Ep 35 | Specialized Insurance Products: Growing Forward with Alicia Calhoun

Welcome to Episode 35 of Uncaptive Agent. In this episode, I’m joined by Alicia Calhoun. She’s with XPT Specialties. Alicia has worked in insurance since 1999. Initially starting as an account manager, she now provides specialty insurance in different professional areas, including oil and gas.

Alicia and I take the time during this podcast to talk about what it takes for specialized brokers to grow in the future. Some of the great takeaways from our conversation include:

• Whether technology use evens out the playing field during the labor shortage
• Can and should a specialty insurance broker’s office or work be automated?
• If so, are there certain instances when it would be better to not introduce automation into the workplace?
• How mindset and business models must evolve for the future so specialized insurance agents continue to grow forward.

It was a wonderful conversation!

Transcript

Tony Caldwell: Good morning, everybody. This is Tony Caldwell and welcome to another edition of Uncaptive Agent, where we are looking at the future of the insurance distribution business in the United States as Alicia and I are... Alicia Calhoun, my guest today, are talking with you or talking to each other. We are both just really grateful to be in air conditioning. It is the summer of 2022 and record temperatures all over the world, but especially in Oklahoma and Texas, where Alicia is. So Alicia, I'm so glad that you're where you're nice and air conditioned and I am too, welcome.

Alicia Calhoun: Thank you. Thank you, Tony. I appreciate you having me on.

Tony Caldwell: Good. Give us just a thumbnail sketch, if you would, about your professional background. Obviously, you're with XPT Specialties now, and you are in charge of oil and gas distribution efforts and activities there. And you've been in that for a while, but tell us just a little bit about your insurance career.

Alicia Calhoun: Sure, happy to. So my insurance career started way back in 1999 on the retail side in the Northeast is where my insurance career started and blossomed. I started, as you know, at the very bottom [as an] account manager. So I really got to learn the ins and outs and what it takes from binding insurance to doing a certificate of insurance. Fast forward 10 years, when I joined the wholesale side now having had experience in both retail and wholesale. I quickly developed a love for energy, oil, and gas being in Houston, having moved to Houston. So like I said, 50/50 retail, wholesale, and now my focus is casualty insurance and energy and environmental casualty.

Tony Caldwell: Okay, great. So the insurance business, as it relates to oil and gas today, I expect is pretty exciting. The war in Ukraine and all the issues with Russia have dramatically increased oil prices, certainly. And I guess gas prices follow along with that. And there's lots of talk of energy shortages in Europe and other parts of the world. And you know, here at home, we've got an administration that's done a lot of things to discourage domestic drilling activities. And so a lot of turmoil and flux in that business, I would think.

Alicia Calhoun: There is certainly. Certainly there is. But with that, being on the, well, on the ENS side, it also creates opportunities. So with obviously rising cost, everything kind of goes along with that. Obviously insurance is based on exposures, revenues, payrolls, et cetera. So with that, insurance prices increase. So it's running the gamut. I think that with the shortages, the manufacturers, the distributors, those guys are hurting because they can't keep up on the service oil and gas side of things. I think we're seeing shortages there, too. There's plenty of work, but there's just not enough help. And then we bring in the shortages that we've had in excess capacity. So every line has been affected. And I think it's not even just so much what's going on in Ukraine with our administration. I think it's a little bit of everything. COVID. Just so much going on exciting times and scary times at the same time, I would say.

Tony Caldwell: So you mentioned shortages just a minute ago and not keeping up, but I'm sure you're referring to labor shortages in the oil patch. And of course there's labor shortage all over the country in every industry, I think when COVID hit and as we came out of COVID in 2021, especially a lot of people felt like, "Hey, the reason that we have labor shortages employment shortages is because people haven't come back to work yet." What I think we overlooked was that 2020 and 2021 were the beginning of the peak years of baby boomer retirement.

