Building the Business Behind the Bonus, Part Two: Profit Sharing Strategy

What can agency owners actually do to improve future contingency and profit-sharing results? From retention and carrier alignment to policy-per-customer growth and the hidden cost of remarketing, this conversation focuses on the day-to-day decisions that shape long-term profitability.

We discuss why building an agency that is more efficient and more intentional becomes more profitable, and how developing strong carrier partnerships creates lasting opportunities.

Learn more at IntegraPartnerNetwork.com.

Transcript

SPEAKER_00 0:00

This is IA Forward, your playbook for success as an independent insurance agent. Now here to help you not get out of the ballpark for your host, Shane Tatum, Daniel Leed, Mike Basel, and Robbie Javor.

SPEAKER_04 0:13

Welcome to IA Forward and welcome to part two of our podcast on how to make your contingency bonuses uh be as prolific as possible. Because last week, this was the topic we started on and Shocker, we got off on some tangents. And we never actually answered the initial question, which was what can we do to make sure that those those bonus checks are as as large as possible?

SPEAKER_01 0:50

Well, that that's fantastic. Um that's a great topic. You're it is also much confidence in Shane and I to remember what we did last week. That's what I'm thinking. Like, what? Like, I don't remember what I did at eight o'clock this morning. Like that was only a couple hours ago. So that's why it's a three cup, I'm sorry, four cup coffee morning for me this morning.

SPEAKER_04 1:17

Wow, it's a happy and connect kind of day.

SPEAKER_01 1:20

It is, it is so it's uh ooh that's bad, but so hey, hey, we'll give it a shot. How about that?

SPEAKER_04 1:28

Yes. So Shane, what can we do to make our 2026 profit sharing checks be amazing in the last nine months of this year?

SPEAKER_01 1:43

Yeah, so 2026 in results, right? So money that you're gonna receive in the spring of 2027 in most cases. You can't do anything, you're done. It's too late.

SPEAKER_03 1:58

Well, isn't that delightful? Well, folks, that has been the podcast. Um uh as Shane would say, attitude's a choice maker.

SPEAKER_01 2:11

I I'm I am being a little bit sarcastic.

SPEAKER_00 2:14

I mean, I don't think you are.

SPEAKER_01 2:16

Well so far. So so yes and no. So let me let me explain myself. You you can do things, right? Um, but I think the word you used, which is a great word, and I think it's true, was prolific. How can you help your profit sharing, your contingency dollars be the most prolific as you know possible, right? I think that's a great thing that agency owners need to be thinking about. And in the sort of tongue-in-cheek statement that I am making of, well, can't really do anything. Um what I want everybody to understand is the insurance business, the insurance agency business is such a long tail business. Okay, and so what I mean by that is that in order to really, really affect 2026 results, you needed to be really working on things in the spring of 20, you know, beginning of 2025, right? And I know that sounds like, well, wait a minute, I thought profit sharing and contingency dollars were year to year, and they are for the most part, right? They are. And so what you're really doing is you're you're if you haven't ever paid attention to it, if you haven't ever really focused on it, you're starting now. It's always now. Start as soon as you can, pay attention to it as soon as you can. What I want everyone to be realistic about is that because of the long tail, that you might see some gain by being disciplined with a few things that we can talk about through the rest of 2026 that will give you better 2026 results. But the work you put in right now through the end of 26 is really about carrying that through into 27 for your payouts in 28. And then having that cycle perpetual, right? You want to have that cycle perpetual, with the exception of the reality that sometimes we have cat losses, catastrophe losses in certain years that are higher than others. Okay. And so when I say that a little bit on tongue in cheek, is you can't really do anything, that's not really true. What I don't want you to do is set this false expectation, is if you work on your retention, if you work on growth and you can't really work on growth without retention, if you do all these things and you increase your policy per customer and all of those things that are related to this. I don't want you to be disappointed if the uptick, if the increase or the payout as a result of 26 isn't just crazy drastic, right? Because what you're doing is you're laying foundation, you're creating foundation that allows you to perpetually get better and better every year. And it's not just a one-year plan that you've got to create.

SPEAKER_02 5:30

So, in that, you mentioned a few things, you know, uh, number of policies per customer, things like that. But one thing you did not mention was remarketing.

unknown 5:41

Yeah.

SPEAKER_02 5:42

Why didn't you say remarketing?

