Thrive: How Insurance Agents & Brokers Will Succeed in 2022

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Title card, Wednesdays with Woodward, Webinar Series. Video feed in upper right, Joan Woodward.

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JOAN WOODWARD: Good afternoon. And thank you for joining us. I'm Joan Woodward. And I'm honored to lead the Travelers Institute. Welcome back to Wednesdays with Woodward, a webinar series where we convene leading experts for conversations around some of today's biggest challenges.

Today we explore the keys to success at today's top-performing insurance agencies and firms in an ever-changing market landscape. As always, we're going to be sending out the replay of this program in the next few days. So, keep an eye out for that.

Before we get started, I'd like to share our disclaimer about today's webinar.

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Slide, About Travelers Institute (registered trademark) Webinars. The Wednesdays with Woodward (registered trademark) educational webinar series is presented by the Travelers Institute, the public policy division of Travelers. This program is offered for informational and educational purposes only. You should consult with your financial, legal, insurance or other advisors about any practices suggested by this program. Please note that this session is being recorded and may be used as Travelers deems appropriate.

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A huge thanks to our partners today for the session; The Council of Insurance Agents & Brokers, the MetroHartford Alliance, the American Property Casualty Insurance Association and the Master's in FinTech Program at the University of Connecticut School of Business.

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Slide, Wednesdays with Woodward, Webinar Series, Thrive: How insurance agents and brokers will succeed in 2022. Logos of co-hosting organizations: Travelers Institute, The Council of Insurance Agents & Brokers, the American Property Casualty Insurance Association, the MetroHartford Alliance and the Master's in Financial Technology (FinTech) Program at the University of Connecticut School of Business.

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Now let's get started.

So, in a world of rapid change, how do insurance leaders continue to thrive? What technology advancements are setting insurance leaders apart? What shifts are happening in the distribution landscape? And what does this all mean for your business?

So, to help answer these questions today, I'm pleased to be joined by Ken Crerar and Pete Heard.

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Slide, Speakers. Three profile pictures, Joan Woodward, Executive Vice President, Public Policy; President, Travelers Institute, Travelers. Ken Crerar, President and CEO, The Council of Insurance Agents and Brokers. Pete Heard, Executive Vice President, Enterprise Distribution, Travelers.

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So, Ken, as many of you know, is President and CEO of The Council of Insurance Agents & Brokers, a leading Washington-based trade association representing the top 200 commercial insurance brokerages in the world. He first joined The Council as Chief Lobbyist and Director of Political Action Committees.

As President now, Ken built the organization into a global leader in commercial insurance and employee benefits. On his watch, The Council has had tremendous impact in the insurance community from launching their Leader's Edge Magazine to establishing The Council Foundation to help create the World Federation of Insurance Intermediaries. That's just to name a few on Ken's watch. So, thank you, Ken. We're so pleased to have you on today's session.

Also joining me today is Travelers' Pete Heard. He's the Executive Vice President of Enterprise Distribution. Pete is responsible for the overall development and execution of the company's distribution strategy. And we're really thrilled to get your perspective today, Pete.

Pete has a long track record at Travelers managing key agent and broker relationships over many, many years. He also did business development and business analytics. He is a tremendous asset for us at Travelers and for the industry. And we're really lucky to have him.

So, Pete and Ken are going to share their insights to help our agents and brokers succeed in this constantly changing landscape today. Ken's going to kick us off with an opening presentation and then hand it over to Pete. After that, I'll come back on and keep the conversation rolling.

I'm going to take your questions today like we always do. So please put those in the Q&A while you think of questions during their presentations. So, thank you both for joining our virtual session. And, Ken, the floor is yours.

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Slide, Thrive, How Insurance agents and brokers will succeed in 2022.Ken Crerar, President and CEO, The Council of Insurance Agents & Brokers.

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KEN CRERAR: Thanks, Joan. And thanks, Pete for joining us today. I'm really excited to be here.

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Slide, The Council at a Glance. 200 member firms. 38 firms with international HQ. $45M median revenue. Placing 90% of all P/C premiums in the U.S. Placing 70% of all EB business in the U.S. Membership includes: retail brokers/intermediaries, MGAs, MGUs, Wholesalers, Agency Networks, Insurtech Firms.

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As Joan mentioned, The Council is made up of 200 commercial insurance and employee benefits intermediaries’ firms in the US and abroad. And I know we all use different terminology as brokers and agents. So, I wanted to call out right from the beginning when I reference "brokers," I'm referring to all intermediaries in general.

Our members place 90% of all PC premium and 70% of all EV business in the US. And they run the gamut from the retail brokers to bank-owned, public and privately held MGAs and MGUs, wholesalers and insurtech firms. All this to say our membership is very diverse with different perspectives and objectives. Today I'm sharing my own thoughts and insights, not speaking for any of our members.

Let me spend a minute reflecting on 2021. It's been a wild ride, a tough two years for anyone in any kind of leadership role.

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Slide, Reflecting on 2020 and 2021. Quote, I honestly feared for the worst, but we've thrived, Matt Gardner, Founder and CEO, Patriot Growth Insurance Services, Leader's Edge, November 2021.

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One of the biggest challenges has been all the decisions we make are made in the context of shifting sands.

As a leader in this industry, you're constantly saying, I don't know. Or you're thinking, I don't know. We don't have all the answers.

And then when you add the component that, if you look at some of the Edelman Trust survey stuff that came out recently, you'll notice that employers are where people are looking to for information. And those employers are coming to insurance brokers and agents. And so, the theme today of how do insurance leaders continue to thrive is really exciting.

Let's just pause on the fact that our industry, despite its absolute chaos over the last two years, is thriving. Of course, we haven't been isolated from the pandemic. No one has.

But we don't have people leaving our industry in droves. Our business has been somewhat stable. There's plenty of great jobs available, as many of you know.

And COVID has really accelerated changes that were needed to get us on the same footing as other industries when competing for talent.

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Slide, Leader's Edge. Quote, Sometimes change can be very hard, but I think COVID made people more open, and it forced us to change. You didn't have a choice. Aimee Kilpatrick, COO, BXS Insurance, Leader's Edge, August 2021.