So the baby boomers are the largest generation in American history, being followed by two generations that are the smallest generations in American history means that you've got a massive gap in employment. And despite rhetoric to the contrary, we've had net out migration people, more people going to Mexico and coming in from Mexico, which has been a big labor pool for us for a generation 12, the last 13 years. So that certainly impacts the oil patch. So this is a long term problem. That's going to take a generation to solve. Curious how your clients are looking at that and what they're doing either from a technology perspective or other ways to find efficiencies, to continue to operate.

Alicia Calhoun: Sure. So I think COVID was a big eye opener for many small agencies, middle agencies to your big guys. And that was because a lot of us were not prepared. We didn't have the technology. I think in some cases, technology in our industry was viewed as "Well, we want you in the office, you got to be in the office. If you're not in the office, you're not performing." And I think very quickly, we've identified that maybe not everybody, you don't have to brush everybody with that same brush. There are ways that you can be efficient with not necessarily being in the office. So I think a lot of things happened with COVID like you mentioned, the baby boomers, a lot of people that maybe weren't quite there at retirement got pushed towards, or it made it weren't synthesized to retire early.

So we've had the shortages, like you mentioned, with people retiring and whatnot, but our entire industry has been affected with the shortages. We had the large barges that contained a lot of inventory offshore, and that went down, which created a chip shortage in the auto industry as a lot of chips go into vacuum trucks, oil and gas type of vehicles that require that kind of technology. So technology all across the board, I think, has really been questioned as to were we under utilizing and now what can we do? Like Zoom, for example. Zoom, I had heard of it, but I really didn't care for it.

Now. That is like, I think you've mentioned before, if that's the T model of today, what's the Tesla going to look like down the road and that's a really good question. You just keep thinking about what is next? You know. Once upon a time, I'm old enough to have watched the Jetsons when I was younger and we watched them zooming around and little cars and getting their food out of the vending machine. And that was back then. Today. That is, we're the Jetsons.

Tony Caldwell: Yeah. Well, I don't know where it's all going to go, but I did have an experience, you know, since you mentioned Zoom. About four or five years ago now with augmented reality where I was sitting across a desk as I am today, I'm sitting in my office, you in yours. We probably have literal desks between us, but we can't see them. And it's a two dimensional conversation that we're having. And I was having a conversation with somebody who was a thousand miles away, but he was a hologram, but it was three dimensional. And now that is getting easier and easier. I was wearing a backpack and a massive headset and all this kind of stuff. Today, the form factor's getting smaller. I think in the next five years, it'll just be eyeglasses.

And, we'll be having these kinds of conversations, but they'll be more real, I guess, because right now I see the monitor and I see the microphone, I see all that stuff intruding into the conversation because it's there. But when you go into a virtual reality, your mind actually within about 30 seconds, you're really in a different place. Right? And so that piece that we're missing and I think we are all craving that to some degree, especially a people business like insurance, we're missing the personal, in person contact, technology's going to get better and help maybe not as good as the real thing, but with haptics and maybe that's going to be the way we interact.

And if we save time, you were an insurance producer, I think for a while, you certainly have an income production role, probably dealing with agents and things. It is probably the biggest time suck in your life. I know it is in mine [along with] the travel time. So if everyone in our business got back 20% of their day from lack of having to travel, but you could accomplish a hundred percent of what you did. I wonder if that's not enough all by itself to replace all the people we're missing. What do you think?

Alicia Calhoun: Well, I mean, I can speak for myself and not having to commute to the office, 45 minutes each way, an hour, depending on traffic, the time that just walking up to my computer, I can get so much done. But it doesn't replace human interaction. I mean, I believe that in order to be successful and from my viewpoint as a wholesaler. Because, one I've been on the retail side and I get to see what works from the smaller agent to the middle size agency up into your big three letter word agents. I see what works and I see what doesn't. The collaboration, you have to have, collaboration and communication and transparency. And you can't, really, you can have some of that, kind of like what we're having right now, but that human interaction, because in the insurance industry, it's a relationship industry, right?

