Last year seems like ancient history. Most people seem to have adjusted to the daily whirlwind of information, activity, and change peppering our businesses and lives. But, with all that activity, it has become difficult for many to find the time to simply think about what transpired during the last 12 months. It is the reflection on our experiences and the harvesting of the lesson within those experiences that allow us not only to accelerate the speed of what we do but the effectiveness of how we do it.
As I reflect on 2024, I have five distinct observations to share.
All my career I've heard prognosticators say some version of "it won't last long." First, it was the near depression my part of the country-the Southwest-experienced during the 1980s and 1990s. Later, the tech boom hit and seemed like it would go on forever. Most recently, it has been the hard market in property insurance and particularly personal lines.
Back in the middle of 2022, insurance carrier executives, large distribution leaders, and even some agents predicted the tough market would be over by the end of that year. I disagreed. I felt alone in my thinking as I considered how slowly carriers, regulators, and balance sheets adapt to dramatically changed circumstances.
Unfortunately, I was correct, and the market troubles not only lasted into 2023 but continue to hamper us as we enter 2025. Despite my conservative approach, I failed to see just how long, dramatic, and persistent this market cycle would be.
What I've learned is that those who adapt to changing circumstances thrive, while those who do not fail. This seems obvious, but I have watched several agencies rack up record sales and profits in the same period where we have also seen large numbers of agency owners admit defeat and shutter the business.
I cannot predict when the hard market will end, but I do know that it will change. Agency principals should be prepared to pivot to new carriers, sales tactics, and operational ideas to take advantage of whatever the broader economy holds for us.
2. Communication is critical to resilience.
The hard market has been tough on everyone. Consumers are frustrated, angry, and scared. For what may be the first time in my career, I read regularly about the impact insurance costs are having on the inflation rate. The price increase is at a different level than any other time I can remember.
At the same time, agency employees' frustration levels have never seemed higher. It's not just the daily deluge of calls from agitated customers, but perhaps even more, their feelings of helplessness to respond.
The teams at our carrier partners have their share of difficulties to navigate as well. It gets old hearing nothing but bad news. No one enjoys cutting loose agency relationships that in some cases are decades old, and no one wants to worry about their job.
Despite all of this, our teams keep coming to work. And they continue to search for solutions while we support each other. I have seen amazing resilience, and I have never been prouder of the people who make up our industry.
Our success lies in communication. We have focused efforts on communicating the big picture to every constituency while also working to inform each party on options. The natural optimism with which our industry is imbued is the icing, helping us to keep teams motivated, partners interested, and clients comfortable.
3. Nimbleness is essential to respond to life's unpredictable nature.
While our industry has had challenges, the larger economy, the political climate, and even world affairs have seen an unusual level of volatility in the past year. It's been a wild political year; consumer sentiment has been largely negative, and it seems like a new war is in the offing nearly every week. It seems that nothing is settled.
'What I've learned is that those who adapt to changing circumstances thrive, while those who do not fail.'
This volatility is deeply unsettling to many people. However, I have seen the calming effect of conversations with employees, partners, and others when they are reminded that our industry, and what they do in it, is critical and stable. They may feel nervous or worried until they understand their job is valued and secure.
This is a message we as leaders need to repeat as a mantra. The truth is when things are unsettled, people need our industry more than ever. That is what I think it really means to be a "trusted advisor."
4. Agencies are and remain incredibly valuable.
There is always an inverse relationship between income or EBITDA multiples, which tend to drive business valuation, and interest rates. As rates rose a couple of years ago, I expected the high-water marks we had seen in agency transactions to recede significantly. While there have been fewer transactions, agency valuations have remained higher than expected.
This is true because there are fewer sellers, but also because agency short-term income and profit outlooks have been driven higher by the hard market. Adding to the agent value proposition has been the fact that investors continue to see security and safety in our repeatable sales and client relationships.
As rates drift lower (I think the floor might be reminiscent to pre-2008 levels), values should remain high as it becomes easier for investors to pay more and business fundamentals remain strong. Agency principals must invest in growth. You will net not only an income increase but an increase in asset value as well.
It's easy in volatile times to think business planning is a futile task. After all, plans are often based on assumptions, and those assumptions are often less reliable in turbulent periods. But successful companies show us that effective planning allows the team to think through contingencies and prepare for them. As waves rock the boat, the team knows how to navigate the stormy seas.
In 2024, I observed that businesses with thoughtful business plans, coupled with creative thinking, enjoyed a stronger year than some of their most optimistic counterparts.
Agency principals should double down on planning as we continue to navigate uncertain times. My column last month took a deeper diver into how agency principles can do just that.
A Year in Review
So, I've learned some things over the last year about planning, patience, pivots, people, and even perpetuation.
The writer of scripture's Book of Ecclesiastes said thousands of years ago, "There is nothing new under the sun." For me, much of what I learned in business in 2024, I already knew. In some cases, I may have had to re-educate myself. In others, I just needed to remember what I had learned in the past. But as I look to the future, I think it's useful to reflect on another line in that ancient verse, "What has been will be again." With that in mind, I'm thinking now about how to use what I learned in 2024 to improve results in 2025. I hope you'll join me.
Caldwell is an author, speaker, and mentor who has helped independent agents create more than 250 independent insurance agencies. Website: www.tonycaldwell.net. Email: [email protected].