The COVID-19 pandemic caused many independent insurance agencies to transition overnight into “virtual” agencies – those with most employees working offsite. A recent study by the Independent Insurance Agents & Brokers of America found many agencies have chosen to remain that way, with few or no employees reporting to the office. However, there are things an agency should consider before deciding to remain partially or completely virtual.
One factor is what employees want. Ericson Insurance Advisors in Connecticut, which went partly remote years ago, surveyed its staff monthly during the pandemic to gauge their satisfaction. Now there are a handful who work from an office one day a week, with the rest off site. The employees are happier that way, says co-president Spencer Houldin. It works because of trust. “We trust our employees. If we don’t trust them, they’re off the team.”
Ryan Fenchel, owner of Integra Insurance Services in the San Jose area, agrees. “I trust our team to professionally manage our clients’ insurance programs whether we are working in an office environment or from their home work spaces.” Two employees worked remotely full time for three years before the pandemic. After COVID hit, everyone moved off site but results didn’t suffer. “We were making it happen,” he says. The agency is 100% virtual now.
Fenchel decided that it made little sense to pay high San Francisco Bay Area rents when his staff and clients were happy with a virtual agency. However, some agencies may want to keep a minimal physical presence. These agencies may want to consider renting co-working spaces or executive suites. Houldin’s agency still has an office lobby with a receptionist and conference rooms for the occasional client who comes in with a payment or to meet with a producer.
Still, “Once you have the right team you must have the correct technology in place to make this happen,” Fenchel cautions. Houldin’s agency uses a voice over internet protocol (VOIP) phone system that enables incoming calls to be instantly routed to employees’ home workstations. They use Microsoft Teams for internal group and one-on-one communications. “People do need to be video-ready during the day,” he quipped. For client and carrier meetings, they have several Zoom rooms that staff can grab as needed. Employees also use the Zoom rooms for group collaboration.
Fenchel migrated his agency in 2018 to Applied Systems’ Epic Cloud platform with Microsoft 365, in part because he wanted to be ready should an earthquake or fire close his location. As a result, “(O)ur move to remote working mode from a technology standpoint was unbelievably easy and somewhat painless.” Video meetings have actually increased facetime with valued clients and underwriters, making the sessions more focused and collaborative.
A virtual agency’s need for community visibility doesn’t change, but it does require a different approach. Houldin’s agency maintains a presence through philanthropy, serving on community boards, coaching youth sports, and other activities.
Because of the smaller footprint, virtual agencies have lower expenses that can boost their values. Houldin’s agency increased profits by selling its building and reducing space. Since selling prices are expressed in multiples of EBITDA (earnings before interest, taxes, depreciation and amortization), every extra dollar of EBITDA gets multiplied. “It’s kind of amazing that, for every dollar I save, I basically increase the value of the firm by $13,” he says.
Houldin says his peers are amazed that his agency isn’t bringing employees back full-time, but he doesn’t understand why they’re not adopting his model. “If you said to me, ‘what’s the downside,’ I can’t think of one.”
Fenchel sees this as the wave of the future, noting that some of his commercial clients have also gone entirely virtual. “Integra is certainly not the first independent insurance agency to make this move,” he says, “and will not be the last.”