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Most of us were really pretty uneasy about the remote work, as this has always been a face-to-face business. But when that was taken away, we adapted. And we learned a lot about ourselves and how we can serve our customers in different ways.

In many ways, the pandemic has strengthened the relationships we have with our clients. They've always come to us for counsel. But during the pandemic, they've relied on us for advice in ways that they hadn't before. And I think that's because we had already established a level of trust.

It's all about trust. It always has been. So, when things were feeling really tenuous and uncertain, our clients felt comfortable leaning on us for support. So, we'll get into the challenges a bit. But when you look at the grand scheme of things, our industry is well positioned to come out of this with much that we've learned from about how to better serve our clients and improve their experience going forward.

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Slide, Emerging Risks. Quote, I think you're going to have more niches in agencies. You're going to need to have a depth of expertise to have a value prop that attracts consumers. Ryan Deeds, Director of I.T., Hub International, Leader's Edge, October 2019.

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So, let me talk a minute about the challenges and the opportunities, the emerging risks that we're all facing. One major challenge we're facing is not only risks involving but they're also becoming more complex. There's also some risks that were greatly exacerbated by the pandemic. Cyber is an example.

But we're not just talking about hackers and phishing anymore. The internet of things and connectivity makes everything really efficient. But that connectivity comes with more cyber risks. Those of you who have Teslas can attest to that.

Then you have social trends, like increased litigation against businesses and corporations. Litigation against insurance companies specifically is definitely an issue driving challenges for carriers and leading to higher prices in certain lines, like D&O. The changing climate is also bringing new weather patterns and higher risk associated with natural catastrophes. Climate is an issue that we're all struggling with. And as all these risks evolve and become more complex; insurance solutions become nuanced.

So, I expect we'll see more and more brokers start to specialize in certain areas, which in my opinion is an opportunity to build brand loyalty. So, what do I mean by that? If you build up a capability and the client knows that your entire firm, not just the individual broker, is investing in research and data and information to get ahead of wherever the risk might face, the more likely they stay loyal to you as a brand and if the broker were to move on or be taken away or stolen. This is very relevant to carriers as well. And it's part of what's driving M&A activity.

A firm that acquires wants these areas of specialization. It's all about scale. And one of the things that I keep hearing from aggregators is one of the reasons they're aggregating is they're building out scale. They have scale to provide services necessary to support their clients.

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Slide, Mergers and Acquisitions. 1,100 plus individual agency acquisitions in 2021. Source: Hales Report.

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There's a flip side to every coin. And M&A is no different. And in 2021, there were more than 1,100 individual acquisitions. It's a great sign for our business. It shows there's confidence in our industry and many firms. And from what we're seeing and hearing, M&A activity will continue to be strong this year.

There will be some headwinds. We obviously know more than we did last year about the virus. But we still don't know exactly how and for how long COVID is going to impact us. I wish I had a simple answer. But we don't.

And there will likely be more attention from regulators on the larger mergers. We saw that last year with Aon and Willis Towers Watson. And I think there was another comment in today's paper about a different industry but another merger.

So, the Department of Justice is looking at all these antitrust issues. We also still don't know what changes the administration is going to make in regard to tax policy and interest rates. But all these factors notwithstanding, I think we can expect a very busy 2022.

However, if the M&A arena stays strong, what does that mean for firms looking to build and integrate their teams? There are some firms that have grown from 100 to 1,000 employees all spread out across the different geographies. None of these people have ever been in the same room together.

And I heard just yesterday from one firm that was, for the first time, trying to pull everyone together in about two weeks. And they got canceled. And that's the kinds of things that are happening.

And the employees who do have opportunities to work together in an office may still be remote because of COVID. So, employers are really going to have to get creative to get their teams engaged, meld those groups together and have everyone singing from the same sheet of music. And there's a simple set of expectations around simple issues.

And I think that one of the things that's clear to me is that the empathy that's necessary for you to hold on to people is going to be critical. So, we know that we can't separate the consumer experience from the professional experience because professionals are consumers.

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Slide, Evolving Expectations. Quote, As a whole, clients want things to happen quicker. And if it's digital that happens to provide that experience for them, then, yes, absolutely, they want their broker to have more digital tools. Aimee Edgin, Commercial Operations Manager, Parker Smith and Feek, Leader's Edge, December 2020

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Everything has to focus on consumers. If there's a special sauce in any industry, it's the fact that brokers maintain the relationship and understanding of their consumers.

So, what's going on there? Well, it's changing very dramatically. I can go online and see exactly where my $5 package is at any given moment. But I can't go online and see what kind of business insurance I have in place in one package.

Now I don't think our clients are expecting us to be Amazon. But transparency is going to become more important every day. And when we talk about transparency, this could mean transparency in data, policy details and fees. Each firm or organization is going to have to decide what that's meant for their business and decide how much their clients want it or don't. The bottom line is that the demand for transparency is growing. And I see it as an opportunity to build trust with our clients and to build out that brand.

I keep coming back to, it's about that client experience. The client experience is what's changed. If each one of you think about how you buy things today, you used to run to the Ace Hardware. Now you just go hop on Amazon.

And you hop on. You order something. And it comes the next day. And you're fine with that. But it's that immediacy.

And you also have an opinion on whether it doesn't work or not. And if it doesn't work, you post it. That's all new. That's different. And that's going to be different for us as an industry.

So, blending technology with human connection is going to be critical. We are at the strange but exciting time where we had business that relied very heavily on human interaction. But then COVID hit. We immediately ramped up our use of technology.

And we moved all the way to the other side, 100% virtual. Look at us today. I think most of us would agree that the perfect formula is a nice mix of both.

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Slide, Blending Tech with the Human Connection. Quote, While nobody knows exactly what that new way looks like yet, I think we can all agree it won't be the same for a long time, if ever. Adam Kiefer, CEO and Co-Founder, Talage Insurance, Leader's Edge, April 2020

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So, going forward, it's going to be really exciting to see how brokers blend these two approaches both with the carriers and with their clients. People still need and want to be connected in person. And we saw that at our conferences that we held in the summer and the fall with very strict COVID protocols. But those in-person meetings will likely be less frequent. And so how can we use technology to support those relationships?