SPEAKER_01 5:44

Uh, well, remarketing doesn't make anybody any money, number one. And it should be the last option, right? It should be, and we've been dealing with that for the last several years in the hard market, where remarketing became a necessity. Remarketing became something that you had to do to retain a client. But remarketing doesn't make you more money, it doesn't make the carrier money. Uh, it actually costs you money because you're you're taking a piece of business, right? A client. Yeah, let's define it. All right, so you're taking a client, you're taking a policy, revenue, and in your mind, as an independent agency, especially those that came over from the exclusive agency system, it's like, well, I got to constantly find them the best price. Well, what happens is that the only people that you can truly remarket are the people that have claims problems, the people that have other issues, and then you end up creating loss ratio problems within the book because you're never allowing that earned premium to mature. You're never allowing the underwriting process to take place, right? If you're constantly churning business from book A to book B to book C and back and forth, you're spending a lot of energy on revenue you already have, okay, which is not the name of the game in the insurance industry. You want to retain the revenue you have with the lowest possible cost structure, right? So that makes like that's just something that is really important. Well, if you're touching every renewal because you're having to re-market, re-quote, rewrite everything you have, you're spending money on existing revenue. You're not spending dollars on new revenue when you're doing that. And so it's the whole thought process is in the choice system. Everybody perceives that in the choice system, the independent model, that you should constantly be remarketing business and moving business from carrier to carrier. That is not the way you become successful in the independent agency system. The way you become successful is you write business, you grow books of business within carriers, and you stabilize those books, and you yes, use the remarketing tool when it's necessity, but it should be a really small percentage of your book that you're doing that with on a year-to-year basis.

SPEAKER_02 8:29

It's an opportunity cost, really. You because you're working through the same customer you already have, and that is time you could be putting towards a prospect.

SPEAKER_01 8:40

Well, and yes, and then it's a people cost issue for us in the insurance industry. I mean, 60% of our expenses on average are people, labor. And if you remarket everything, then you have to have more people. You have to have people to do that, unless you don't sell anything new, and that's now we're going backwards, right? Because we know, we know even the best agencies are losing seven to ten percent of their business through natural attrition every year. A 90% retention rate is fantastic. So if we're if we're losing 10% of our business naturally, we've got to write enough business to grow, right? If we want to grow 10%, we have to account for the fact that we're gonna lose 10% as well. And so again, the higher we can retain and push that number up, well, that's the fallacy is that remarketing is the answer for that, and that's not true.

SPEAKER_04 9:45

I just want to go back to something you just said and and point this out. Do you know how phenomenal it is that we have a 10% attrition ratio? I mean, like from a sales perspective, that's incredible. I mean, like in in most businesses, you're looking at, you know, keeping maybe, maybe 60% of maybe 60% of your customers, right? And so just looking at us as a model, like like Shane always says, you know, it's the independent agency model is the best model in the world. And I just wanted to stop on that, but um had a little squirrel moment. Uh, do they have squirrel moments in other parts of the country, or do they call them other things like where they don't have squirrels?

SPEAKER_02 10:36

I don't know the answer to that because I use that term, but I have also worked with people in the south for 20 years, so I don't know.

SPEAKER_01 10:46

Well, it it's definitely a squirrel moment in Texas. And you know, yeah, I mean that that's definitely a true statement. We have squirrels everywhere, it's Disney in our yard every morning, and so oh you know here too.

SPEAKER_04 10:57

And they've murdered they're murdering my palm trees, by the way. Well, yeah, the squirrels in Florida are different squirrels than the squirrels in Louisiana and Texas. I mean, they are like what is happening, they are the most destructive thing. In fact, like if you see the exterminator billboards around town, they have squirrels on them.

SPEAKER_01 11:19

Yeah. Yeah. Well, you know, an eight-year-old Emma Kate uh took care of the squirrels. You know, they were she was chasing them out with her BB gun, and that was kind of funny because I had like the little, you know, my my youngest daughter was basically the little boy when she was eight, and she was she was running around outside shooting at squirrels with her BB gun. It wasn't doing any good. I mean, you know, she couldn't, number one, she wasn't hitting any. Number two, you know, it wasn't gonna hurt them if she did hit them. And so, but she was chasing them, right? She was chasing them from the yard. And since uh since that's been 15 years ago, uh the our front yard, our backyard looks like a Disney movie every morning because there's 20 to 30 squirrels everywhere, but they don't tear stuff up. That's kind of weird.

SPEAKER_04 12:10

Yeah, there I mean, like all of my furniture by my pool, like my pretty chairs and stuff, they have eaten. Because I I actually almost called one of y'all last week because the cute boy was out of town for 10 days, and I heard this noise right outside of my office, and um, I had actually had one of those little things all in the pole.

