The Changing Landscape of Insurance Distribution

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Text, Wednesdays with Woodward (registered trademark). A webinar series. The Changing Landscape of Insurance Distribution. Travelers Institute. Travelers. A red umbrella logo. Joan Woodward. 

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Hello all. Good afternoon, and thank you all for joining us. I'm Joan Woodward, and I'm honored to lead the Travelers Institute, which is the public policy division and educational arm of Travelers. Our Wednesdays with Woodward series was created last year to explore issues impacting our personal and professional lives in these very difficult and uncertain times. 

We're pleased you're here today, and we hope you'll stay engaged with us. 

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Text, Join our mailing list: institute @ travelers dot com. LinkedIn Connect: Joan Kois Woodward. Watch replays at travelers institute dot org. Hashtag Wednesdays with Woodward. 

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You can join our mailing list by emailing institute@travelers.com or connect with me directly on LinkedIn or watch replays of our past webinars on travelersinstitute.org. We have a number of them there, and they're very useful and practical advice for all of us. So check them out. 

Before we get started, I'd like to share a disclaimer about today's program. 

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Text, About Travelers Institute Webinars. Wednesdays with Woodward is an educational webinar series presented by the Travelers Institute, the public policy division of Travelers. This program is offered for informational and educational purposes only. You should consult with your financial, legal, insurance, or other advisors about any practices suggested by this program. Please note that this session is being recorded and may be used as Travelers deems appropriate. Travelers Institute. Travelers. 

(SPEECH) 
Today's topic is a really important one, and one we think about daily here at Travelers, which is the changing landscape of insurance distribution. The pace of change within the insurance industry was accelerating before the pandemic hit, and has been impacted significantly as you all know by the demands of this new world we find ourselves in. Here to help us make sense of all this in the new world is my very good friend Patrick Kinney. 

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Speakers, Joan Woodward, EVP, Public Policy and President, Travelers Institute; Travelers. Moderator. Patrick Kinney, EVP, Enterprise Distribution Management and Business Insurance Marketing and Communications, Travelers. Speaker. 

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Patrick is Traveler's Executive Vice President for Enterprise Distribution Management. In his role he leads all of our field teams in delivering the Travelers’ promise for customers across our business units. Patrick also has responsibility for marketing and communications for all of business insurance today. 

He's held positions within Travelers ranging from Workers' Comp, Managed Care Product Manager, Risk Management Specialist to Regional Vice President for the New England region. He has a unique and broad ranging perspective on the changing landscape of insurance distribution. And will really draw in his 38 years of insurance to help us understand. 

Number one, what is happening in the industry. Number two, how the pandemic is shaping current trends. And number three, what will this mean for the future of insurance distribution for all of us. 

So on a personal level Patrick is really committed to the communities where we work and we do business. He serves on the board of Hartford Youth Scholars, and on the executive committee of Gamma Iota Sigma, a college academic fraternity for students pursuing careers in the insurance industry. He also serves on the board of the Travelers Championship everyone knows what that is, golf coming up soon. The Village for Families and Children in St. Francis Hospital in Hartford and is a very active supporter in ARK which provides programs and services to individuals with intellectual disabilities. 

So I know many of you know Patrick, but I'm going to throw out three fun facts about Patrick that you probably don't know. Over the years he's held 14 different jobs within Travelers. 14, that's a lot. Number two, he has led the Travelers Community Connections Campaign, which is our very large scale across the board enterprise wide 30,000 people, charitable activities. And usually we have a person do that for one or two years. Patrick has been doing this for eight years we won't let him off the hook. So thank you for that Patrick. And then, of course, third and last and most of you already know this he's a diehard Eagles fan, so we won't hold that against you Patrick. 

Before I hand it over to him a quick note. We're going to have lots of time for your Q&A at the end of the discussion with Patrick, so use that function bottom middle of your screen you guys know how to do this by now. Q&A check anonymously if you don't want me to read your name otherwise I'm going to read your name. And so with that, let me turn it right over to my friend Patrick. Take it away. 

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Patrick Kinney. 

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Hi, Joan, and thanks for having me. I really appreciate the opportunity to be here with you. The camera's not coming on, hold on. 

There you go. We got you know. 

There you go. All right, it's great seeing you guys. Joan a couple of things. One thanks for using my picture from about. 20 years ago. So I really appreciating that as I approach my 60th birthday here. I think we're going to go--we'll be going backwards to the ones where we find I have hair, so really appreciate you doing that. 

And I like--I appreciate the opening facts. And my friend Bob Jankowski, I am to me right away to said 14 jobs clearly you can't keep on and could we get HR to do the next session Joan on why we had to change 14 times. So Thanks Bob love you too. 

So Joan, thanks for having me, and thanks for setting up what we're doing today. And a couple of things. One we want to just talk to you about what we've been seeing going on with distribution on the retail side for the last five to 10 years. I want to talk to you about how that's impacting the industry, where it's leading to. And what we've seen the reaction post-COVID on your side and on our distributor side, on the agency management system side and on the carrier side. 

So distribution has been consolidating my entire career. 

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A chart of U.S. Merger and Acquisition Trends graphing Deal Count by Buyer Type in percent between P.E. Backed, Independent, Public, Insurance carriers, Banks, and Other from 2005 to 2020. Private Equity takes on a larger and larger share over time, growing from almost none in 2005 to 50% in 2020, with banks, insurance carriers, and other combined with less than 5% by 2020. Source: SNL, Factset, Other Public Sources. Source: The Hales Report, January 4, 2021, Issue number 1, Volume 5. 