The meetings have changed a lot. And they've become more meaty in some ways, more substantive because there's less of them. And it means that some of the chitchat doesn't happen the same way. How can we create these touchpoints, so our clients are reminded that we're working for them year-round, not just during renewal? That's clearly what's happening.

And then there's the data piece. If we're collecting a lot of information from our clients and there's a lot of information out there to buy, they're going to expect us to know more about them. Think about today how you approach things.

You expect someone to know what you want and how much you want it your expectation is. And that's what brokers are anticipating. We're going to have to know more about our clients and what their businesses are like and how they're changing so we can mitigate the risk and we can see the bigger picture.

You need to build an A team to deliver on all these pieces, which brings us to our talent issue. See, I'm covering a lot of ground here. But talent's the big one.

Obviously, it's just the firms. And we've been talking about talent for a number of years. And talent has been--at one point, we said, well, we're going to need more financially oriented people.

Now we're going to really need--the talent thing is really about understanding the people that we're bringing in and making sure that they understand our clients. And so, they're going to become more specific. While our industry isn't being impacted by the great resignation at the same level as some other industries, we're facing an uphill battle when it comes to recruiting young and diverse talent. This was an issue before the pandemic. And it's an even greater issue now.

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Slide, The War for Talent. Quote, Recruiting and developing talent was named the top challenge in the third quarter of 2021 by 74% of respondents. The Council's Q3 2021 Commercial P/C Market Survey.

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The Council publishes a quarterly P&C market survey. In its last quarter of 2021, recruiting and developing talent was the number one challenge, top challenge among our firms. What we're hearing from our members is that they have to reach further and deeper for good talent.

And in many cases, that means recruiting professionals from outside our industry. They're fine with training folks that don't have insurance acumen but have foundational skills and experience needed for their specific roles. But that creates a cultural shift. And you need industry-specific training to get these folks up to speed at a rapid pace.

We've been hearing from our members and for some time that a gap existed in training and development options for up and coming brokers. We felt that it was an opportunity to build something brand new just for brokers. So, we created the New Professional Designation APRI.

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Slide, The War for Talent. Quote, The only assets we have are people. We're constantly looking for the best way to teach them the business. David Becker, CEO, Cottingham and Butler, Leader's Edge, January 2022.

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And that program earns you a designation.

The program that is developed to earn you that designation is the Insurance Professional School. We've created it in partnership with the University of Georgia and The Institutes. And the whole goal is to shorten the learning curve for people who are new to the industry so they can be effective and work quickly with their firms and clients. Industry-specific training is just one of the examples of how we can support that recruitment and onboarding process.

I've been in this industry for a long time. And I think, for brokers, our talent crisis is more of a marketing crisis. This is an industry that allows the world to dream big and take risks. We haven't ever marketed ourselves in that way. So that's an opportunity going forward and one that I'm excited about.

Finally, I want to talk about the social contract. I believe we're all facing a new social contract between employers and employees. Of course, once we get the right people, we have to worry about keeping them. And that's where a lot of leaders get stuck because things are different now.

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Slide, A New Social Contract. Quote, We can't be the best we can be without developing our people. Ryan Michalowski, Chief People Officer, MJ Insurance, Leader's Edge, January 2022.

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Competitive salaries and benefits simply aren't enough, especially in an environment where you're not even bound by geography. You can work remotely from anywhere. Research has shown that it costs businesses between one and a half to twice the annual salary of an employee if they leave. And we know that the two of the main reasons people leave an organization is because they feel like their career path is stalled or they're not being given growth opportunities.

You know, it's funny. I used to work with a lot of people who would think that, if you weren't in the office, you can't possibly be working. Well, I can assure you that I have a team here that has worked really hard and worked virtually and produced an incredible amount of material during a period of the pandemic. So, I'm over that feeling. And I think many of us in this industry have learned from that.

As leaders, we often put conversations about development and career paths on the back burner in favor of more pressing priorities. And we make an assumption that our employees know how much we value them. That's just not the case. You have to say it over and over again.

But the talent development piece can't be overlooked, particularly as our current leaders start to age out of the industry. It's not enough to just recruit young talent. We also have to prepare the talent. We have to be the leaders of the future.

We have to talk to them. We have to interact with them. We have to mentor them. It's really important.

Finally, I know Pete's going to talk a lot about technology in a minute. But I just want to make a couple of points. Let me start by saying that I'm not a tech expert, far from it. I have a lot of really smart folks on my staff who are in charge of that.

But where I do have a lot of experience is taking risks and trying out new things. And I've seen these situations where really good ideas fail because the right people weren't engaged in the process. We have insurance professionals who've been in our organizations and this industry for decades. But they've seen a lot of change. And there's a certain element of fear when it comes to technology replacing them or making their roles obsolete.

But these same people are the ones with the institutional knowledge that's absolutely crucial to the success of these projects. If a solution isn't properly vetted, your team feel can feel like this, as something that is being foisted upon them versus something that would make their lives easier. So, don't rush. You absolutely need to do the pre-work.

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Slide, Validating Solutions. 70% of all digital transformation initiatives do not reach their goals. Boston Consulting Group, October 2020. The technology is important but the people dimension, organization, operating model, processes, and culture, is usually the determining factor. Boston Consulting Group, October 2020.

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But remember the other thing that's really important to remember is this is about clients and that you understand what they want in terms of taste. So, talk to your teams. Vet the solutions. Explain what this new technology is going to do and so that, when you're ready to pull the trigger on the new investment, your people are excited and ready to jump in.

Sometimes, technology can be visible to customers. Or it might be about tools that support employees. This is obviously making your organization much more efficient. It's also about where you're going to have the greatest impact.

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Slide, Supporting the Customer Experience. Quote, Anything we do on a routine basis today is ripe for automation. Brian Comerford, SVP, IT Director of Strategy, Governance and Innovation, I.M.A. Group, Leader's Edge, June 2019.

