Knowledge Center

Knowledge Center Items Podcast Episode 6

Episode 6: What Will the Demand for Insurance Look Like Now?

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The way we protect clients moving forward will be different than before.

That might seem like an obvious statement, but it's one we have only begun to see the realities take hold.

New coverages will be considered at an unexperienced rate, and liability will (and has) adopted a whole new meaning.

That's not even considering companies around the world permanently changing some aspect of their business.

In this episode RPS' President Joel Cavaness takes us back to where it all began and talks about where everything is heading.

For more Change Insurance episodes, click here.

Full Episode Transcript

Joey (00:00):

Mr. Joel Cavaness. How are you doing today, sir?

Joel (00:02):

I'm doing wonderful. Thanks.

Joey (00:03):

Yeah, I got to know. You'd mentioned this on a, on a town hall call that we had a couple of weeks ago and I just, I have to start here because it's the only place we can. You've recently picked up a painting hobby and I need to know more about it.

Joel (00:17):

Well, when you're stuck in one location, you got to find things, at least I do, I'm a person who doesn't sit down very much. I usually don't actually sit down. I'm not a TV watcher. I like to do things. I like to stay active. So somehow we started on a painting project that seemed to not have an end. Once you start painting, then that leads to the next room or the next deck or the next spot. And it starts to look really, really good. And so you go to the next place. And then when you get to 26 gallons later, you're finally finished.

Joey (00:54):

So is it just the main standard you're doing any sort of fancy designs or anything, are you taping off like borders or anything, or just pretty straight solid colors. Any accent walls?

Joel (01:06):

Pretty much four colors for different parts of the outside of the deck, the windows. And probably my life insurance company wouldn't be happy with me at all if they knew the precarious spots that I put myself in to get someone, a high windows, we wouldn't have been happy at all, but I got it done, I'm in one piece. The good news is that we're finished and there will be no more painting the entire rest of the summer. So the good news.

Joey (01:38):

All right. Well, you can probably be one of the most productive people during this whole time period. You could at least count that for yourself. I'm curious. I don't know the answer to this question. This is more selfishly for me. I want to know how did you get started in insurance? I mean, I'm sure you've probably told this story a lot of time, but I mean, what was that moment like? Where did it all start? Most people it's by accident. I'm curious.

Joel (02:01):

So mine is a lot of people when you ask "How'd you get into the insurance business?" A lot of people would tell you, especially for my generation that they fell into it somehow. Mine was a little bit more planned. I guess I truly got touched by the insurance business when I was about three years old. At that time, my father made a major career move by purchasing a almost out of business defunct, independent agency in far downstate Illinois.

Joel (02:40):

And it provided very well for our family. My dad did a great job of selling insurance and he, he was active in his agency until he was 89 years old. After that, it was a little bit of a struggle to keep up with things and it's been fully turned over to my brother.

Joel (02:58):

So when I graduated from college, I really had only one goal. And that was to get into the insurance business. I didn't know exactly how or where. In 1983 jobs were tough, inflation was out of control and different things were occurring. And I was very fortunate that one of larger insurance companies, Carmen Forester, they had a training program back then, and they were looking for a trainee in casualty insurance.

Joel (03:32):

It was an interesting interview because the 10 people that were vying from the job did a group interview. We were all effectively staring at each other in a conference room going, "Okay, who's going to get this job?" I was very fortunate, completely honest with you that. My dad helped me. He did business with Carmen Forster, and that was certainly a part of the leg up that I needed to get that first job.

Joel (04:06):

So I did that job for 18 months successfully, graduated from their training program and began underwriting. Again, one thing led to another, they were owned by Xerox at the time, and they decided that they would do a big downsizing across their business. And that forced me into the ENS world where I jumped in there and I became ENS casualty underwriter for a company that no longer exists called Saron Toso. And that lasted me 18 months. You got to remember in that point in time, the marketing was extraordinarily difficult, a lot of pain. And so a lot of disruption and candidly that disruption forced me over to [inaudible 00:04:56] Shane Gallagher. And that was 34 years ago.

Joey (05:03):

It's a pretty eclectic journey just in a very short period of time. What I mean? So with the underwriting roots, what led you to this point now with RPS? What did you see back then when you said this is something that we need? I'm assuming there was sort of a moment that you said this is something that I have to do. What was that? I'm curious.

Joel (05:25):

Yeah, I spent 10 years on the retail side with Gallagher in St. Louis, Missouri, and due to some unfortunate changes inside the company and the due to adapt they to Chicago land area and take over a marketing operation that the company had back then, it was called international special risk services.

