There are moments in every insurance business owner’s career when a crystal ball could really come in handy. Can we reach our goals on our own, or should we merge with someone? Can we build our own technology platforms, or should we buy a firm with the technology capabilities we need? The uncertainty is endless.
As a naturally risk-adverse industry, insurance leaders are well-placed to deal with uncertainties. They can effectively underwrite their own future to determine which decision should produce the best outcome. This type of strategic thinking is particularly important when it comes to succession planning – what’s going to happen to your brokerage or your MGA when you retire?
In his keynote speech at the Target Markets Annual Summit in Scottsdale, AZ, this week, global insurance leader Patrick G. Ryan described succession planning as “critical”. Change to a business or a market can either happen suddenly or it can evolve over time – and company leaders need to be prepared for both, he reiterated.
Ryan is founder, chairman and CEO of Ryan Specialty Group (RSG), an international holding company specializing in wholesale brokerage, insurance underwriting managers and other specialty services to brokers, agents and insurers. Prior to launching RSG in 2010, Ryan founded Aon Corporation and served as its chairman and CEO for 41 years.
Under Ryan’s leadership, Aon expanded into more than 500 offices in 120 countries, generating revenues then in excess of $7 billion. When the entrepreneur reached his late 60s, he “didn’t really want to retire from Aon” but felt obliged to provide the public company with a successor. “We went out and hired Greg Case – and the rest is history,” he said.
At some point every business reaches a point where succession planning becomes a key priority. Ryan commented: “So many businesses [in the insurance industry] are family businesses and they’re worth a lot of money. What’s the right thing to do with that business? If you feel you want to sell, what you should do is look around and talk to people.
“Look for a good cultural fit because you’ve worked so hard to build your business, your employees are likely family [or are at least considered like family] and you care about them. You don’t want to put them in the wrong environment. Insurance is a professional services business – and professional services businesses can blow up with the exit of people.”
A strong cultural fit is more important than the money, according to Ryan. He advised the Target Markets audience to “not go any further” with a deal negotiation if the culture is not quite right, even if the pay check is tempting. Once the cultural fit is satisfied, those selling a business should then look for a strategic fit and for a platform that will help the business grow, Ryan added.
“If you’re going the other way [and looking to buy a business], the same principals apply,” he continued. “If you’re going to buy an MGU, make sure they do business the way you do business and the cultural fit is right, or it will implode. Then, make sure it fits with your strategy.”