We do business with those that we trust and you can hear a lot over the phone or via telecommunication, but it's still not the same as somebody sitting before me shaking their hand, breaking bread. And it's just, it's a totally different thing. So I hope that doesn't ever go away, but I do see the agents that have really relied on the telecom. It's great for marketing and getting your name out there, but it's not going to be what ultimately drives a relationship. The way I guess I would put it is that it's probably a lot easier for somebody to tell me no, or to move something from me next year. If we don't have that kind of a relationship. It's easier just to not pick up the phone or not answer my call versus, if we have a meeting we're talking about it.

And I think it would be a scary thing if we ever lost that completely. But I do believe that technology, like I said, from a marketing standpoint, getting a message out, being transparent and getting a message out to the masses. Technology's huge things that, like you said, if I could make five marketing calls on a Zoom call, as an introduction versus getting in my car and driving an entire day and having missed emails and phone calls and it's huge. So there's got to be a balance, Tony. I do believe that. And I think it's just finding what that balance is.

Tony Caldwell: Well, so in the surplus business, I think technology is an interesting cause. My perception is that that part of our industry has really lagged behind the standard market part of our business. So insurance companies over the last decade or so have been making it easier and easier and easier for larger and larger accounts to be written either with little human involvement or faster because the technology or whatever, as we are talking today, multi-company rating systems for bots and things like that are taking over the low end of the business. They'll be working their way up the channel before too long, really it's middle market and above where you have more, what I would call, the traditional send in an accord form, have a conversation with an underwriter, go through the back and forth. You know, if the smaller end of the business, it's almost completely automated now.

At the same time though, on the wholesale side, it's really almost like it was 25 years ago from my perception. So two questions. One is how is my perception incorrect about that? Number one. Number two, over the next five years or so, what do you see changing that speeds all of our workup between retail agents and wholesale brokers to gain the efficiencies that we need to have to overwhelm the lack of people?

Alicia Calhoun: Sure. So there are insurance companies that are listening that they do get it. There are some that have their own platforms where they do give the underwriter or the broker, or like myself, the authority to go in and to rate. And they're always looking for ways to do it better. And I think it is that middle market and below now there are, I have seen over the past eight or nine years, because those platforms have been out there. They're evolving more to giving more commission to the wholesaler, if they're going to do the work and then just have... I'll give you an example, there's a market that I represent that has the capabilities to do very tough construction and then they can also handle ancillary type of construction, service contractors, handyman. So I can go in and as long as the threshold, below an X amount of revenue, I can rate it without an underwriter looking at it.

I just keep everything in file for audit purposes. If it goes over a certain, a certain threshold, then it just goes directly over to an underwriter and they review it. It's very quick. I've already done all the lead work for them. I've submitted everything, I've downloaded everything. And I just need somebody to say yay or nay. Kind of, I think that's the direction that some of the bigger companies are trying to go to. It's just creating that platform and working out the tweaks. In my career, there have been insurance companies that have said, "We're working on being the next ABC company that has the latest and greatest platform," but then it just doesn't come to fruition. But it depends. Specialties, I think it'll be a lot harder to automate. specialty type like oil and gas because there are too many questions that you couldn't populate enough questions in a platform versus talking to an underwriter and working through something.

However, I think that there is an area of what I would call soft ENS where it's too high risk for standard markets, but it's really not at high risk for the ENS. So I think that's the platform that it would work for to do the automated because of speed and as an ENS broker. And I think where a lot of people failed during our COVID was the technology and not being able to be up to speed. I was in a position where I was already working from home and automated and paperless and able to work my systems without any interruption. And so that fit me in advantage because my workload was never interrupted. Speed is king sometimes. And in the ENS world, a lot of times it may get worked in the... an account, maybe be worked in the standard market. And then at the last minute, it's just not a fit and all of a sudden hair on fire, call your wholesale broker. And then we have to perform very quickly. So speed is king. So in those instances, technology could be very helpful.

