--:-- Ryan Hanley: And but you know, a lot of times we're just talking through ideas, and we have to test those ideas. We have to put those ideas out into the marketplace. We have to execute on a strategy and then see if it works. I mean, think about that. Think about how much different that methodology is to the way all of us—every one of us, every one of you listening and myself—how we were all raised in this industry. There was no "test and see." You don't test things in insurance. You don't try something and hope it works. You don't put your business in a position where a process or procedure or something like that could fail. Except when you're building something that hasn't actually been built before on a premise that seems to be working by all accounts but certainly isn't proven. I think we've had good success so far, but we can't call this a victory yet. It's not time to spike the football, certainly. We've got a lot of work to do. And it forces us to make different types of technology decisions. It forces us to make different types of HR decisions. It forces us to make different types of procedural process systems, tracking, accountability, reporting, how we do meetings, how we talk about the company, how we market the company, how we build internal culture, how we keep people happy. There's no place to turn. There's no one to sit down with. So I have to sit down with people from all over the industry. I have to talk to people from all over the industry. I have to read. I have to look at what other industries are doing. I have to find people who are willing to share even small bits of their business and then, like a patchwork quilt, weave it all together and try to come up with what Rogue is to meet our mission, right? Like, we have a mission that we're trying to execute on and trying to put all that together. It just, man, it absolutely wastes my brain. I get to the end of the day and I'm just spent. I'm beat, you know, and I'm trying to get myself in shape and use fitness and health as a competitive advantage, right? If I'm going to play this game and execute at the highest level, I want to make sure that my body and my brain are in good position, good health, good, you know, high levels of energy. And that's helped. That's been good. But man, it's stressful. It's stressful to work through some of these things and, you know, think, "Geez, if only we could do this well—we don't have the money for that." Okay, so we don't have the money for that, and we don't have the people to execute on that. So how do we get there? Well, is there a tool that can help us get there? Well, tools cost money, and they take time, and there's a sunk cost in all the time and money that it takes to put a tool into place, and if that tool doesn't work and you got to back out of it, and then culturally, right, I mean, anyone who's ever tried to change a system—well, you know, the backlash that you get from your people. Well, thankfully, the team that we have at Rogue kind of comes in, and we have a culture of understanding that things are going to change at different times. And we haven't figured this out. And they've been— the team's been absolutely tremendous. I'm very blessed by the people who've decided to buy into what we're doing and commit themselves to this. And, you know, it's been—it's been really great in that regard. But, you know, there's just—there's a lot of stuff there. And this is a very long-winded way, eight minutes into the podcast, and I haven't really shared too much with you. But, you know, it's just a long-winded way of saying, I'm sorry that I have not gotten an episode out to you in the last three weeks. I promise I'll be more consistent because I want to be more consistent because there are a lot of incredible things going on, but I've just been a little overwhelmed, and it's been—you know—and prioritizing Rogue, which, as much as I love you guys for listening to this show, I'm always going to prioritize Rogue over the podcast because I just—I mean, I probably don't need to explain that, but I do want to share what we're doing and what you're going to get now is basically a two-parter. We're going to break this conversation up into two parts, most likely. And I want to talk a little bit about philosophically what we're seeing, what's working for us, what you should consider, why we're making certain decisions, things I find that you might find interesting. I'll share that with you. And then I also want to share some of the things that I've been reading and seeing from different thought leaders in the space. And particularly, I want to start with this report that was forwarded over to me by McKinsey. So I had a—it was actually my brother-in-law. He forwarded over to me this report that McKinsey did—or he forwarded over to me the breakdown of the report that McKinsey did. And I read the McKinsey report as well, but the breakdown is pretty easy. It's all about reinsurance, and I think the title is "Reinsurance, an Industry Destroying Value, or Shifting It to Brokers," which is the part that I found interesting, right? Destroying value is tough to wrap my head around. I'm not an economist by any regard, but the report—well, you know, one of the big lines from the report was essentially that half of insurers globally are not earning their cost of capital, and they're trading at half of their book value, and that this destruction has continued, and while insurance companies had been at about stable returns for decades, that is not the case anymore. And I'm just going to kind of get to the rub of this particular report and what it means for those of you listening. Is that McKinsey—and this came out like a month ago, I think. Maybe a little longer. But basically, this report basically says that the value in the insurance industry is rapidly shifting to brokers. Now, brokers is a very broad term. They could be talking about the biggest brokers in the world, but I think we all need to take to heart what they're actually