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I'm sure I'm not unique in this. But believe that there's more art than science in what our members do. So, I think the most impactful investment for brokers are those that augment--I'm sorry--or support, not replace, the broker-client relationship. That's just critical. I mean, it's about doing what you do better and more effectively and more impactful.

Finally, I think we're going to make investments. We've got to test those investments. The special sauce here is about understanding your client and understanding their business and where it's going.

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Slide, Test Small, Fail Early. Quote, I've missed more than 9,000 shots in my career. I've lost almost 300 games. Twenty-six times, I've been trusted to take the game winning shot and missed. I've failed over and over and over again in my life. And that is why I succeed. Michael Jordan.

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So with that, I'm going to pass this over to Pete and let him give you some real words of wisdom from somebody who's on the side of the business that is really changing pretty dramatically like ours is. And so, Pete, take it away. It's yours.

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Slide, Thank you. Slide, Forces of Change in Distribution. Numbered list. 1. Emergence of mobile, empowered customers, agents, and employees. 2. Advanced technology and data being used as enablers to achieve their aspirations. 3. Growth, consolidation and PE capital is bringing experiences and capabilities from other industries. 4. New entrants create threats, solutions, and opportunities. 5. The emergent distribution model is driving decisions on placement, relationships, compensation, investments. Text, How do we collectively manage engagement in this environment?

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PETE HEARD: Great. Thanks, Ken. And hi, everybody, from beautiful downtown Hartford, where today it's about 11 degrees, I think. So winter is well set in here in Hartford, Connecticut.

When looking to answer the question of how we will thrive in 2022, I like to rather think of it in terms of, how do we collectively manage engagement in our environment? And in that regard, there's so many subjects that we could go deep on today. Engagement is shaped by what we call forces of change, things that are affecting our businesses and our careers and our lives today. Ken definitely touched on a few of those. So, let's explore a little bit more on these risks and opportunities.

We could talk about engagement and forces of change within the context of the access economy, mobile, empowered customers, agents and employees. Some of the more interesting and perhaps unusual ones that I've learned of recently are people who are owning and buying physical assets to monetize them in surprisingly new ways. And, of course, we all know about Lyft and Uber and VRBO and Airbnb.

But people are now sharing their cars through companies like Turo and Getaround. And they're even renting usage of their backyard swimming pools using an app called Swimply. There's so much to consider in the gig economy and with the gig worker. And these are just the new and emerging risks that create both threats and opportunities and solutions for sound advice provided by agents, brokers and carriers.

We could talk about engagement in terms of the continued robust M&A market. Ken said there were over 1,100 transactions that happened just in 2021 alone. Now what does that mean for our businesses? And how do we keep up with those changes? That's a big, big question today.

We could also talk about engagement within the context of broad societal trends, things that, like Ken said, might have happened anyway. But they're hyper-accelerated in this COVID world. For example, we've seen younger people get married or otherwise settle down later in life than prior generations.

We've seen a delay of purchase of assets, like houses and cars and life insurance. And everything that goes with those delays well into their mid and late 30s. And while housing purchases vastly increased in the last couple of years, the challenge now is lack of inventory and escalated prices. And what's the impact of all that on our business? And how do we protect emerging asset purchases, crazy things like e-bikes for the micro-mobile crowd?

We are increasingly multicultural. Aging is redefined. Are we prepared to engage with buyers in new and effective ways? Maybe not.

We could talk about demographic shifts. It's no secret that Southern Tier and Western Interior states are experiencing unbelievable population growth. And some of that is fueling our challenge to ensure and service customers in states where there are significant risks of hurricane and flood and tornado and fire. And while the move to urban centers was a trend, say, the last decade or maybe two, is it still in the pandemic or post-pandemic world?

It seems that suburbs are especially attractive today for reasons of safety and well-being. And these are two core life principles of today's millennials and Gen Z-ers that are increasingly being active in the marketplace and spending a lot of money in those places. And what's that trend going to be post pandemic?

Another one is climate change. We're seeing an increase in the frequency and record number of events causing aggregated losses in excess of a billion dollars. What's our response there as an industry?

And, of course, lastly the evolving customer. We're all looking for convenience. We're looking for speed. We're looking for choice. And we're looking for fulfillment. And more and more, believe it or not, we're looking for tailored solutions while all that's going on, something that's very unique built just for them and just for us.

So while all those are really, really interesting subjects--and we could talk more about those in a future date--what I'd like to do for the next couple of minutes is to pick up on two of the themes that Ken shared with us, talent and technology, because both of these are so, so essential to our businesses. And they're incredibly intertwined; engagement between our colleagues and our customers and our connections between agent and carrier and how technology is radically changing how we communicate and what our expectations are of each other. Like Ken said, I too have been in the business a long time. I think of them in terms of art and science, maybe left-brain, right-brain if you believe in that. And that's one of the beauties of our business that I hope never changes.

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Slide, Consumer, Agent, Carrier Relationship of the Future. Travelers, Welcome to the Age of Disruption. Speaking with stakeholders across the industry, we all agree. Distribution channels are experiencing a rapid pace of change, resulting in a higher degree of customer and distributor sophistication and demand for simplicity of engagement. Today’s way of transacting business within the commercial insurance sector needs to evolve to meet the needs of the customer, agent, employee of the future. Our industry has an opportunity to transform ‘how’ we conduct business enabling us all to drive profitable growth. Greater ease of doing business in a faster, more fulfilling, more satisfying way.

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At Travelers, we spent a great deal of energy over the last couple of years unpacking and better understanding the trade or the lifecycle of an account and all the components of that transaction. We've set an ambitious number of priorities and investments across our businesses that will meaningfully transform how we work. And I know you're probably doing the same thing in your businesses. And what we all want out of these efforts is for you and us to spend less of our time on the paper shuffle and be able to free up that time to provide more consultative services to customers and prospects and to do what you do best, be the trusted advisor, and to have what we do best, which is evaluating risk, looking for creative solutions and to even better serve you and our customers.