Tony Caldwell: So as you think about the next five years or so, and you think about what you just said about technology improvements, particularly on soft ENS, which is an interesting term. I hadn't heard that before. And some of these other things, what's on the table from a time savings from a percentage basis, would you say, is it a 10%, 20%, 50%? What do you think we can accomplish over the next five years?

Alicia Calhoun: So, I mean, if that soft ENS that I was mentioning, which is huge, I would say, I could be on the phone with you right now, Tony, and you say, "Alicia, I have an opportunity. And here's what it is." And while you're talking, I'm logging into my system. I could literally quote something if it fit the box and have you a quote prepared with the terms, the conditions, a specimen copy of the policy in a format, however you want it with your retailers' name, to where when I send it back over to you don't have to recreate the wheel. You don't have to put...you can maybe throw your logo on there if you want to, but some of these programs are getting so sophisticated to where they allow you to even do that. So, I mean, how amazing would that be while we're talking, five minutes later, you can hang up the phone with me and call your client and say, "I've got it done. We're at $9,000."

And you move on down the road. You don't bother anybody else. No more submissions are going out. But with that comes a very successful agent, a very successful broker is all about knowing their product, right? So the more I know my product and the more versed I am and exactly what I am selling, and I'm not dabbling.

That's what's going to make you very successful. That's what's going to build the trust and the relationship with your clients. So I chose to be a specialist in energy and construction because I've been doing both for the last 24 years. If you sent me something that is out of my wheelhouse, I'm going to go spend a whole lot of wheels a whole lot of time on something that if you had gone to a specialist that specializes in directors and officers, let's just say, for example, you're going to get the same speedy service that you would get for me because I know my products, my market.

So I think it's twofold. It's about if you sent me something, I'm not going to quote it on that platform that it's not going to fit, because I'm just wasting everybody's time. So it's as automated as we get. We still have to think, we still have to know our products. We still have to be on top of what's going on in the industry. What's going on in the marketplace? You know what carriers are cutting back on capacities and what players are pulling out of certain classes of business, et cetera.

Tony Caldwell: So I think this is interesting and I'm inferring from what you've just said, that there's a couple of keys here. One is, and I do think that it's easy, our default reaction to the future is well, technology solves our problems. And, clearly, technology is getting better, but you've really talked about something that I think is not discussed very often as we think about the future. And that is really a demand in terms of success, a demand to be even more skilled from a personal perspective. In other words, you talked about really knowing your niche, what you didn't say was that the agent on the other end of the Zoom call probably in the future needs to know their niche better because they need to know how to find you. Right? Technology helps us with that a little bit too, but by large, they've still got to know, okay.

If I have this kind of risk, it's Alicia, if it's a different kind of risk, it's Bob, but a whole different broker and they've got to know the product better. And so that's interesting. Because as we bring new people into the business and as we have done over the last 15 years or so, there's been a real focus on selling on price, not on anything else and so there's been a focus on marketing, not necessarily on product knowledge. So do you think that as we move into the future that, product knowledge, product expertise, depth of knowledge is more important than in the past or not?

Alicia Calhoun: I absolutely do. And the way that I look at it is, when I'm choosing a... because I'm a professional, we're professionals, when I'm choosing a dentist, a neurologist or whoever, whatever a mechanic, I'm going to choose the guy who understands what they do and they do best. I'm not going to take my car for an oil change at a break shop and I'm not going to take my son to a general doctor if he needs braces. Right? And whenever I do find that professional, I'm going to find the one who is up to date on what's going on, the dentist that has the latest and greatest tools. He's constantly educating himself, his staff on the latest and greatest. And that's who I'm going to go to because I trust that he's not been doing the same thing for the last 20 years over and over and over again and expecting the teeth will look better, to be straighter. I want to go with a dentist who's been around. That's okay. Or a new one, but as long as they're as passionate about their profession as I am.