saying, which is distribution is what wins this game. Distribution wins. If you can distribute your product, you can grow your business. Now, I think there are some caveats to that. You have to be able to retain, right? We look at—and we'll get to this in a little bit—but you look at like Lemonade and Root and a lot of these InsurTech carriers who were supposed to change the way that business was done. And they definitely knew how to distribute, although I would argue that their distribution model was actually fairly remedial versus what some people want to pretend. And, oh, you know, people—it's funny, I always had this Twitter conversation, and Will Shaw was involved, Raghav, Tana from Tarmica, and T-A-R-M-I-K-A.com. T-A-R-M-I-K-A.com. Go to Tarmica today. That's a little plug for our peeps over at Tarmica. Mid-roll, mid-roll real-time. I'm a pro. That's the way it is. So Raghav was involved. Zach Gould, GNN was involved. A couple of people were talking back and forth. And basically, the comment was made, well, they've written X hundred million dollars in premium and have over a million customers. And that's all great until you realize that they had like 13 rounds of funding and raised however many hundred million dollars in venture and PE capital and all this kind of stuff, and that their strategy for acquiring business was essentially Facebook and Google ads. I mean, yeah, they did some PR, and I think a lot of that was internal, and I think at the beginning they got a little bit of publicity in some kind of a little more mainstream because of like the whole B Corp, which is basically a charitable for-profit organization or whatever, and the fact that they were giving some X percentage of earnings over their combined ratio back to charities that people could pick and all this kind of stuff, which was as gimmicky as gimmicky gets. And essentially what they did was just create gray, white, and pink moving Facebook and Google ads and just ran a shit ton of them and acquired business. And because it was easy to buy their product and because their product had a very low price point and because their product was a product that people don't overly mentally invest in like their car insurance or their home insurance or business insurance—it's renter's insurance, right? It was incredibly easy for them to acquire business, and they overpaid for it and they just ran a shit ton of ads and for a cheap product that people aren't overly emotionally invested in, like renter's insurance, blasted into urban areas with solid branding, which they absolutely had, and some messaging that created a clear adversary, which was the traditional insurance space. They were able to acquire customers. I just—I'm not impressed by it. Like, I get it, but Jesus, if you gave me all the money they had, I could probably do the same thing, and I'm not even that smart, right? Like, I could probably do it from my frigging basement. Like, it's not rocket science. It just doesn't impress me. All the fanfare, all the apps, the bots, all the talk. I mean, it's interesting and it's intriguing and it's good fodder for a conference, right? We can dissect these things and that's all great, but they haven't made a dollar, and their model is thus far completely unsustainable. And they had to go out and buy Metro Mile to stay relevant. And I just don't get it. The reason I don't get it is because there's no humans involved. People stick around because of humans. People don't stick around because the app is easy to use. Let me back up a little bit. People don't stick around for products that they are emotionally and psychologically invested in because an app is easy to use. Now, I'm sure you can throw some exceptions at me. I'm sure that's true. But when you buy home insurance, you're buying home insurance, you just had to go through the process of getting a mortgage and walking into 20 different homes. And it's most likely at the point that you're buying, especially your first home, it's probably the largest purchase you've ever made in your entire life. And you need to make sure you can afford it. And there's all the tax ramifications. And you've got to upkeep. And you're going to build a family there. And you are emotionally, psychologically, and financially invested in that home. Well, you're a little more likely to want to have some human, some person, with some level of perceived expertise and experience, go, "You know what? You're doing the right thing. You should buy that policy. Yep, you're good." That's what you want to hear. You know, you don't need to have someone walk you through every element for 45 minutes across a kitchen table like we used to do. Those days are over of needing that. But what you do need is someone to just—and we, you know, at Rogue, we do this using video, but, you know, walk through that policy quick, a minute, three minutes, five minutes tops. Here's what's important. Here's some decisions you may need to make. And here's why I think you're doing the right thing by making those decisions. And then the person has all the validation they need. And now they feel like they're making a good decision and they feel emotionally invested in the person who kind of gave them the stamp of approval or that check mark that they were doing the right thing. And they're going to stick around. And we've seen that over and over and over and over again. It's 440 years of that exact process with different technology up to today where now we use mostly computers and a lot of people sit at home and do that work, right? Well, when you're completely disconnected either through, you know, a call center someplace, whether it's here in the States or external, or you're just using an app or a bot or whatever, you know, silly thing you're trying to, there's no emotional connection. Like, it's fine while it's fine. And as soon as it's not fine, you're gone. And there's just no emotional connection to it. And frankly, without some sort of human touch, I don't know that