SPEAKER_01 12:33

Now, are we sure that you don't have woodpeckers and giant rats?

SPEAKER_04 12:41

No, they're squirrels. I mean, I know what squirrels are.

SPEAKER_01 12:43

I mean, are they really squirrels? Yeah, they are really squirrels, and basically in the same family, but that doesn't feel right. Like squirrels eating furniture doesn't feel right.

SPEAKER_04 12:52

I'll I will send you pictures. I will send you, I will send you my palm trees.

SPEAKER_01 12:55

Yeah, they're some sort of genetically engineered. I've got something going on. Somebody's this is uh another country has has dropped. This is some type of like counterintelligence thing going on in in in the panhandle over there.

SPEAKER_04 13:13

This is one more reason that uh home homeowners insurance is high in the state of Florida because we have killer squirrels. But yeah, I had one fall in the pool last week. And and the cute boy was like in meetings, and you know, I don't know what to do about a squirrel in the pool. So anyway, that was most unfortunate.

SPEAKER_02 13:35

Yeah, you you Mike is trying to envision me. That your foundation damage was due to some sort of hybrid squirrel.

SPEAKER_04 13:46

No, but our neighbors uh behind us had foundation damage due to their pet tortoise.

SPEAKER_02 13:54

Well, that I can see, those things have some bite force, yeah.

SPEAKER_04 13:59

So, but anyway, back to profit sharing.

SPEAKER_01 14:04

It continues to be in our scorable moment. I just want to point out that that distraction moment was brought to you by Tanya and not Mike and Shane.

SPEAKER_04 14:14

So it was, it was. I I accept full responsibility for that. Um, but but anyway, I I um I digress and I do apologize for that. And I have no idea where the squirrel moment was leading to. But the one thing I can see that might make a difference is watching how many carriers that we're writing with and making sure that just because we're losing one or two to a new carrier, a different carrier, a random carrier, that doesn't necessarily mean we have to change our entire way of doing business because something happened.

unknown 14:59

Yeah.

SPEAKER_01 15:00

And this is a classic problem. Uh it's a it's a classic problem in the channel, in the independent agency system, because we're salespeople, we're competitive, and we don't like to lose business, right? Number one, we don't like to lose. And a lot of a lot of competitive mindsets you can ask, you know, do you like what do you like more? Do you like to win or do you hate to lose? And I there's just a lot of that, there's a lot of split there, and there's a there's a lot of salespeople, agents that are that would probably say they hate to lose. And so losing something actually hurts more than winning something helps, as far as the mentality in a lot of cases. And a lot of times what happens is is to Tanya's point, you get you lose a client to somebody, right? Some market that you think you now need. And uh you go out and you get that market, and because you you had one client that you lost, um, instead of having this like really important view from an ownership chair of, okay, now wait a minute, is that a pattern or is that an anomaly? And you know, obviously looking at patterns is important. Understanding when a pattern develops is important, but a single loss of a client or even a couple of clients is not a reason to go out and pick up a new carrier. The reality is that when you when you have too many carriers, you're hurting your contingency and profit sharing dollars as an agency, as an organization, because there's tables and there's uh the more premium you write within the certain carriers, the reality of it is is earned premium that's going to give you a better chance at a better loss ratio, which is also going to trigger a higher payout by percentage. And so, you know, getting spread thin across our book of business and say having, you know, if I asked an agent, you know, would you like to have profit sharing qualifications across eight carriers or four carriers with the same size book? You know, what what do you think the right answer might be? And um, most will say eight, right? Most will say eight. I'm gonna say four. And I'm using that analogy, not because four is a perfect number. I'm just using it, right? The reason that I think four is better is because if you quote qualify across eight, that means you spread things out to the point that you could have really gone in and partnered with four carriers, you could have grown those, that book of business within those four or five carriers, and you are qualifying at a higher level at that point, right? And so the dollars, it's just math. It works out, right? If you have a qualification measurement of, say,$500,000 in premium for a single carrier, and you get to$500,000 across eight carriers, right? Or you get to a million across four carriers, your book is the same, but your payouts are going to be higher at the four carriers versus the eight carriers because your percentages are going to be higher because you have more volume with them.

SPEAKER_02 18:42

But here's the thing, right? If you join a group, you can kind of split the difference because you don't need to have as much volume per carrier to hit those thresholds.