Tony Caldwell: So if Zoom or augmented virtual reality that I mentioned, if that's a communications modality, that we're going to increasingly use in the future. And if we have to be more skilled, more knowledgeable on our subject matter that we're the subject matter expert on than ever before to be successful. Do those two things, though, argue that we've got to operate in bigger geographies so that we have a bigger prospect base for our expertise and because we had the technology to operate in a bigger geography? So first of all, do you accept that or disagree with it? I'm curious. And then secondly, if you agree, do you see that happening right now?

Alicia Calhoun: So as far as... Can you explain exactly what you're asking me again?

Tony Caldwell: Sure. So what I see is that, we're on Zoom today and maybe we'll be talking avatar to avatar in five years. I mean the communications technology, I think we've agreed is going to get better. That allows us… You're in Houston, I'm in Oklahoma City. We're 600 miles apart. And we're able to have this conversation that we couldn't have and the way we're having it today, five years ago, because you didn't like Zoom. And five years ago I kept asking people if they would have a Zoom conversation with me. Nobody would do it. But anyway, so we're on Zoom today we're a long way apart, but we can have a better conversation than we could, before COVID, let's say. At the same time, we've just agreed that you've got to be more skilled from a product knowledge [level] and also from a networking [level], like who's Alicia, how do I find her because this is what I need?

In the future if you're a retail agent, then you've had to be in the past, right? We've got to get better at knowledge and specialization. The problem is that in most communities there's just a limited number of businesses in our specialty. Right? And then, if we have to deepen our knowledge, we can't afford to have as many niches because our brains, you know, we have a limit of time and capacity. So to me, that argues that agents have to get into bigger geography so that they have more prospects to be able to take advantage of this unique set of knowledge that they are creating. And the technology is there for them to do that. Okay?

Alicia Calhoun: That's right.

Tony Caldwell: Right. But I don't see that happening right now. I see agents' mindsets being, I work in my hometown and this is what I do or agency owners saying, “If we're going to operate in Houston, we've got to have an office in Houston.” And so I wonder what you think about [this]. How does that mindset or business model need to evolve given this demand for greater expertise that's coming?

Alicia Calhoun: Sure. So I think it's limiting that mindset. It is very limiting because you're pigeonholing yourself to your hometown. I mean, if you do that, then you basically become a generalist because you're going to take anything that walks in the door because you have to write business in order to grow. And I think that also, it's fear. People, in my opinion, of course, that's your comfort zone. So as long as you want to stay in your comfort zone, you're not going to grow. So you grow by stepping out of your comfort zone and making a decision. I may sit in Houston, but most of my business isn't in Houston. Most of my business is in Louisiana, Oklahoma, New Mexico, some in Houston, but a lot of my retail partners aren't in Houston. They're elsewhere. And I do get out and I do go visit, but I'm chasing my specialty.

So obviously I'm not going to be in Hawaii, tracking down oil and gas companies. I'm focused on where the need is. And I think once you identify that, no different than anything else, once you identify what path you want to go down, it is going to get uncomfortable. You are going to be out of your comfort zone, but you're going to grow and you're going to get better. And as long as you're collaborating with others and surrounding yourself with underwriters that can help educate you or just getting out to network events and collaborating and communicating and networking, you'll be on the right path. But no, I do. I think that I'm comfortable here. This is my hometown. That's okay. If you only want to be X size of an agency, but if you want to grow, you got to step out.

Tony Caldwell: Gotcha. Okay. So at XPT, you guys obviously sell insurance all over the place, right? You deal with brokers all over the country. I think your home offices are on the east coast. So is that what your business is currently doing or growing through using automation and communications, or are you doing it through local office relationships primarily? And do you see that changing inside your own company?