there's any branding or marketing that can really create that connection. I think you can get it initially, you can get them interested, you can get them down a funnel, you can get them to maybe even purchase. But to get them to stick, they're only going to stay until things aren't fine, and they're going to leave because there's no one—there's no connection. They're just like, "Ah, this one. Yeah, I bought renter's insurance from Lemonade for $134 a year, but Traveler's is $115 a year. So I'll just go to that." Why do I care? What do they care? I mean, right? Right? Am I crazy? What's up, guys? Sorry to take you away from the episode, but as you know, we do not run ads on this show. And in exchange for that, I need your help. If you're loving this episode, if you enjoy this podcast, whether you're watching on YouTube or you're listening on your favorite podcast platform, I would love for you to subscribe, share, comment if you're on YouTube, leave a rating review if you're on Spotify or Apple iTunes, etc. This helps the show grow. It helps me bring more guests in. We have a tremendous lineup of people coming in, men and women who've done incredible things, sharing their stories around peak performance, leadership, growth, sales—the things that are going to help you grow as a person and grow your business. But they all check out comments, ratings, reviews. They check out all this information before they come on. So as I reach out to more and more people and want to bring them in and share their stories with you, I need your help. Share the show, subscribe if you're not subscribed, and I'd love for you to leave a comment about the show because I read all the comments, or if you're on Apple or Spotify, leave a rating review of this show. I love you for listening to this show, and I hope you enjoy it listening as much as I do creating the show for you. All right, I'm out of here. Peace. Let's get back to the episode. So my point in saying that is reinsurers and insurance carriers have, I think, stepped on brokers for a very long time. And what we're seeing is brokers, because of how important distribution is, are taking back some of that power, and it's why I've encouraged you guys from a very long time and you've heard me say this, I think I said this on the podcast with Billy Williams, I've certainly said it in the last couple months because it's what I believe, is as brokers, we need to stop looking at our carrier appointments as some gift that we were given. Franchise value doesn't exist anymore; there's no franchise value. I don't care if you have an eerie appointment or whoever. There's no franchise value. No one gives a shit. It's, is your pricing consistent? Is your product underwriting consistent? Can I talk to an underwriter when I need them? Are you guys going to take care of my customers when there's a claim? Or are you going to screw me? Are you going to make it difficult for me to do simple processes inside your system when I need to do service requests? Are you, you know, these are the things that matter. You, the broker, today in 2022, are doing the carrier a favor by deciding to sell their product and not the other way around. Now, granted, do I think it could be a real partnership? Absolutely. Absolutely do I think you should think about your carrier appointments as partnerships. This is an entity that plays a large role in your organization, a large role in how you provide value to your customers. So I don't think you should mistreat carriers. Certainly, here's what I would recommend. Do not treat carriers the way carriers have treated brokers. Carriers have treated brokers, unless you were writing a ton of business with them and maybe they'd fly you out to some place and let you play golf for a little bit for free, right? But even those guys, they still treat you like crap in between those meetings. They still, you know, talk to you like, "Oh, you should be, just understand by having this appointment, you have franchise value and blah, blah, blah." Nobody cares. Nobody cares. Franchise value doesn't exist. It does not exist today. It doesn't mean you can't have a good partnership with carriers that are willing to do right by you. But today, this report, this McKinsey report, go Google this, right? This McKinsey report clearly outlines, clearly outlines that the power is swinging back to the brokers and the reinsurers and the insurers are feeling it in their value, in the capital, in the way that their capital is being used and deployed and their actual asset values, it's swinging back to the brokers because brokers have distribution. Brokers have relationships. Brokers have retention. And they don't. So do not. Do not look at carrier appointments as gifts. They're not gifts. They're not doing you a favor by appointing you. You are doing them a favor by writing their product because there's, look, we have like 54 different markets that we can go to at Rogue because we write nationally and we write all different classes of business and we need all those markets. I can tell you from firsthand experience, there is very little difference if you take a broad stroke. Basically, all the carriers—you know, some of the carriers are a little more technology, some have a little more broad appetite. Some pricing fluctuates. Some are easy to deal with. Some are whatever. But the grand scheme is there's always another carrier that can write the business. There's always another carrier that can write the business. So if some carrier rep and that you would love to work with their carrier, right? You go in, you're, "I would love to work with you, man, we could do this." And they're going to give you crap or talk to you like, like, you know, well, "You should be honored in the franchise value that you get by having—nope, just I'm good. Move on." I'll write it with someone else. If they're going to give you that nonsense, just move on, right? Just move on because it's not worth it. That's going to be a headache for you down