Humans have always been attracted to fast money like moths to flames. Nothing is new in human behavior, at least in this regard. The difference today though is how technology can now measure how strongly attracted the moths are to the flames. An old-fashioned analysis of a gold rush is a good example of people chasing easy, fast money. This example is very relatable versus discussing financial engineering, huge debt loads that are not really debt but sort of is debt, derivati

A lot of entities want to pierce the corporate veil, and none of them have your best interests in mind. Multiple government entities have new, and some old, options for piercing the corporate veil and your clients’ corporate veils. As their broker, you can help protect them, but protect yourself too. A lot of entities want to pierce the corporate veil and none of them have your best interest in mind. Multiple government entities have new, and some old, options for piercing th

If you are interested in running or building a high-quality agency/brokerage that is focused on commercial (though not exclusive to commercial), below are nine critical metrics. The following metrics are a subset of the detailed metrics I provide exclusively for my clients. My firm has developed the most important metrics for agents and brokers at a depth previously unseen in our industry. Our predictive metrics eschew averages and quartiles, which are absolutely horrible met

I recently returned from a phenomenal convention dedicated to business valuations. The presenters and attendees were high quality, extremely well-educated people focused on all the complexities of doing business valuations correctly. I hate to tell the readers who believe a business valuation is simply X times EBITDA that it is not that simple. Business valuations vary significantly by purpose, jurisdiction, and a myriad of other factors. For example, the value of a business

Insurance is an awfully old product. Standalone insurance policies not attached to contracts or loans were sold in Italy in the 1300’s. But reference to insurance dates all the way back to the Hammurabi Code from around 1750 B.C.! You might think that after 4,000 years, people selling and buying insurance would know what they’re selling and buying. But they don’t. Not really, only superficially. This is not just my opinion. I’ve surveyed hundreds of people in the insurance wo

“If you waste your time talking to the people who don’t listen to the things that you are saying, who do you think’s gonna hear?” This line was written by Kris Kristofferson, one of the great songwriters of the last several generations. I am fairly confident the context in which I hear him sing this song is not the context he intended. I hear it in the context of a consultant’s advice. And I hear that consultant’s advice from two perspectives. The first is from the perspectiv

“It’s what they don’t tell you that matters.” The person, an esteemed expert, who emailed me this quote was referring to insurance company shenanigans, illusory coverage, and maybe fraud. The easiest analogy is E&O (errors and omissions/professional liability). Most E&O classes cover errors, mistakes that agents make (do you ever wonder why the policies are professional liability policies but in E&O classes instructors advise agents to never classify themselves as professiona

Recently, I’ve come across many instances of agencies binding coverage without realizing they do not have the authority or they do not even realize they are binding coverage. First things first. What is a binder? I find that only a small minority of people whom I ask, know the correct answer. As the formal issuance of binders has dwindled to almost zero, people have lost the knowledge of what a binder is. A binder, simplistically, is a short-term insurance policy. IT IS AN IN

The last couple of years have seen the first true hard market since the 1980’s. We had a few minor events in the ‘90’s and the 2001-2002 “hard” market was simply fortuitous timing for some carriers to cover up the losses they had been hiding in their insufficient reserves. For example, if you review the subsequent reserve changes, you’ll see that reserve deficiencies in specific lines were far larger than initially and, for all practicality, publicly recognized. This long his

“You’ll never accomplish anything if you care who gets the credit.” Gerald Weinberg, The Secrets of Consulting “It is amazing what you can accomplish if you do not care who gets the credit.” Harry S. Truman “A man may do an immense deal of good, if he does not care who gets the credit for it.” Father Strickland (1863) When I was young, I remember my grandmother planting seeds, both literally and figuratively. She liked a good garden (best snap beans ever), but she was also pl

Based on what’s happening in claims and the way rates are rapidly increasing, no one would ever think insurance companies are charities. They might think they are cheats, voracious capitalists, necessary plagues, and those are the nicer terms. But the best insurance companies are run more efficiently than a great many charities. I began thinking about this when I realized that some insurance companies are running on 15-16 cents. Out of every premium dollar, after subtracting

Sometimes I just have to find some humor. Have you ever wondered if some material percentage of insurance executives attended a Monty Python marathon and left thinking they had a attended a management training program? If you Google, “Monty Python management training course” you will see somewhere near 2.2 million results! So maybe it’s possible and based on the ridiculous statements I’ve been seeing, I’d say this conclusion is almost guaranteed! For proof, consider their fam

An analysis of a U.S. intelligence operation failure concluded a key cause of that failure was, "We all have this tendency to look for information that confirms our beliefs and to ignore what conflicts with them. It's very hard to give somebody information he doesn't want to hear, and the more senior they are, the worse it is." --Peter Sichel This is another way of saying, "Don't tell the emperor they are not wearing any clothes." The insurance industry is at the cusp of dram

Socialism involves minimizing the value of merit. In the world of insurance, where is the value of performance if every single agency gets exactly the same commission rate regardless of merit? Historically carriers partially mitigated their socialistic commission schedules with profit sharing. But today, with so much aggregation, whether through networks or acquisitions, distributor books are so large that statistically, their loss ratios should mimic the carriers' loss ratio

What does it really mean when a carrier says they need to increase rates by so much? Let me translate: It means they screwed up. They either need better actuaries or, assuming the actuaries made the appropriate rate recommendations in the preceding three years, their management team needs to listen to the actuaries. The fact is someone screwed up. It might be worth asking who got fired when the carrier announces these kinds of rate increases. Why would a carrier need a 22% ra

In some states, nail technologists (people who do manicures) must complete 600 hours of training and education prior to earning a license. P&C agents only need 40 hours give or take, depending on the state. For perspective, each fingernail gets the equivalent of more education than is required for agents in total! I have lost fingernails in accidents, but so far, the value of a fingernail has never come close to the value of my home. However, agents with only 40 hours of educ

Agents are facing ERISA exposures they don’t even know exist. And their E&O policies likely do not provide coverage. Most people think of ERISA relative to retirement accounts. However, ERISA was expanded to health insurance around 2020. Much of the ensuing litigation involves excessive fees as related to self-funded health plans. I am not an expert on this issue by any means. However, I have solid knowledge of most insurance agents' lack of knowledge in this space and their

Have you had your agency valued recently? If not, an up-to-date valuation can be a valuable planning tool for your agency. An agency valuation is the crucial first step for many agency events, including: Perpetuation Mergers and acquisitions Estate planning Buy/sell agreements Divorce settlements As the foundation for these important transactions, an accurate valuation is crucial. Furthermore, a valuation that does not cut corners and meets tax and court guidelines may preven

A Carrier Management article, from July 17, 2023, covered a report by McKinsey Global Institute that $800 billion of value has been lost specific to office building values attributable to work from home, post-pandemic employment trends. For context, $800 billion is about 80% of surplus as all U.S. insurance companies have, combined, as of 12-31-22 ($1 trillion). This has multiple implications for insurance. The first is, if you insure office buildings, you may need to find so

(And if the process sounds easy, you've chosen the wrong appraiser/business broker) One of the most dreaded emails/phone calls I get is from an agency owner, usually of a small agency, that has been led to think agency appraisals are simple. Agency appraisals are indeed simple when they are wrong. I know immediately the owner is going to be frustrated with me when I am simply trying to protect him and his agency from their own shortcomings. Some appraisers will gladly take ad