We have the opportunity today to transform how we conduct business. We have technology that has only come to the fore in the last couple of years. And we must simply put our shoulder to the task.

Our customers are demanding it. And they will benefit greatly from our efforts. And you and we and all our work colleagues will have more rewarding experiences that will attract great talent.

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Slide, Investments linked across the account lifecycle. Re-engineering and digitizing the CL industry. A flow chart from left to right. Prospect, intake, triage and enrich, quote process, service.

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1. So, let's get a little more specific. Over the last couple of years, Travelers invited many an agents and customers to come to Hartford to share with us their experiences. Perhaps, many of you on this call today joined us. What we wanted to know was specifically what it takes to transact business on your and our customers' end from the onboarding of a new producer or an acquired agency all the way to the binder.

For commercial lines, commercial accounts, multi-line, middle-market size account, which is what we were mostly focusing on at that time, we identified five broad steps in the transaction. And they're here; the prospecting stuff, the intake, the triage and enrichment, the quote and then the service. Or you may think of it as fulfillment.

And while it's five big steps, it's literally, as you know, hundreds and hundreds of little steps within those. And due to the complexity of many deals, it isn't always a consistent process. So, no surprise to any of you on this call that are in the business, 90%, 95-some-odd percent of our transactions are done via email. And they're done with spreadsheets. And they're done with PDFs and applications and so forth.

On our end, account clearing alone can take 20 steps.

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Slide, Investments linked across the account lifecycle. Re-engineering and digitizing the CL industry. A flow chart from left to right. Prospect, intake, triage and enrich, quote process, service. Red bar shows today the process takes approximately up to six weeks. Blue bar shows vision/aspiration for the process to take under a week.

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And while we get the job done through hard work, what we call here brute force, basically our trained and experienced people, it can take up to six weeks, maybe even longer, to transact a deal. Boeing assembles a 737 faster than we can put together a deal generally in this business, a middle-market deal. And we need to do better. We need to get that under a week to meet the growing expectations of our customers and frankly ourselves.

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Slide, Numbered list.1. Innovate, innovate, innovate. 2. Unpack and understand the entire spectrum of the process you are attempting to improve. 3. Find and partner with the best technologists to build core and/or plug and play solutions. 4. Develop everything with an outside-in view. 5. Do it all to improve the experiences of your customers and colleagues. Flow chart shows account lifecycle. Prospect – know employees, customers, agents, and carriers before the transaction. Intake – real-time or near real-time send and ingestion of submissions. Triage and enrich – accept or decline faster: Enrich submissions with data sourced publicly and from third parties. Quote process – right-sized underwriting and quote process and models. Service – focused on employee, customer, and agent experiences

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So, at Travelers, we're investing well over a billion dollars annually on technology. Great work continues to be done in the digitization of personal lines and small commercial spaces. And those learnings are fueling the re-engineering and digitizing of the larger commercial lines’ traits, leveraging cloud technology, artificial intelligence and everything from automation to deep learning. And we're tapping into new data sources.

And so, under each one of these chevrons, we've identified pain points along the way. And we're working on ways to know you and our customers and our prospects better even before the transaction has started. It's incredible to us.

Oftentimes, we frisk a customer for information that we should have already elsewhere. A customer that maybe we've had for five or 10 years, we're frisking them for information. And that needs to stop.

We're seeking ways to digitally ingest submissions. We need to build a big catcher's mitt, all of us do. We need to be able to still ingest data in the hard copy form but to do so with technology that can actually scrape the data off of PDF forms. And we've worked on that here. And on the other end of the scale, we're building APIs so machines can talk to one another seamlessly and to do so agnostically.

One big learning for us over the last few years is we know firms and we know people need to work in their own familiar environments for an agent and their own account management systems. They need to continue down those paths, things that are familiar to them. We simply need to make the bridges between these systems work better.

And I know it sounds easy. We all know that's really hard work. But it's hard work that we have to do.

We also want you to know our appetite for risk much earlier to stand up deals quicker to our underwriters, who can make fast go/no-go decisions for you. We know it drives you crazy if we sit on a deal for three weeks and then tell you we're not interested. We need and we owe you an answer a lot quicker.

And we continue to invest in advanced tools for claims administration, like drones and satellite imaging and AI. And those just devastating fires that happened in Colorado earlier this year, we used that technology. And the results were incredible.

So, I'll wrap up here by highlighting these five bullets on this last slide. Continue to innovate, innovate and innovate. And unpack and understand the entire spectrum of the process you need to improve. This is the agile environment.

And I think this third one's the key one. You need to hire or partner with great technologists to help build your core. I could name hundreds that we've engaged with.

But I'd risk missing some. And I'd probably offend others. You know many of them already if you're in this industry and read any of the journals.

And also, engage with great industry accelerators that have cropped up over the past couple of years. They're doing really, really, really interesting work. And again, I could name them. But I'd probably offend a few that I miss.

And finally, develop everything you do with an outside-in view, not the other way around. You'll be rewarded for doing so. So, while all this sounds like science and technology, it really isn't.

There's an incredible need for art in this business. And I'd suggest that we need more of it. And I think that's Ken's point too.

We need to innovate to rapidly changing needs and the wants and desires of our customers. We need to do this to attract talent. We need to do this by digitizing the trade wherever possible. And this will relieve the incredible burden work that our customer service reps and client managers and account executives, producers, customers, whatever, relieve them of some of this maddening work and will give us all a more meaningful and higher value interactions. This is what we're working towards.

Like Ken, I've been in the business a long time, nearly 40 years. And honestly, I couldn't be more excited about the opportunities and possibilities today. And while we went through this pretty fast and a lot of subjects, I encourage you, if you have any questions on any of this, find me. I'm glad to talk with you. Thanks, Joan. With that, I'll turn it back to you.

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The presentation closes. Three video feeds.

(SPEECH)
JOAN WOODWARD: OK. Well, that was just terrific. Both Pete and Ken, thank you so much for all your thoughts on how it's working. And, Ken, in particular, I like that you said that you were a true believer that people had to be in the office to really be productive. And your mind and as well as a lot of other people's minds, I'm sure, in this industry got changed pretty quickly when productivity is up.