SPEAKER_04 18:59

If your group offers profit sharing, if you're like the integral partner network, same list self-promotion.

SPEAKER_01 19:05

Yeah. If it does, and and yes, that's true. If um uh if the group offers profit sharing, but in your group, and I'll take Mike's, I'm gonna take that that debate for a second because I think it's valuable technically, yes, right. The group is qualifying at a higher level. However, if the group has a payout level, right? Like, you know, based on you can get you can qualify for more based on either volume or loss ratio components. It's my argument that the more volume you have with a carrier, the better loss ratio potential over the long haul you're going to have as that book of business matures. Because look, carriers don't renew business year in and year out, year in and year out, if that business is not profitable. Okay. They don't they don't renew business just to renew business. They renew it because it's working, right? And if somebody that has a high claims activity, incidents, um, you know, bad driving record, et cetera, they're eventually going to be non-renewed. They're eventually you're gonna have to move that client to somebody else that will take it. As that business that's having claims problems migrates somewhere else, and you've continued to partner and grow with that carrier, the natural thing that happens is your loss ratio should go down. Well, in our case, in our group, we reward higher uh better loss ratios, improved lower loss ratios over time. We've aligned what we're saying with the payout potential, and so you can actually earn more by having a growing, stable book of business instead of again spreading things too far. And look, this is gonna put some people into some PTSD because of the last three years, because they're like, Well, my gosh, Shane, if you're telling me that I need to only, you know, really write business with you know four or five carriers, well, you know, two of those carriers stopped writing business altogether, you know, two years ago during the hard market. It's true. That's that's a true statement. What I want to make sure that that agents understand, especially agents who have only been in the channel for about 10 years now or less, less than 10 years, is that that cycle we went through, right? That cycle happens probably once a decade. And that cycle was the worst cycle since at least the 80s. So let's go back and say four decades, right? So out of the hard market cycles that come and go, and and it's it's just a It's a cycle, right? That's why they call it a cycle. Is things go hard, they go soft, they go back to hard. This is a long period of time. And in between, in between, yes, you may have these situations where things get a little difficult when you have a smaller carrier portfolio over a larger carrier portfolio. My contention is that your efficiency gains, your profit sharing payouts, your operating profit potential will always be better with a smaller portfolio over a large portfolio.

SPEAKER_04 22:38

One of the things that our listeners may not know is when I initially came to work for Integra, the first thing that Shane had me do was this really interesting nine-month study of our partner agencies and then some agencies outside of our group. And we looked at agents that were our really fast-growing our agencies, our really profitable agencies, some agencies that were um newer, that were in a growth process, some agencies that had been with us for a while, maybe a little bit stagnant. Um, and what they did similarly and what they did differently in looking at our agents, other agents. And one of the things that uh that we discovered really quickly was that our agents that were super successful and had been super successful long term, and our newer agents that were successful were using a smaller number of carriers, and they weren't remarketing every time there was a renewal. Our agents that had the thought process of, well, it is my job as an independent agent to make sure that my clients have the least expensive rates possible. Andor they used the word cheap on the sign out in front of their building, those were the agents that really and truly weren't growing at the rate either they wanted to grow at or at the rate that others were growing at, right? And since that project happened eight to nine years ago, I still pay attention to that, right? And I still see those those same patterns.

SPEAKER_01 24:31

It's it's a true pattern. It's it's a pattern that's gonna be there, it's gonna it's gonna stand the test of time. Like even efficiencies like AI, they're they're not gonna change this this situation, right? This this question. Um it's a perception issue, right? It's a perception issue because as an independent agent, as a choice model, this uh sort of unlimited number of carriers idea, this this concept of you know, 50 carriers, a hundred carriers. Number one, it's a marketing ploy by aggregators, networks that are just selling that model, right? It's a it's a marketing ploy. It's not real, it's not true, it doesn't work. It just gets you to be interested in their market access model. The truth of it is is that uh it's about a competitive portfolio. It's it's enough markets to have choice, but not too many markets that kills your efficiency, right? And and this is the thing. Yes, independent agencies are are started, owned, and operated by salespeople, but you have to shift at some point. You're you're no longer just a salesperson, right? It's not about just making a sell, it's about making sales and growing a book and running a profitable venture, profitable business. So you have to think about things like operating margins and efficiencies and what does this book of business look like five years from now, eight years from now? Because this whole adage of you know, the whole thing about the insurance agent through, I don't know, 60 years, 80 years, some number of really long time is that insurance agents worked really hard for the first five years of their life and then they got to play golf, right? That's the that's the old adage, that's the perception. It's not though that far off. Maybe it's not go play golf or go fishing, but it is this how you build your book of business, how you build your book of business in the beginning, and what you want your book to look like five, eight, ten years down the road, can create an easier life for yourself as an owner than finding the cheapest insurance for your client every single time the policy expires.