the line. If they're going to have that conversation with you, they're going to be a headache for you. And trust me when I tell you, there is always another carrier that will write the business. However, there is not always another broker who can find the accounts and retain the accounts like you can. Because they can't do it. They can't. They don't have the willpower. They don't have the internal expertise. And they don't have the fortitude of building out a sales force. They just don't have it. It's expensive. It takes time. It takes expertise. There's no way to expedite it. How do you justify it when you already have a broker network who's writing business for you, right? Your agency plant, as it used to be called. So they're never going to do it. They don't have distribution. They have you. And for a long time, the pre-social media days, the pre-technology days, right? Before digitization of our industry, they could hold franchise value over you. They just can't anymore. You have the power. You have the power. Never allow yourself to be browbeaten by some carrier rep because you're looking for an appointment and they think somehow the franchise value or whatever is this holy gift that they're going to bestow upon you. Screw that. Go find someone else. Someone else will write the business. Find a partner who believes in you, who wants to grow with you, who wants to work with you, who's going to give you some leeway, who isn't going to email you every month and ask you what business you're going to write the next quarter? I mean, that's so stupid. You either believe in what we're doing and you're going to give us the grace to grow and adapt and learn and have good quarters and bad quarters, or you're not. And those carriers with the open-mindedness to see that we are in like the first, maybe the second inning of the digitization of our industry and that no one has a good answer to what's coming and that everybody is testing and failing and flailing and winning and losing and it's all over the board, those are the carriers you want to find because those carriers are the ones that are going to be your real partners moving forward. So this report just solidified in my mind the power—the power of the broker. And I know independent agents aren't broken. To be honest with you, everybody who isn't an independent insurance agent refers to us as brokers. I just call myself a broker now because I know technically it's a different license and it holds a different meaning with the carriers. God, it's just too much. We can only give so many brain cycles to these silly nomenclature things that are nonsensical to everyone except for the purists of our space. So I just refer to us as brokers and so does McKinsey and McKinsey has a lot of smart people. So I do want to read to you just a passage in here about what McKinsey was saying. So when it comes to the equality of the distribution of winners and losers and also those generating profits, one notable shift is the rise of the broking or broker segment. That's a weird way of putting it. Over the past five to 10 years, brokers have emerged as clear winners of the industry, both public and private investors recognizing their position of strength in the insurance value chain, McKinsey explains. Part of this is down to insurers and reinsurers lacking control of distribution channels. Remember, franchise value doesn't matter. That is a silly concept. Which intermediaries are firmly in charge of today? That's brokers, intermediaries. McKinsey's consultants point out that because of the lack of control of distribution, reinsurers might run an even greater risk of becoming pure balance sheet providers while intermediaries keep their asset-light client relationship model. Booyah. The authors of the McKinsey Report say that the shift towards digital is perhaps the last chance for insurers to regain the upper hand in this fight for the customer. Screw that. While value may have been destroyed by the insurance and reinsurance industry in economic terms, we believe it has also been shifted or relinquished by not capitalizing on the one thing brokers do not directly wield risk capital itself. That's starting to change—you're seeing more and more people going out and grabbing their own paper or fronting paper and launching their own products into the market. I think there's a huge opportunity for brokers to launch their own paper, to bypass some of the standard insurers, go directly to reinsurers, find paper that's been shelved and launch it as fronting paper that you can brand yourself. Huge opportunity, huge opportunity, especially when you're working against insurers who will launch their own direct product in a heartbeat, like Travelers buying Trove and all the other things that they've done. They would cut you out in a second. They would slit your throat and hang you upside down if they thought they could get away with it right. So why not start your own paper? Rather than breaking down the market value chains as disruption should likely have delivered with risk capital the key to the ultimate delivery of a risk transfer product, control of the chains is consolidated towards brokers. Guys, that's a lot of words, a lot of thoughts. I highly recommend you Google this report. Just Google "reinsurance, an industry destroying value or shifting it to brokers." McKinsey, something like that. Just Google some of those words. I'm sure you'll find this report. I think it's absolutely incredible. And our days are far from done as brokers. I think we all kind of know that, and you wouldn't be listening to this show if you thought that they weren't. But it's just always interesting to me how there's just all these conversations that happen around how, you know, "Geez, if you could just get past the brokers and intermediaries and that 12 to what max 20% commission that you have to pay for all the work that it takes to acquire business." I mean, it is—it's just so much work to acquire business. And look, if you