And people are just leaning into to their jobs at home and elsewhere. It's remarkable, I think. And I appreciate the fact that you put yourself in a different camp now than you were earlier.

So, we have a lot to talk about. And we want to get to all your questions. So please drop those questions in the Q&A feature at the bottom of the screen there. Just type away. And we'll try to get to as many as we can.

But first, we want to ask our audience a question. So, we're going to turn the tables on you for a minute. And we're going to do a polling question.

So, the first polling question. And then just simply click your answer here. How prepared do you think your agency, brokerage or firm is for dealing with changes around the preferred customer experience? So, the customer experience of Amazon or any other, DoorDash, that you get all your goods and services immediately. And it's a frictionless transaction by the customer.

So how do you think your agency is doing with changes around preferred customer experience? So, it looks like about 70% of the audience right now. We're all just voting here. But the results are coming in.

And it looks to be about 70% are saying they're somewhat prepared. We got 12% saying they're not prepared at all. So, we want to talk to you folks, those 12%.

We have a pretty confident number of 21% said they're very prepared around changes in the customer experience. So that's really encouraging, 21%. Pete, would you have guessed that, that people are feeling confident?

PETE HEARD: No.

JOAN WOODWARD: No. I wouldn't have either.

KEN CRERAR: No. I didn't either. That's a bit of a surprise.

PETE HEARD: Yeah.

JOAN WOODWARD: Well, that's great. That's a really optimistic note for us to start this conversation on. OK. Next question for the audience, we're going to get to.

Question two, what percentage of total employees does your agency or firm expect to hire in 2022? What percentage of total employees are you going to hire in 2022? This is assuming right now it's January. Who knows? But you're currently planning on hiring.

Give it a second to come in. So, the results I'm seeing look to be a little surprising here. 20% or greater, that number's come in at 11%. So, one-fifth of your workforce, you intend to hire. That's a lot of people, 11%.

30% of you say 10% or more. 40% are saying 5%. And 20% said no one. They're planning to hire no one. So, Ken, what do you make of these results in terms of their hiring plans right now?

KEN CRERAR: So, Joan, that tracks with what we've been seeing. As I listen to people who are giving us their plans for the year, there's an enormous amount of hiring going on. There always has been. And it's one of the motivations we did in creating the APRI and the Insurance Professional School was to gravitate towards getting those people on board and making investments in it because one of the things that we've all learned is that, in this talent war, one of the things that employees in that whole employee relationship--it's really important--is not only that they care about you, that you're empathetic towards them, but you're also willing to make an investment.

What I keep hearing from some firms, the middle-market firms, is that they're limited on the amount of service they can provide a client. But if you focus in on some of the aggregation strategies, it's been about building out a service component. So, I'm not surprised.

JOAN WOODWARD: Pete, your comments on some of these results on employees and attracting and retaining talent and investing in people. What are we doing at Travelers? And what best practices are you seeing in some of the agencies that you deal with all the time?

PETE HEARD: Yeah, I mean when we go out and talk to agents, I guess I am a little surprised by those numbers because, when we go out and speak with agents--and we have been out there over the last few months--every one of them talks about hiring producers. They're looking for producers because they're looking for people that are going to generate new business and new connections. And so, I don't think I've been to one meeting where somebody didn't say to me, say to us, hey, if you know of anybody on the street, can you please let us know?

So that number's surprising. But this is a big audience. And there's a lot of different needs. And it comes down to individuals and individual firms.

With respect to Travelers, I mean, listen. I've been the beneficiary of working here for 37 years. It's been a great, great career. This company and its value system and all that has just allowed me to thrive and be comfortable in my role. And I think there's a lot of companies like us out there that people can go to and really have a very rewarding career.

I do a lot of talks to young people in some of the nonprofits that I work with and colleges and university and thing. And one of my standard questions to a group, when I get up in front, I say, hey, name me one job that doesn't apply to insurance or is not a job within an insurance company? And somebody invariably will say, well, a policeman. And I say, well, that's not true. We hire a lot of policemen investigators for claims.

And then they go, well, how about a fireman? Well, actually, we have a fire lab as do other companies. So, we hire people to set fires and to see how those fires burn and how we can control those. And they'll get into, well, how about a weatherman? Well, we have weather people.

There's just a tremendous number of opportunities in companies today. And again, I think for data scientists and for technologists and things like that, I think it's a really cool career. There's a ton of capital in this business. There's a ton of risk in this business. And we need really, really smart people to sort all that out and to do the things that Ken, and I, talked about. And I just--

KEN CRERAR: Pete, the only thing I would add is the reason that producers--you hear about producers. And what I'm hearing about is employees. And the reason is not only does do the carriers need climate people and security people, et cetera, et cetera, and claims people but so do the brokers because brokers have now built out services around those areas in understanding a business.

And if you really think about it, one of the exciting parts of this business, I think, is the fact that it doesn't matter what you dream about, what startup we're talking about. Everybody needs insurance. You want to protect the asset. If you're building an asset, you want to protect it.

So, the industry allows the world to dream. And that's an exciting component to it. And you don't need to be a producer that sells necessarily.

You can be a claims person. You can be a technologist. You can be a climate person. That's what's really exciting about this, I think.

It's an industry that is so comprehensive that there isn't a job. That's a great question. There isn't a job out there that this industry doesn't have some connection to. And that's really exciting.

JOAN WOODWARD: I agree. That's a wonderful conversation on employees. So, I want to shift a little bit because I want to get to the heart of the matter here.

We're talking about the changing distribution landscape. And a lot of questions have come in. People want to thrive in that changing distribution landscape.

But, Pete, first to you. What are really the biggest challenges? Or what may be coming and we're not seeing it to disrupt our industry? Obviously, COVID in the last couple of years. But what is the biggest challenge right now that you see to this changing distribution landscape?