Alicia Calhoun: Sure. So, we're very focused on specialization. We're very focused on bringing in talent, be it transportation, be it construction. And we're bringing in talent that's their specialty. And then once we have those on board, we collaborate and network internally. So that we're spreading that love, kind of like what you were saying about the geography. I may not have a relationship in Pennsylvania, but maybe one of my counterparts who all he does is trucking might and there be an introduction and then vice versa. So that's where the collaboration comes in. And the more you collaborate and... For example, I may have a great relationship with a retail agent that all they do is construction and energy, but then they may have an opportunity on a trucking deal. They may not have the expertise in house, but they have a great relationship because that's what this is. And then I make an introduction to one of our trucking specialists. I'm not going to dabble in something that I'm just, I'm not going to do you any service by dabbling.

Tony Caldwell: Gotcha. Well, and so I think the bottom line here is, and we hear this a lot, that things are changing. They're not always changing in ways we can anticipate, but they're also staying the same. It's about knowing the person who can help you and having a great network, first of all. And then increasingly having really solid product knowledge yourself so that you can sell the product to somebody who, as a consumer, whether it's personal or business, has higher expectations of you from a knowledge and expertise perspective. And hopefully technology will help us along the way. Just curious, any last thoughts you might have around the current environment we're in. So, inflation's running according to the consumer price index is about 9%. The wholesale inflation rates around 11, both of those are just guideposts because they don't represent true inflation costs, right?

I mean, it's a basket of some things. It's not a basket of other things. But what it's doing to our industry and this is really increasing dramatically over the last few months, is it's reducing the supply of available insurance. And so it's getting tougher, I think, to find the right coverage and find enough of it and get the limits you need. And then the prices, of course, are going up. So particularly in your industry in energy, I'm wondering how you see the market. Is it going to harden a lot over the next year or two? Is it going to just be kind of a slow growth thing? I mean, what's going to happen?

Alicia Calhoun: Sure. Well, for energy, we were in what I would say a hard market maybe a year and a half ago, two years ago, but things are starting to change on the casualty [side], starting to level out. Capacity on the excess side is really where we've really hurt most MSAs in the energy sector require at least 10 million in excess limits. And most of our excess markets have cut back. So we've had to where we used to be able to place a $10 million excess layer with one carrier. We're having to find two, three, in some cases, but where I'm seeing the hardening is really property, which I don't do, but I collaborate with others that do. And I think that's the struggle and it's not just inflation, not just the shortages in construction materials, but it's the losses that we've had. Like I mentioned, I work a lot with agents in Louisiana and they're in a lot of hurt right now. A TIV that was maybe 15 million you placed with one carrier. Now you're placing with three. Quota shares that you just, would've never thought of 15, 20 years ago. So I think that's where the hardening is. The most right now is property… property and transportation. But I think transportation is going to be that way. And until we have more players in the marketplace.

Tony Caldwell: Well, that's not likely to be in your term. So this has been an interesting conversation. Alicia, I appreciate you being with me today. I think it's interesting to see what's going on the excess side of the business, compared to the retail side of the business, they seem to be on parallel tracks. But I think that most retail agents are probably not aware of some of the things that are going on that are going to change their lives as they interact with you. So I'm excited to learn that things are getting faster, better and cheaper from a use case or from the transactional perspective, because it's certainly getting that way on the retail side. So thank you for being with me, and stay cool.

Alicia Calhoun: Thank you, Tony. Appreciate it. Bye, bye.

Tony Caldwell: Hang on just a second. And Emily, are you still there or did you just leave all together?

Alicia Calhoun: I don't know.

Tony Caldwell: Sometimes she sticks on there and says, "Oh, we need to do something," but she's not. So I guess this is going to work. So we'll get this produced in the next two to three weeks and publish and send you a link.

Alicia Calhoun: Well, appreciate it, Tony. Thank you so much for the invite.

Tony Caldwell: You bet. Thanks for joining me. I've enjoyed our visit.

Alicia Calhoun: Likewise. All right.

Tony Caldwell: See you later.

Alicia Calhoun: All right. Take care. Bye-bye

Tony Caldwell: I'm talking to independent agency owners about this all the time. If you'd like to have a more personalized conversation, click on the button or the link in the description and we'll make that happen. You can also reach out to me at tonycaldwell.net/contact.