have a dump truck full of VC capital that's just dying to be burnt up, shit, you can go out and acquire business tomorrow. But if you haven't built the systems processes, if you don't have the technology, if you haven't set expectations, if you don't have the brand, content, messaging, if you don't have a culture built inside your business to support the retention, the service, and retention of that business, it means nothing. It means absolutely nothing. And what brokers have more and better than any other piece of the value chain is everything I just mentioned, minus in some cases the technology part, to retain the business. That's what we have. That's what we have. We can actually grow from a new business standpoint slower because we're able to retain where all of our insurer, reinsurer, and InsurTech competitors—they have to grow as fast as they possibly can at all times because they can't retain. And my friends, the reason I'm spending so much time on this topic is that this is the core concept of what we're trying to do here at Rogue. It's what I recommend you start to think about in your own agencies—is that it's the human-optimized model. I've been talking about this for almost two years—is your humans are the power of your business. However, if you are deploying those humans into the field in an old-school traditional way because it's all you know, you are going to lose. I can drop a pin in your backyard and acquire that business, acquire business right out of your hometown tomorrow. I can do that. I can go to different lead gen sources. I can run Google ads and Facebook ads and I can acquire that business. And the difference between me and everyone else is that I can retain it. That should scare the crap out of you. And the reason that—and my point in saying that to you is not that I want to put you out of business. I certainly don't, although don't think that I'm not trying to grow my business. And as much as I love all of you, I'm going to grow. I'm certainly not going to strategically target any of you. I just don't have any desire to do that unless one of you really pisses me off or comes after me. And then I can't make any promises at that point. My point in saying this to you is—with simple tweaks over time, maybe utilizing a mentor, like some of the ones that I mentioned before, or just thinking through with your leadership team and your people and focusing on, okay, how do we streamline some of our service? How do we reduce costs where we can using technology while still making our people a primary focus of the process? And then deploy some tech into the acquisition phase of your growth so that you can acquire at a slightly lower cost of acquisition or at the same cost of acquisition but at a larger scale, you can grow and grow indefinitely. There's no more, "Oh, I hear all this stupid crap about five, ten years. Why do brokers ever have to go away?" Seriously. What in the marketplace makes you think that a human-optimized insurance broker is ever not going to be part of the process? Just ping me with one example, right? Ping me with an example or a case study or an idea or a concept or give me that out of left field exception to the rule of here's why a human-optimized insurance brokerage can't grow indefinitely. I can't find one. I can't think of one. And this is what I think about all the time, right? Because while I'm growing my business, I'm also thinking about how to defend my business. So this is what I think about all day, every day. And I cannot find a way. Now, granted, if somehow over the course of time, people become so—you know, these products become so ingrained like in the internet or embedded insurance, like every product we own, the insurance comes with a product. And like when you're born, you're born with insurance or something. I don't know. Maybe then, maybe then, maybe then, they're not necessary anymore. But even there, there's going to need to be brokers to sell the product liability and handle claims and do all this kind of stuff. So I don't know. To me, we have to consider this concept of human optimization. And if we do, we can grow indefinitely. Now, I think this is a good spot to stop for this portion of this two-part series. And I just want to say, guys, I share these thoughts with you. Obviously, this is what I believe. It's how I grow my business. It's the bedrock of what we do. It's our methodology. It's our culture. It's our ideas here at Rogue Risk. It doesn't mean it's right, but I think I've put as much thought and time and energy and effort into these concepts as maybe anybody in our space. And if I'm wrong, I'm not wrong by a lot. So this is the way the industry is going. And the winners are going to be human-optimized. Some of you are big enough today to ride this wave to retirement. And to you, I wish you nothing but the best. But for everyone else who knows they have 10 years left in this space at a minimum, this is the way you got it that you have to be moving in this direction—you absolutely have to be moving in this direction, guys. In the next section, I'm going to break down a really cool—I guess it's a white paper—uh, that was done by Reuters—I guess I always mispronounce it—it's not Reuters—it's Reuters—uh, and four contributors from the space—uh, Mark Seek, who's the chief psych—I'm going to mispronounce your name, man. Mark, if you're listening, you're from Berkeley. Apologize. Chief Customer Experience Officer at Berkeley Fire and Marine. Bobby Collies, VP of Strategic Distribution at Grain. What up, Bobby? Craig Welsh, Chief Distribution and Marketing Officer at Westfield. Love, Craig. And Tim Riley, Senior Director of Digital Distribution at Tokyo Marine Highland. They were contributors to this white paper. Seven key trends of 2022. I want to break down this report in the context of this episode, and I think you're absolutely going to love it. So I think we're going to launch these two episodes on the same day. So if you want, just click the next episode