PETE HEARD: Wow. I don't think there's really one, Joan. One of the things that I'm always reminded of with a mentor of mine, he always said watch the trend lines, not the headlines. And basically, what he was saying is don't overreact to headlines that are on the page. Think about what it is that those headlines are leading towards.

And in whatever subject, whether you're talking about Middle East politics or whether you're talking about the Ukraine today, think of what the trend lines are. Don't worry so much about that episodic event. So, I see this march towards this digitization. I have a hard time with that word. That has just been accelerated tremendously.

But we can't leave behind those that aren't ready for that. I think as an industry, we need to do our best to bring everybody along. There are companies and agencies that won't be able to invest in this technology.

And they just shouldn't go to the dustbin. They serve a purpose for their communities and for their workers and so forth. And we need to figure out a way to support them all the way up to the big guys.

And so, I worry a little bit about some disenfranchising in the business. Maybe that's the natural course of competition. But that's one thing. I mean, I could talk about a lot of things; cyber. We already probably killed the talent thing.

But I do dismiss the notion of disruption. I think I'm going to steal something from one of my coworkers that I loved. If you looked maybe five years ago in the insurance press, it was all about disruptors. People are going to come in and disrupt our business, disrupt, disrupt. And what ended up happening was a lot of them didn't realize how complicated the business was, how regulated it was, how much capital was required in the business. Right?

So, then a lot of these companies pivoted to technology. And this is again not my line. Somebody else's line said, well, some of these technologists came out with a solution for making the doorbell talk to the toaster. And you're like, that's really neat technology. But what did that do for us?

Today, the last couple of years, we now have these technology companies that are focusing on one thing, maybe the application process, maybe the drone process, maybe the satellite process, maybe the scraping of data off of hard forms. And those are the ones that we need to encourage and to plug and play into our systems. So, I know that I probably went a little off topic.

JOAN WOODWARD: No. That's great.

[INTERPOSING VOICES]
KEN CRERAR: Joan, let me hop in here because, Pete, you and I can probably disagree sometimes. And I don't like to necessarily disagree with you. But I disagree with you completely.

I think this industry--I don't think the FinTech players that came into the business were focused on disruption as much. I wasn't worried about that disruption. What I'm worried about is, I think, clients are different today.

There's been all this discussion about all this data being sold. OK. So that's OK. Buy all the data you want.

And I think we get to this point where a broker shows up with a carrier. And all of a sudden, they have the amount of data that they believe is necessary for you to underwrite. And you look at it. And you don't need much anyway. You can buy most of it.

I mean, think about property insurance at this point. I've gone off on this tangent before where you're in a building. I could probably, in any building, find out when the renovation was, who did the renovation, who's in the space, when the lease was signed, what the material was constructed with, what's the weather like around it.

I mean, the amount of data that is necessary. And clients expect us to know that now. If there's a secret sauce, that's the secret sauce. It's taking that information in and being able to translate it into something that makes you into a business.

JOAN WOODWARD: All right. I'm going to jump in here because we have a lot of audience questions coming in. So--

KEN CRERAR: I'm sure.

JOAN WOODWARD: --we need to move on. So due to the tax rate changes, 2021 proved to be a really red-hot M&A market. A lot of activities, as you said. Do you anticipate that this is going to continue in 2022? Or do you think there'll be a slowdown? Ken--

KEN CRERAR: I think it'll continue. I think it'll continue. I don't think we know what's going to happen. But right now, it's appearing like we aren't going to see any significant tax changes. But that's as of today. Who knows what tomorrow brings?

JOAN WOODWARD: Pete, do you have a thought there?

PETE HEARD: I agree. I agree. I mean, it's 1,000 last year, 1,100 last year. I think we'll see something similar this year. There are a lot of reasons for selling and not all monetary. Some of them are perpetuation and so forth. So, I think a lot of those reasons still stand.

JOAN WOODWARD: OK. Another question coming in. This is interesting. "I'm a youngish agent, 34. And I've been licensed for a little over two years. I still have a lot to learn on the insurance side. I understand and love technology, however.

But most of the people in my agency are old school. They don't like change. They don't want to hear about technology. Any tips on getting them on board with the digital speed of where this industry is going?" That's a great question.

PETE HEARD: Wow.

KEN CRERAR: I don't know. You can have that question, Pete, because--

PETE HEARD: Wow. I like that a lot. Maybe whoever asked that question can give me a call. We can talk about it a little bit deeper.

That's a challenge. I mean, you could put articles in front of people and so forth. Maybe even take a copy of this webinar and send it on to them.

But forces of change are coming. And you don't want to be overrun by them. And you possibly could. Technology doesn't necessarily mean a vast change. In fact, I think Ken and I violently agree that what technology is going to do is allow us to do what we do better.

And so, if you have an old agency, they're probably there and successful. And they hired you because they've been a successful agent for a long time. And they've done that because they're good in their community. They're good at relationships and sale and all that sort of stuff.

And I think if you sit them down and talk to them about their frustrations with certain things, whether a carrier takes forever to get back to them or why can't we self-create certs or get policies electronically or whatever? Tell them that there's a solution for that. And here's how. And that's 30 seconds. But I'd love to chat with you more, whoever asked that question.

KEN CRERAR: Yeah. Otherwise, you're going to end up in the M&A category. I mean, that's the other option. Either they understand the benefit of technology or they end up deciding that they're just not in that business anymore.

JOAN WOODWARD: OK.

PETE HEARD: Maybe.

JOAN WOODWARD: Another question coming in here. I'm not sure who wants to handle this one. “I want to hear a lot more on the market. Are we looking at a harder market, premium increases over the next couple of years? I understand cyber has definitely changed. And higher deductibles and higher premiums there. But what do you see overall with the commercial lines market?"

KEN CRERAR: Well, I can tell you that I can't talk forward. I can talk backwards because we have our survey. We've seen it. It is starting to soften up. And that's what we've seen in the numbers.

And I think that's an issue of data. There's more data out there. And as underwriters become better at underwriting, their pricing becomes better. It's that simple.

PETE HEARD: Yeah.

JOAN WOODWARD: OK.

