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Digital Broker Management: The Secret to Successful Mergers and Acquisitions

Roi Agababa
Roi Agababa

This cloud-based technology makes the M&A process seamless for insurance brokers.

You've just heard the good news. A friend of yours in the business is retiring, and their insurance brokerage is up for grabs. Whew. You don't have to prospect anymore.

Or do you?

In today's insurance industry, many established brokerages with strong revenue are looking for ways to buy out or merge with other brokerages to either expand their business geographically or acquire new lines of business. This trend is based on the fact that the average age of an insurance agent is 59 to 65. The older agents who own brokerages eventually want to sell their businesses and retire, while the brokers who are still in business step in and take over.

However, the M&A process isn't exactly a quick and easy affair. It seems like a no-brainer, but without understanding the numbers of the business you're acquiring, you don't really know what you're getting yourself into.

If the brokerage you want to buy has a long history of good service to its policyholders, and you've spent some time getting to know your friend's customers, then it might not be as big a deal to drop the coin and pick up their book of business. But that still means you're only operating based on rough numbers.

The key question here is "What did I just buy and what value am I truly getting?"

The way you answer that question is through the right technology. Cloud-based digital management platforms give you key data on customer intelligence, performance measurements and customer profitability – all in real time.

By implementing an intelligent digital platform, you'll be able to identify key pieces of information to make the M&A process as seamless as possible, such as the following:

  • Which customers are and aren't profitable

  • Which agents are and aren't profitable

  • Who you're going to lose in the transition, and who's worth keeping

  • What new lines of business you can expand into, and which ones will be a waste of your time

Flexible technology: The secret to seamless M&A 

Unless you're still running a paper-and-ink business, you know the importance of technology in the insurance industry. But even if you've upgraded to digitally managing your business, you might still be using outdated tech. Today's new platforms outshine legacy systems and ease the M&A process in several important ways.

By using a data-driven broker management platform, you can integrate the new brokerage's book of business into your system faster and with more transparency. It will also help you determine just how profitable the other brokerage is (or isn't) so you can truly understand your ROI.

For example, let's say your friend tells you their business had an annual policy renewal loss rate of approximately 10 percent. You then factor that into your calculations, and now you want to know if, after acquiring it, you're anywhere near the 10 percent target. Are you even in the ballpark? If so, what can you do to hit the same mark or, even better, lower the loss rate altogether?

An intelligent platform gives you access to a wealth of dashboards that reflect the current state of business at all times and empowers better decision-making. Because every policy your agents sell is digitally updated into the system, you'd be able to see all relevant data, such as when the policy is up for renewal, at the click of a button. Your agents would even receive automatic reminders to contact the client and renew the policy in time.

By analyzing the data first, you know what you're getting yourself into, so you can prepare before you sign on the dotted line.

How clean is your data?

Legacy systems are probably the biggest technological threat in the face of an M&A, because merging your new system with an old one can be difficult at best. Some older systems can be modified, and some newer systems can "hook" into older ones, but you really have to hunt for a top-shelf platform that can make the transition simple and hassle-free.

If you are dealing with legacy-style data, merging successfully is going to take some time, because you're trying to take old data and manually jam it into a new system. It's like sticking a square peg into a round hole. It's not going to work.

On the other hand, if you're the one with the legacy system, then merging with a newer, faster system will have its challenges. But it might be easier than you think.

It could even be a strategic merger. Once you acquire an intelligent insurance management platform, you'll be able to track new businesses you want to merge with faster and more efficiently in the future. Also, because an intelligent platform gives you unparalleled visibility of your business's data, you can easily integrate new lines of business into your system and manage them separately.

Action plan

Before you do anything rash, sit down and make a plan. Acquiring or merging with other businesses is something that should take time and due diligence on your part. If you don't want to end up in a mess of unclear data, approximate numbers and overall uncertainty, it's best to take advantage of the technology that's available today and help your mergers run smoothly. You should know exactly what you're getting into, what your ROI will be, and how far you can grow with your new lines of business.

The right broker management platform will give you flexibility and infinite scalability to pursue your business needs. It will also come with better support and a more streamlined interface, which is exactly what you want for your next M&A.

Image Credit: kenary820/Shutterstock
Roi Agababa
Roi Agababa Member