Joel (05:53):

And it was a marketing operation. And I got there and I spent about a, trying to turn that business into what I believe was for a traditional wholesale organization, tried very, very hard. And it wasn't working certainly as quickly or as well as I really thought that it would, it was a true challenge, an uphill climb. So Dave McGern and I were at his place up in Wisconsin, and we were just talking a lot about business. We were talking about where we saw the organization that I was leading, where we really saw it going.

Joel (06:36):

And he had led the business before I had a, so he was very familiar with the struggles that I was facing and at that point, we hit a reflection point where we said, well, we can spend an enormous amount of energy and time trying to take this business that I was running he had run before me and transform that into what we really wanted to do or candidly, we could just start all over.

Joel (07:04):

And it was just something that was a business. It was wholesale only at that time, wholesale brokerage. When we started, we started with four people in downtown Chicago and then honestly brick by brick. And I know that maybe a little bit overused term, but brick by brick, we built the company and it was flying around talking to insurance companies about appointments. It was flying around talking to people about joining us, very talented people. And we were candidly, hard work and luck sometimes collide and you have success.

Joel (07:45):

And that was really what happened to us. We were at the right time, in the right environment with the right people and the right strategy on knowing what we wanted to do and really where we wanted to take the business overall. And fortunately for us, from our original thoughts of what we wanted RPS, I know take a quick step back. When we started the company, we didn't have a name. When we hired the first four employees, we didn't have any markets, we didn't have any customers or clients. We had potential customers and clients. And lastly, we didn't even have a name. We hired the first four people on a Monday morning and we went right back to the office and started fooling around with what are we going to call this thing? What are we going to call it?

Joel (08:33):

And Dave was really, really good at coming up with acronyms and little things and kept writing things down and candidly after really an hour or so, we came up with a name, Risk Placement Services. And we sent that name down to our document creation department, which is the only artistic department that we had inside the company. And they came up with a logo, which is really not that dissimilar to what we have today. Fool around whether we liked, well we like that. Black letters, blah, blah, blah. And we were off to the races.

Joel (09:21):

And it was a lot of work. It was a whole lot of fun, you were learning as you're wet because we didn't have maybe the pedigree and the wholesale business and some others had, it was a very disruptive time with a lot of mergers and acquisition activity going on with very, very large players and that provided us opportunity to really bring aboard, some very, very talented people. So it, was it looking back a lot, like I said, luck and hard work sometimes collide. That's really what happened to us.

Joey (09:59):

One thing that I do love about the name Joel, is that there's absolutely zero confusion as to what is going to happen at this company. It just tells you exactly what's going on. I'm curious, is there a moment was there, where were that luck and opportunity climbed where you thought, okay, this is it we're off. Like, was there something that happened that really set things on a new course?

Joel (10:20):

Well, actually I guess it was we made a profit and so we started May 11th, 1997 to be exact, we finished the year. And we actually made a profit of $53,000. And I guess that was a point that I thought, okay, if you can do a startup from a dead start and somewhat, seven, eight months later actually turned a very modest, small profit instead of losing money. This is something that we can build on. And starting start looking at as truly a business that we can grow well beyond even where we are today.

Joey (11:06):

And, we've obviously seen, fast forwarding all the way to today. We've seen a lot of changes just in the first couple months of this year. I mean, where do you think we're at right now in terms of the market? And is there something that you think that there's potential for that sort of next pivot point? Are you looking for anything? Like what, what should we be paying attention to as far as that's concerned?

Joel (11:28):

Today what's going on is there's evolving. I would put the market. And again, it's a little bit different in large accounts or challenged businesses that we placed. It's very much of a developing market. People are looking at things today that they want to crawled over broken glass to write just six or eight months ago. And today those accounts that they would have loved to had, they're saying no to, or they're saying that, price needs to be three or four times what it currently is. And so it's very much developing and I think it will continue to develop really over the course of the rest of 2020.

Joel (12:12):

Of course, the challenge is that many of the headlines have brought us, why we're doing this from casual dress and from my home, that also brings opportunity because the way that we need to protect ultimate clients after all this settles down will be very different than many of the coverages that we provide today.

Joel (12:36):

I think we'll still continue to provide the same type of coverages, but I also believe that there will be a need and a demand for how people might need to protect their interests going forward. We've all heard that and read the headlines about business interruption. There'll be a large clamor for our ability to respond to that need.

Joel (13:01):

People will be looking at liability issues very differently because they're not following or maintaining certain types of protective precautions, what kind of liabilities or new liabilities we didn't think about before that businesses might be accepting. And it's just goes from that. Worker's compensation might be treated very differently with people catching the virus at the workplace. And that's one of the reasons that we've been very, very methodical and strategic on how we ultimately get back to the office environment. And how will that look going forward.