SPEAKER_02 27:12

So this is off topic, like we like to do, and we've already talked about this, but this all goes back to who you are as the agent to this person. Like, there's only so many insurance carriers that are available for you to market. Everybody's gonna have a similar book of carriers, portfolio of carriers. So you have to differentiate by something other than price. You have to be consultative, you have to have that person be comfortable with you. You know, talk to them about things outside of insurance so they know who you are and what you're about. And then they'll be more confident in you when you give them a quote that maybe isn't exactly the same in terms of dollars and cents as the person down the street.

SPEAKER_01 28:05

Yeah, that's right. And I think that's a great point. Um, over the last 20 years, for sure, 15 even, the the prevalence of the agency network, we're part of that, um, has created a more level playing field between small agencies, startup agencies, and you know, third and fourth generation agencies across the country. We, you know, 40 years ago, uh certainly even 30 years ago, when I started in the business, agents were protected. They had sort of this um moat around them around what which carriers they had access to, right? Having access to a certain carrier that your competitor down the street couldn't get a contract with because you had a contract with them, because that was the way the carriers saw things. They saw things through this lens of, well, we've already got an agent in that area. We're not going to give a contract to another agent. Well, the agency network model obliterated that. Basically, startup agencies can now get a portfolio of carriers to compete with extremely large agencies, right? And I think it's been wonderful for the consumer. I think it's been wonderful for the industry, right? Because we were headed down this path where as consolidation was going to happen, and it did, that the insurance industry, the independent agency channel, was going to go from about 35,000, 36,000 agencies across the country down to potentially less than 10,000 across the country, which was going to be terrible for independent agency carriers, which is why the agency network model started taking off and happening, is because all of this consolidation that was happening with the big boys and the big agencies that had those moats, those carrier contracts that were protecting them. Well, now all these startup agencies over the last 15 to 20 years, all the way to this day, you know, we've got guys right now in startup onboarding mode. We continue to perpetuate this. It became a perpetuation process for the industry, for the channel. That became really important because now travelers and Liberty and uh Hartford and Progressive and now the geikos of the world, now they're seeing that we are perpetuating distribution and they're continuing to grow and can and we're continuing to take market share. And so this is a really important thing that has led us to this place. Now, what we have to be careful of is that we don't spread ourselves so thin as independent agencies that we leave dollars on the table, right? We leave we leave dollars on the table by not being efficient with our portfolios, by not partnering with the right carriers that are going to drive additional dollars to us or points of commission to us, because we are driving results for them. And you do control that. I know you don't control hurricanes coming in the Gulf and convection storms in the Midwest or anywhere or hail. We don't control that. We can't control the weather. What we can control is who we're partnering with and how we're partnering with those carriers.

SPEAKER_04 31:46

Okay, I want to ask a question, and I'm gonna try my best not to step on toes when I ask this question.

SPEAKER_02 31:53

So this is exciting. Just step on the toes.

SPEAKER_04 31:58

You just gave a list of carriers. Yep. Right? Right. Yeah, one of those carriers does not offer profit sharing. They're working in carrier, yet, yes, they're working on it. They're working on it. Um but right now that particular market does not offer profit sharing. So does it make sense if it is five, ten, fifteen dollars less expensive? That if I have another carrier that's close that I have a long-term relationship with that does offer profit sharing, do I give my client the cheapest product? And I just use the C word, which y'all know that I can't stand. Or do I go with my carrier that I I know I trust that offers me profit sharing? Which one's better for my client? Which one's better for me?

