viewing perpetuation as an event rather than a process. Nothing could be further from the truth, says Reagan Consulting President Kevin Stipe, and whether you choose to sell or pass your business along internally, there is one thing you’ll need: young, talented staff.

“The most valuable agencies in the industry are those that can actually perpetuate themselves,” said Stipe, who has nearly 22 years of experience in the agency merger and acquisition space. “The best thing an agency can do to maximize its value is get younger talent in the system, which gives it the choice of whether to sell internally or externally.”

The advantage of young and talented staff for internal perpetuation is obvious—the agency will still be profitable when the owner retires, negating the possibility for leadership gaps.

However, making skilful hiring decisions is also key if an agency owner is looking to sell the business.
“Nobody wants to buy a wasting asset, which is an agency devoid of talent,” Stipe said. “Truth be known, the buyers out there are looking for talent just as badly as everyone else. Talent is the most important thing they’re trying to buy.”

Given stereotypes of flightiness and entitlement surrounding the millennial generation, however, many independent agencies may be loathe to hire younger people in key broking positions. Yet this is not the case in the United States.

Reagan’s 2009 “Young Broker Study” and its 2012 update, found the 91 young brokers followed produced a book of business in excess of $500,000 by their fifth year of employment. Three years later, 80 of the original 91 were still employed as brokers in their same agencies. Of the remaining 11, 10 were employed elsewhere in the insurance industry and one had left due to the birth of a child.

The median broker in that group was generating new business commissions of $117,000 annually, and 45% had taken on leadership roles within the firm.

Based on the study, Reagan Consulting suggests that while hiring young talent directly from college is an effecting talent acquisition strategy, hiring young brokers with work experience is more effective.

“These hires may be a little more expensive, but they typically have greater maturity and bring real-world experience,” Reagan said. “We would encourage you to consider hiring talented brokers at all ages and stages, but would encourage you to make certain that young broker hiring is a part of your plan.”