Joel (13:41):

I also believe that you're going to see a substantial number of businesses like ours that have effectively been able to work and be productive and be efficient from home. So I think just you're going to see a very different environment and needs for people that are working remotely now. Where we had a small number percentage wise with people working remotely before and a high number of people working in an office environment, that's going to change dramatically and shift to an environment where I think we'll probably have upwards of 50% of our folks working remotely.

Joel (14:22):

That brings a whole level of issue again, into worker's compensation, people working remotely. How do we ensure that they're, that they have a safe working environment? How do we make sure that they have a proper desk for them to work and ergonomics all of the things that go into it. It is an unknown at this point, but it will develop. And that will provide for opportunities for organizations like ours, who do work in the ENS market to be able to craft those types of coverages, to respond to an exposure that we didn't even think about other than crazy movies and books, just a few months ago.

Joey (15:09):

You talked about that response that is more than likely coming from all of this. And I'm curious from the agent's perspective, what do you think, what would you want to tell them? What should they be paying attention to right now? What are the things that they should be telling their clients about? Is there something, if you could give them one or two things to say, listen, this is where we're heading. This is what we're doing. This is what we need you to be focusing on.

Joel (15:31):

Yeah. So I guess first and foremost, we're there to help. We're there to help to provide guidance or education or direction, or give them information on what's going on in the state of the marketplace. I think it's very important to share that information. I was looking at a lot of information the last two days over consumer spending, what's happened to consumer spending, where are people spending or not spending money. And what are you seeing over the last three month point in time, and where along that three month period of time, did we see a change in that spending?

Joel (16:11):

And it was very, very interesting information where most recently in consumer spending, we've seen a spike of past two weeks in auto sales, I found that interesting, there might've been a pent up demand for that, that people could buy a car because some of the dealerships were closed, but a significant increase from where it was a couple months ago in that spending. That's just one point of the data that we look at.

Joel (16:39):

And I would also tell them that be there for your clients and find out how you're doing. Unfortunately, we as all know that some of these clients are, are struggling/ if you're a restaurant, you're probably having a tough time, if you're a movie theater, you're probably having a tough time and on and on. And I think that what what I would convey to the retail base that we do business with is we're there to listen. We're there to help, we're there try to find creative solutions to a client that while their sales might be down, they're now delivering food that they didn't deliver before.

Joel (17:22):

It's a whole new exposure for having the employees who are driving their own cars and delivering food. We have a whole new higher non-owned exposure that needs to be taken into consideration. So I guess my advice is keep us informed of what's going on with your clients. That's what they do. You talk to them on a routine basis and then allow us to help you navigate to all these new open issues that exist in the marketplace.

Joey (17:52):

We've talked a lot about changing things what's going to happen, where you got the initial idea for everything. Is there something that you think is around the corner for RPS that I don't want to say rivals because obviously, that's, that's an entire 20 plus years history, or is there something that you see that's there as an opportunity for RPS and how are you looking to possibly get there?

Joel (18:16):

So we've been on a journey over the course of the last couple of years of working towards being able to capture, organize, and utilize our data, to develop proprietary products and programs and things that we can offer out an exclusive basis that is only available through us because it was our data that we use to put these schemes or programs together. That is going to change really the next 10 years. I would tell you that is really one of the true change points is going to occur. We have come a long, long way. On the data that I get today that are truly just data to run the business is one thing. And then you have a whole nother set of data that exists around niches, around similar businesses.

Joel (19:25):

We can now tell you we're getting very close, good luck, 58% of our data captured where we can now tell a potential customer or a retailer who's bringing us a piece of business to either underwrite or pull a broker. We can tell them with good clarity, based on our older book of business over that particular type or class of business, what other businesses by the form of limits or deductibles. We can also tell them what other coverages others are buying through us so that maybe we can spike an opportunity for both of them and for us. And we can automatically suggest other customers like you buy these lines of business.

Joel (20:19):

And so it really is a way for us to organize our data, to be able to create opportunities, not only for our customers to sell more coverage to their clients, but also obviously for us to be able to be the one that she just sent an offer that coverage automatically. Well, that's one piece that we can actually already do. We're also combing through our data to look at how can we look at how much of a particular niche or industry that we already write that maybe we know it's good business. Now, how do we go out and create from the very bottom nature up a program that only we have that we can offer as a very creative solution to our customer base.

Joel (21:07):

And I could go on and on. Our ability to use robotics has been fabulous, and we'll continue to use robotics in the backroom to become more efficient so that we can become faster in providing quotations to our customers. And then of course, don't want to leave out our digital offerings that we've been working on for several years where we can quote, bind and issue within a matter of minutes on a small subset of questions for a particular line of business, and actually quote, bind and issue within just a matter of two or three minutes and give the customer, our customer, our retailers access to that 24 hours a day, seven days a week, every single day of the year. And that is a true futuristic game changer for us to be able to provide that. And it's already there. We were well past the point of proving it out that we can do it. We are doing it. And that'll be again, an additional bump for us as we look towards the future.