SPEAKER_01 33:02

Yeah, I mean, this was the whole argument uh that predates uh, you know, you guys being in the industry uh back in the early mid-2000s with Elliot Spitzer in New York. Uh, you know, his his his argument of uh charges and prosecution was that contingency dollars were driving where brokers were placing business versus what was best for the consumer, right? So one of the problem one of the problems with his argument though was that uh there was no actual real evidence that brokers were not providing the best option to uh to the to the customer when it was all said and done. There truly wasn't that, right? And I think what was naturally going to happen and what did happen, I think it's gonna happen again when you have new entrants into the marketplace. Uh they're just trying to get into the market. They're they feel like they're behind any carrier, right? Any carrier that's traditionally been in another channel exclusively that launches into uh a new channel, whether that be a direct, you know, a captive carrier that goes direct, a direct carrier that goes into the independent channel, whatever, it doesn't matter. Um, I'm a proponent that the marketplace is going to take care of that, right? Like what's going to happen is yes, ultimately agents are going to place business with the the carrier that's best for their client, but when all things are even and equal, they're going to place that business with that carrier that maybe is more partnered with them. And I will say it that way. If a carrier is coming to the table with profit sharing or bonus dollars, then I they're partnering with agencies, right? If a carrier is not coming to the table with profit sharing or bonus dollars, then that that carrier, that market is is, I'm not necessarily saying that that they're really partnering yet, right? It's almost like having your toe in the water. What will happen is if they do that for too long, right? It's like if they do it for too long, the marketplace is going to adversely select against them, and their results are not going to be what they could be. And my my case in point is, you know, when a new market comes into the channel, whether it was a direct market like, you know, insure tech like a lemonade, uh, or you know, now Geico's coming into the IE channel, like it doesn't really matter in the sense of who or what, but the new kid in town's gonna get the shiny object effect, and they're gonna get a lot of attention. And uh the funny analogy that's coming into my mind is here in East Texas, uh, I've talked about it a lot. We we're in a small town, we don't have restaurants, uh, but we're a bedroom community. Uh that's what we call suburbs. If it's not really a city, we call them a bedroom community. Um, and so we're a bedroom community to a town of about 40,000, 50,000 people. That's quote, the largest, largest city in in our area. There's restaurants there, all right, and and they're pretty much the same restaurants, right? I mean, there's the chains, there's a few local places. When a new restaurant comes in to Lufkin, Texas, the entire county tries to get in the front door of that restaurant on opening day. I do not know why. I do not know why this is. Tanya has experienced this more than likely in Monroe, West Monroe, or even I experienced it at Raisin Canes in Lufkin.

SPEAKER_04 36:51

I was there when the Raisin Canes opened, which is you know one of my favorite restaurants, and we're finally getting one at Pensacola, thank goodness. But it was insane, like it's chicken, and it's my favorite chicken. Like I am, I am a raisin canes kind of girl.

SPEAKER_01 37:07

It's a two week it's overrated. Yeah, it's not overrated.

SPEAKER_03 37:12

It's not overrated.

SPEAKER_01 37:13

Look, look, for two weeks, Raisin Canes and Lufkin looked like any normal any Chick-fil-A, right? They had police, it was crazy, it was nuts, right? But but that's what happened. Now, you can go to Raisin Canes today, very successful in Lufkin, Texas, and it's just go get your chicken, right? It's fine. It's not there's not police escorting cars and security and all that. And and it, but if if we open up another Raisin Canes on the other side of Lufkin, the same thing's gonna happen, right? Because it's the new kid in town or the new kid in that part of town. This is what happens in our channel. The new kid comes to the to the table. Now everybody wants them. Distribution, something new. They're afraid to say no to the distribution. They bring them in. The network generally gets gets first because they get the appointment first because they can provide some immediate distribution uh for for the uh that new carrier that's coming into the market. And everybody's happy at first. But over time, not having, if you're trying to play in the same space where everyone has profit sharing or bonus dollars available, and you're the one kid in town, new kid in town that doesn't, eventually that's going to hurt you. You're going to eventually end up in an adversely selected environment. Your book of business is going to perform at a uh less desirable level, right? Because your front-end salespeople are not being motivated in the same manner as the marketplace is motivating them, right? And so, unless you're a unique model, right, like you're the only true cat available homeowners market in you know, on the Gulf Coast, that's a unique model, and you can probably get away with it for a while until someone else comes in and competes with you, right? And so we've seen all this. This is this is stuff we've seen over the last five, maybe up to eight years, that's kind of new. It's kind of new because this, you know, carriers didn't move from the captive channel to the independent channel or the direct channel to the independent channel, and now everyone's trying to get a piece of the independent agency channel pie. And I love it because obviously I'm a champion proponent of the independent agency channel. I think it's the best channel, I think it's the channel that's going to win in the end when other channels are suffering and struggling. But that's just what happens, and we have to have this. It's kind of why I said you can't really solve your 2026 results starting in 2026. What I really mean by that is it's such a long tail cycle of an industry that you have to think about it long term, which is why we say play the infinite game with your agency.

