MANAGE & LEAD
sustainable cash flow derived from steady premiums is what powers organic growth . Smart agency principals are finding ways to produce revenue more efficiently and minimize expenses , and they ’ re now willingly leveraging technology to increase growth opportunities , particularly those arising from the pandemic .
8 . Tax policy may spur even more transactions . Elections often bring changes in fiscal policy , and we likely will see changes to the tax code . If there is an increase in the capital gains tax , expect a rush in sales transactions timed to beat the tax change ’ s effective date .
Several factors are converging to create the perfect storm for agency acquisitions in 2021 : plenty of inexpensive capital , willing sellers who want to retire , aggressive buyers who wish to take advantage of the market , relatively high values , and tax uncertainty that may accelerate activity if capital gains taxes go up .
Owners who are a few years away from retiring can have the best of both worlds if they sell part of their business now and the rest later . Such staged exit strategies will continue to gain traction in 2021 , with owners choosing to cash in on some of the upsides of their agency ’ s value but still retain control of their business .
A typical scenario would be for a seller to identify a nextgeneration owner , such as the agency ’ s top producer . The current owner might agree to sell 30 % to the producer now and the remaining 70 % three to five years later . In the interim , the current owner continues to earn income , retain control and participate in the agency ’ s growth .
CONSUMER DEMAND FOR DIGITAL INTERACTION During the height of the pandemic , McKinsey & Company observed that “ we have vaulted five years forward in consumer and business digital adoption in a matter of around eight weeks .” We all learned to work remotely and
access services online . Americans are quickly shifting to a new way of life , from ordering restaurant meals and groceries on the internet to telemedicine and online classrooms .
The insurance industry is no exception . Personal lines customers and small business owners are looking for easier ways to connect with their agents . These same clients can interface digitally with banks and brokerage firms ; now , they have the same expectation for insurance providers .
Consumers seek convenience because that ’ s the way business will get done in the future .
Agencies are also learning that there is a difference between innovation and agility . New technology isn ’ t enough if you can ’ t adapt and respond quickly to changing events . Digital collaboration tools are becoming the new normal and will remain in place long after the pandemic is behind us .
Bricks and mortar aren ’ t going to be as important , either . Customers can use their smartphones to power their banking relationships , so why not their insurance relationships , too ? Nimble agencies that invested in technology and automation , new agency management systems , and remote conferencing capability will be able to ride the innovation wave to achieve greater efficiencies and capture new business .
In 2021 , agency owners will need to hold onto their best people with both hands . The battle for agency talent predates the pandemic , but remote working arrangements and greater mobility will make retaining good people even more challenging . A recent study by Cisco found that companies have 4.7 times more , home workers now than before the pandemic . Agents are no longer limited by geography and can sell remotely from anywhere .
Agencies must adapt to a changing workplace where remote employees are trusted to get their jobs done , empowered to work flexible schedules , and encouraged
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