Joey (22:16):

I only got two more questions for you. And I'm curious, you talked about the digital platforms, you talked about creating specific products. How far can we push it? How crazy can we get with creating very customized, very focused, things and how fast can we do insurance to the point where, what's that sort of breaking point? Like how, how far can we really go to get things new and exciting into the hands of it?

Joel (22:40):

I don't think that there is an end to what we can do. With today's technology, our ability to get information through third party data sources, where candidly, get to the point. And really not that far off of really only having to put in a name and address and everything else generally populates for you through third party data companies.

Joel (23:08):

And then being able to take that and every time you collect that data and it also becomes data that you now possess. Maybe you don't write that account. Maybe you weren't successful, but now you have the data to again, look at it 10 months from now and solicit that account and find out if there's an opportunity for you to write it again. So there really is no into it because the industry, if you think about the insurance industry, it's just massive.

Joel (23:42):

It's just massive, massive trillions of dollars of industry. And I don't think very few of us, even if you go to the biggest players in the world write fractional amounts of the insurance industry. So truly the sky is no limit on going out there and creating new lines of business. And they've been created cyber. We didn't think about cyber 10 years ago. Very few people thought about it and just a few years ago, but yeah, every headline is watch your cyber exposure, watch the ransomware, watch what you're downloading and, watch your passwords, watch all the things that we're really worried about.

Joel (24:26):

And it's truly anybody that touches any computer candidly has a cyber exposure. And I think developing as technology's developed, so does the need to protect that development and technology, but I truly don't believe that there is any horizon that will ever reach when it comes to developing new programs, new opportunities, and that we can all take advantage of and help our retailers sell more insurance.

Joel (24:59):

I say that last point, and again, it really goes back to my roots and where we started. My father being an independent agent and in deep Southern Illinois, but every day, my dad really had one job. My dad's job was to go sell more insurance. And if we could push opportunities, like we just talked about out to our retail customers and give them the ability to sell more insurance, that's our job. Our jobs are very much aligned. They have to sell more insurance to feed their families, or take their families on vacation. It's our job to provide that opportunity for them to do that. And if we're both aligned in those and everything will be just great.

Joel (25:49):

So I understand what the role is of our customer, because I've been there since I was a very young person. If we had a great year, my dad sold a lot of insurance. We got to go on vacation. If he didn't, we didn't. Fortunately he sold enough insurance, we'd have to worry about food on our table. So it was very, very true for me, but, if we can help our customers sell more insurance, then we'll all be successful together.

Joey (26:16):

Hi, Joel, last question for you, sir. If I were to hand you a magic wand and you could make any part of the industry do whatever you want, maybe a little bit differently. What is that? And how's it happening?

Joel (26:32):

I suppose, and this is probably, I don't know if it's a popular statement or a not popular statement, or I think that we could all be much more inclusive and diverse as an industry group. It's a weird time to be talking about these with everything's going on across the world, but it really is something that we all need to take and heat a lot of effort towards you.

Joel (27:11):

You can talk about it, right. And everybody probably has a statement about it, but really organizations that are really taking the lead and making sure that we're all doing our part as large employers and large organizations and doing our part to make sure that we are working towards that social good, I guess, of being a diverse company, being able to look broadly across our employee base or somebody else's employee base and say, Hey, we did make a difference.

Joel (27:46):

And I think at the end of the day, and it candidly will probably be somewhere after I retire, but it would be great to be able to say, you contributed to that. You encouraged it all the way across, and I'm not talking about any particular color or gender or anything else. I'm talking broadly across the entire industry and say, all right, we really, truly did our part to make sure that we had a very inclusive environment across the entire industry that we support in all cultures and all types and all people. And we encourage the growth can across all of that.

Joel (28:27):

So I know that's probably maybe a surprise answer to your question, but I guess, we're all very lucky to be in this industry. It's the best industry in the world, a global economy doesn't exist without the insurance business. It just doesn't, everybody wants to make sure that if you're accepting their goods, that you're insured, that there's somebody that will stand financially for the obligation that somebody is taking it contractually, or just by taking your property or walking into your premises.

Joel (29:01):

And so it's a wonderful, wonderful industry. And I encourage all young people to look at this business, because it is very resilient. It's very dynamic, it's very creative and I believe that we will continue to be successful into the future. So I consider myself lucky. I'm very lucky. And I think that my magic wand was there, I think that's one of the things that would be a wonderful change industry-wide.

Joey (29:31):

Joel, I don't think we can do any better than that, sir. I'm leave it right there. I appreciate the time.

Joel (29:36):

Okay, great. Thank you. Have a wonderful rest of your day.

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