SPEAKER_02 40:36

But isn't the answer to the part of the question that Tanya asked pertaining to the client a little more complicated? Because you're talking about, okay, maybe the dollars are slightly different, but the chances that the coverage and everything within are going to be identical between the two is probably fairly slim. There's always going to be some little difference between carrier A and carrier B. Couldn't that make a difference to the customer?

SPEAKER_01 41:08

Possibly, right? Depends on the agent, depends on the client. But yes, there's some possibilities to that. Um, I think, you know, an agent's not going to naturally sit there in a sales transaction. I've never seen this. And this was kind of this was the reason that the whole Elliott Spitzer thing blew up and didn't didn't do what it needed to do or what he intended for it to do. It became this sort of political sham thing that was going on. And but but the argument that that blew up on him was that agents were doing something, you know, they were choosing the carriers with the contingency payments versus this, other than that.

SPEAKER_04 41:52

Just like pharmaceutical sales, just like pharmaceutical. Right because of Trent and all such things.

SPEAKER_01 41:57

Okay, right. Sales, I've never met an agent, number one, that was so top of mind about that, that they decided that they were going to play, you know, they're not sitting there going, okay, carrier A, B, and C, and carrier B doesn't have profit sharing, go with A or C, right? Um, they're looking at this like, okay, what's my best option? And we can say price, it shouldn't be about price, but a lot of salespeople, I mean, at the end of the day, if they if they offer something that's$30 more than an option they have on the table, they're worried in the back of their mind that they're going to get undercut by another agent who offers that$30 less option, right? And so, I mean, it truly has to be apples to apples, coverage has to be apples to apples to Mike's point. I just think it's such a small percentage of the time that agents don't think about it. Now, when they think about it, it's kind of back to my argument, is a year down the road when the profit sharing dollars are coming out and they're looking at this one carrier that they wrote$750,000 worth of premium with that's not offering profit sharing, and they wrote, you know,$500,000 with carrier A and$800,000 with carrier B that do offer profit sharing, and then they start to think, hmm, if I could have got an extra two points off of that one that$750,000, that's$15,000 I'm missing. So it's not during the sell, it's the oh crap, down the road, what did I do that happens? That's where I see it generally go. And then that's where I say the market kind of takes care of it and the adverse selection takes care of it because then that carrier's sitting there going, hey, we got to get this bonus program out the door, or we're going to start losing what we've built. So they can't sit on their laurels too long.

SPEAKER_04 44:20

And I want to go back to like thinking about Brian Besch, Tech Star Integra in uh down in Austin-ish area. And he is the ultimate insurance advisor. I mean, like, there's nothing about he would not consider him a sales self, a salesperson, but he's the quintessential salesperson because he's so good at what he does, right? But but he's the he's the best insurance advisor that I've ever met. Um, and uh shout out to Brian. And I know lots of good ones, so I hope nobody gets offended by that. But the idea that I would say to Brian, but you know, this guy over here is$30 cheaper. Brian's gonna be like, okay, please go over there, right? I mean, like, he's not because his he, you know, he sees himself at the same level as a CPA, as an attorney. In fact, if one of his clients needs a CPA or an attorney, they call Brian to find out who to use, right? Because he's such a connector. He's he is truly, he truly understands that he is helping people protect their most valuable assets, and he does a fantastic job of explaining that to his clients. And I've seen Brian sell things that were significantly more than what anybody else was offering because he explained what he was selling to them. It wasn't, I'm gonna get you a quote and I'm gonna send it to you. It'd say, This is how I'm protecting your assets, this is how I'm protecting you. This is what could happen if you go with someone else. And and I I hear people that are listening to this podcast saying, I don't have time to do that, or my clients don't have time to listen to that, they just want to get the cheapest price. That's our fault. Sure. Right? That's totally our fault. And to go with the new state farm commercials with the the horrible 80s rock music, again, making fun of the independent agents, right? There's there's a reason that they chose that. And there's a reason that they're presenting themselves as advisors as opposed to the cheesy, I'm gonna get you the best price. That's right. Thing.

SPEAKER_02 46:51

That's right. Well, look, you're gonna lose 10% of your business every year, right? Make it the 10%, that's a problem.