PETE HEARD: I mean, for me, listen. We really don't forecast the market here at Travelers. But it will be what it will be. And there's a lot of competition out there, for sure.

And there's all sorts of drivers, the things that we talked about today. There's the weather. There's social inflation.

There's still very low investment returns and so forth. So, none of those things have changed in 2022. So, take that to where you think that might go.

KEN CRERAR: Yeah.

JOAN WOODWARD: OK. This one's for Ken. "What ways are brokers reaching decision makers today; traditional methods, like phone, email, cold calls, or newer methods, like TikTok and social media?" That's a good question.

PETE HEARD: Wow.

KEN CRERAR: Well, I think all of the above. It's not just the relationships anymore. Let me just tell a quick story.

So, I had a relationship with a commercial real estate broker that I had for a long time. And a guy that worked for him many years ago who he trained came to see me. And I saw him because I know who he is. And he got in there.

But he gave me a slew of data that I had never seen before. It was so compelling. It made me move. And I picked up the phone. And I called my old broker.

And I said, hey, Bill. Sorry. I'm moving this. And here's why. And he completely understood why. Now I'm just suggesting that there's more to this story than meets the eye.

JOAN WOODWARD: All righty. Pete, this one is for you. "Are there any specific patterns that you notice that successful agencies are doing to market themselves by using new methods to generate new business? And what are those new methods or platforms that they're using?"

PETE HEARD: This is like stump the author today. Yeah. That's a really challenging question.

JOAN WOODWARD: I mean, are you seeing agencies use Facebook, for example? Maybe that's more personal lines.

PETE HEARD: Yeah. I think they are. Let me just maybe give you the side of the carrier because we face the same thing on the carrier side. Right?

JOAN WOODWARD: Right.

PETE HEARD: So, we have underwriters and account executives and business development directors that are also challenged by new business and new connections and so forth. And it's been fun for me to watch. And I'll just call them younger people just because they're younger than me. 30 and 40-year-olds using new methods to connect with people whether they're digital or--we used to do stuff on the golf course. And today they're going out axe throwing and all that kind of stuff.

JOAN WOODWARD: That's a good point. There you go. That's a new method.

PETE HEARD: Yeah. I mean, I just encourage people to break through that noise. You can do it. You can do it if you really think about it.

KEN CRERAR: But, Pete, and I totally support what you're saying. I would just say that it's all about the same thing. It's about recommendations. It's about personal relationships.

Social media is nothing more than I read something here. And it catches my attention. And I tell somebody else. Look at how we all watch TV. It's all done by social media now.

And so, I think Facebook, anything that works, any relationships, anything, we see it. We see a lot more people being involved with local employers, like construction people or whatever. It's all changing very rapidly. It's where people are.

PETE HEARD: Yeah. And, Joan, I just had one thing. Listen, a lot of things are coming in electronically, still email and all that sort of stuff. But pick up the phone. I guess I would say if you're sending in a submission, I love to hear from the CSR, account executive, broker, whatever. I want to hear what's behind that submission that you're sending.

KEN CRERAR: Think about it from the concept of, when was the last time you got a handwritten thank you note? You notice those. You really remember those.

JOAN WOODWARD: Those will stand out. Those will stand out.

KEN CRERAR: Mail stands out these days.

JOAN WOODWARD: No. Good point.

KEN CRERAR: Whatever works.

JOAN WOODWARD: And phone calls too. Right?

KEN CRERAR: Yeah, absolutely.

JOAN WOODWARD: Phones calls. I mean, talk it. Don't text it. Right?

KEN CRERAR: Right.

JOAN WOODWARD: You'd much rather hear from your kids on the phone than a text. And same way for your business relationships.

KEN CRERAR: But a text or an email, a text or a phone call or a note is more important. It carries more weight. And it means you're communicating something.

An email just-- I don't know. I'm not a big fan of email. But that's because I get so many of them.

JOAN WOODWARD: Well, listen. Good advice, I think, for all of us. And our time is up. And what a great discussion.

I want to thank you, Ken, and Pete, for your time today. We will have a replay sent out to everyone of this great session. And so again, thank you.

KEN CRERAR: Thanks, Joan.

JOAN WOODWARD: Really appreciate your joining.

KEN CRERAR: Thanks.

(DESCRIPTION)
Slide, Wednesdays with Woodward, Webinar Series. Visit us travelers institute dot org. Upcoming Webinars, February 2, A conversation with Johnson and Johnson CFO Joe Wolk. February 16, 60 Minutes in the Middle Market, Opportunities in a Changing Marketplace Featuring Travelers' Middle Market President Scott Higgins. February 23, Who Gets What, Setting Compensation After Tragedy, Featuring preeminent mediation expert Kenneth R Feinberg. March 2, Power Up, Growth Opportunities in Renewable Energy, Featuring Travelers' Global Practice Leader for Renewable Energy, Eileen Kauffman.

(SPEECH)
JOAN WOODWARD: And also, join me next Wednesday for a conversation with Johnson & Johnson CFO, Joe Wolk, the largest health care company in the world. And he's going to join us talking about lots of different things that you're going to want to hear about. And then February 16th, I have good friend and President of Middle Market here at Travelers, Scott Higgins. He's going to talk about what's going on in the middle market and changing landscape there.

And then renowned attorney Ken Feinberg, special master of the 9/11 settlement, is going to talk with us about what's going on in his world. And we're going to be giving away his book, Who Gets What. So, register for that. And get a complimentary copy of his book.

March 2nd, we're going to talk about renewable energy with Travelers' Eileen Kauffman. So, register for any of these programs on our website travelersinstitute.org. Connect with me on LinkedIn. I always post lots of invitations there.

(DESCRIPTION)
Slide, Watch replays, travelers institute.org, Connect on LinkedIn, Joan Kois Woodward, Take our survey, link in chat. #Wednesdays with Woodward.

(SPEECH)
And, listen. It's great to be with everyone. Thank you so much for joining us. Stay safe. And we'll see you next Wednesday. Take care.

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Logo, Travelers Institute, Travelers. travelers institute dot org.