SPEAKER_01 47:02

Yeah. That's right. And and and and and that's really what should happen, right? And I I would even say you like when you have somebody like Brian, um, when Techstar, you know, he's training his people to emulate, you know, his his vision on that and what he expects. And he's he's raised the bar really high in his agency. And here's the true, true evidence of that. Uh three and a half, four years ago, um, when really kind of the early, early signs of the hard market and inflationary cycle that we were about to head into, um, Brian's policy per customer ratio was 2.52. Now, let me just explain this for a second, right? So, in order to get your policy per customer ratio, um, share of wallet, that's kind of a measurement we use internally. Our our magic number that we push people best practice is above 2.0. Because what that says is on average, you write an auto and a home policy for your clients, right? To get to 2.52 across, you know, 500, 600 clients, a thousand clients, um, that takes a lot of things because you know there may be situations why uh maybe they own a company vehicle, they don't have any personal vehicles, whatever, right? Maybe they they don't have insurable, two and a half insurable things. So you're writing some four policies, some five policy accounts. You're writing a lot of two policy accounts, you know, in order to get to that 2.52, you're writing several accounts of three or more policies in in your book of business. Over the course of the hard market, I just saw this a few days ago. Brian has increased his policy per customer ratio to 2.61. So during the market cycle, that everybody was panicking and saying we got to remarket all of our business. And I'm not saying Brian didn't. He did. He had to remarket some business. There were some carriers having to get off of some business, there was carriers having to get back to profitability. It had to happen. But he did it while increasing his policy per customer ratio. Okay, that has been tremendous for his profitability, and his profit sharing dollars are growing because of that book of business that he has built with an intentional mindset to not have a lot of operational costs tied to it. He doesn't have billing questions, he doesn't have a bunch of vehicle changes. I know that's crazy, but like his customers don't change vehicles every three months. People that they might change a couple of years, they may not change, but once every five years, but he's not doing a bunch of churning of auto endorsements, or they don't they don't lose their ID card, right? They don't these customers that he's writing that's getting him to this policy per client ratio, they're they're great customers, right? And he's been so intentional about that. Sometimes I think we get so wrapped up about we are a sales organization, independent agencies are sales organizations that we do forget that the profitability of the client to our agency is a really important thing to think about.

SPEAKER_04 51:01

Thank y'all so much for listening to the second episode on uh profit sharing. I hope this really helped. Uh planning for this year and starting this year planning for next year because we love mailbox money.

SPEAKER_01 51:18

I I think it's important that we do plan, and I know I started out with you couldn't do anything. No, you can. You can work on your book. You can, yes, work on your sales. Obviously, it's a given that we want to sell new business. We should be selling a stable, significant amount of new business every month. We should be doing that, but we should be looking at our book of business and making sure that our partnerships with our carriers are aligned really well and have some intentionality. And if you've got business spread across 10 or 12 carriers, think about what a consolidation to four or five might look like. You know, if it brings you an extra two points annually on, you know, say five million in premium, um, just to take an just some average across like our network, that's a hundred thousand dollars a year that you're leaving on the table if you're not thinking about contingency profit sharing dollars uh as a business owner.

SPEAKER_04 52:27

Follow up to the squirrel thing. I'm thinking about Emma Kate, and since she is doing an internship with us this semester, uh, do you think that I could bring her in for a week or two and let her get rid of some squirrels on our property?

SPEAKER_01 52:44

I'm sure she would. I don't know. She may have to channel her eight-year-old self. I don't know if she's how much she's gonna be.

SPEAKER_04 52:59

Yes, I did. Yes, I did. That's exactly exactly what I had doing.

SPEAKER_01 53:05

I wish I had a a video of you trying to get the world out of the net once you got it out of the that is that's a good point.

SPEAKER_04 53:14

Oh no, I just turned it over.

SPEAKER_01 53:17

And ran. And ran for your life.

SPEAKER_04 53:21

I opened the garbage can, I turned it over. I closed the garbage can.

unknown 53:25

Gotcha.

SPEAKER_01 53:27

Wow. That's good.

SPEAKER_04 53:30

I'm gonna leave us today with this quote from Tony Dungey. Consistency is what transforms average into excellence.

SPEAKER_01 53:40

Attitude to choice. Make a great one.

SPEAKER_00 53:42

Bye, y'all. At the Integra Partner Network, we understand that carrier access is the key to your agency's success. That's why Integra offers direct access to top-rated personal and commercial carriers, ensuring your agency thrives in today's challenging market. And with our comprehensive resources, profit sharing, and bonus opportunities, technology and peer support, all where you retain 100% of your book with no penalties to exit. Integra is ready to empower you and your agency to find sustained growth. Find your way to Integra. Visit IntegraPartner Network.com today. That's integrapartner network.com.