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If you go back when you started you had Marsh would be buying J and H, you had multiple mergers. It was all really at the time done by the biggest distributors, and really stayed away from buying up a lot of the really great regional and state specific assets that the distributors had. And so we pulled a slide here to just give you a flavor of how it's changed. One to show you that mergers and acquisitions are not different that it's not new. Who's doing it and who's buying has changed. 

So there's been a rotation in who's buying, there's been a rotation in how it's being funded in terms of public equity, private equity, independent money banks. But as you look at this exhibit in front of you 2005 what you see a couple of things. Is you go back to 2005 and you see that at that time it was really independent, public, some insurance carriers buying, and banks were the major buyer at the time. 

And you see for about six or seven years banks are the biggest buyers. And the public companies buying in there are Brown & Brown, and others, Wells Fargo at the time all buying as you go through. But as you start to see the financial crisis crises come in 2007, 2008 you start to see the merger of the private equity backed firm. And if you just look at the chart in front of you and follow it across the bottom going from 2007 to 2020 you actually have to add the red bar and the gray bar above it. Because Acrisure has been spiked out by these Hales Report independently since or back to 2012. 

So the real PE backed is almost 67% of what's been bought, so that's really interesting. And you also see that the banks have been reducing the number that they're buying, and we also have been a major seller over the last couple of years as the rotation moves into more private equity backed. To give you an example of our data of the Traveler's top 25 distributors 11 are PE owned at this point, which is a record we've never experienced. 

Now that's of the top 25 we actually if you expand out that we have more distributors that are PE backed, PE owned been outside of the top 25 as well. So 2020 it continued it was another record year, and if you really step back and look at it and say, OK, what's it starting to show you if we move forward. 

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A data table titled Most Active Acquirers. Most active acquiring brokers 2011 to present, domestic deals, with number of deals broken down for a list of major acquirers for each year, and a 10 year total to the right, with subtotals for each year at the bottom. The broker with the most deals is circled in each year. Private Equity firm Hub in 2011, Public firm AJG from 2012 to 2014. And then former private equity firm Acrisure from 2015 through 2020. Source:  The Hales Report, Jan. 4, 2021, Issue Number 1, Volume 5 

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And so this gives you--this exhibit I think is a really good way to see one who's buying the rotation and the velocity. And how the deal sizes there's more deals that they're getting. They had gotten smaller over time faster to do. 

So if you go to 2011 when really PE started to come into this space the most acquisitive broker has been or acquirer has been Acrisure, Gallagher has done an amazing job down this path. And you can see Hub and Shaw Partners and Broad Street. Another interesting fact out of Travelers' data is when we look at our top 25 distributors all in countrywide year end 2020. There is not one independently owned distributor in that listing and that is the first. 

So just to tell you where you see facts emerging to even say that there isn't one that's independent is really interesting in the top five now have more than a billion dollars in premium. To put that in context, when I started with the Travelers as my kids would say back when dinosaurs roamed the earth. The Travelers was in total $2.8 billion in all lines premium. So just to give you a scale, and how it's changing. 

So if you look down this list there's a couple of things that is really interesting inside this list. Is one you see consistent number of players, but you also see rotation starting to come in as well. 

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The later years have more total deals coming from the addition of more firms. 

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New money is coming in groups like Patriot Group, Alera that has been out there a couple of years, but has really had started on the employee benefit side. Moving over you see BRP move in, which was new, little bit different came out as an IPO and has done a great job. But you'll see it's starting to rotate a little bit here as well with other companies, and firms entering into the game. But the total number of deals just has continued to go up, which if you continue to move forward. 

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Text, M&A Deals. Top 100 Acquired Companies By Year. From 2017 to 2020. 4 deals in 2017, worth $1.4 billion, 7 in 2018, worth $1.3 billion, 6 in 2019, worth $330 million, and 8 in 2020, worth $490 million. Source: Hales Analysis, Hales Top 100. Public Sources. Does not include Aon's planned acquisition of Willis Towers in 2021. Not official rank. Source:  The Hales Report, Jan. 4, 2021, Issue Number 1, Volume 5 

(SPEECH) 
So this is just a slide that we liked that came out of this to just again show rotation but also size, and what's starting to happen inside of this. So if you just go back as recently as 2017 one of the biggest acquirers prior to that was Wells Fargo, and by the time you get to 2017 for a lot of issues Wells Fargo is sold and merged with USI. You see Jay Smith Lanier become one of the cornerstone parts of MMA, right? So the MMA franchise is phenomenal and Jay Smith and his team joined at that point. And you just keep going down here through Blue chip properties and entities across the board, and you see the size that they are. 

You got Key Insurance is sold to USI so you see the bank rotations regions moving, and it just keeps getting bigger. And you start to see as you get further out that the pieces that are being bought are feeding back to the same buyers. And so the franchises are getting bigger, an agency plant that may be 10 or 15 years ago, we would said is built around. You always had the Aons and Marshes in the top 10, but a really strong independent agency system family owned ESOP owned. 

We have definitely seen a significant move of that agency into the different buyer models. And I would say that-- I would think that most of our agents would say who've been part of the buying or the selling here is that our agents have options of which model they want to work in. That they think and the buyer thinks fits their model the best, right? So Gallagher has a model, and MMA has a model, and there's the aggregator models of SIA. So as a distributor is thinking of buying or selling one of the biggest things that we've seen over the last two years is choice in terms of what kind of model you want to join. And also the footprint and kind of DNA of the firms that are buying are emerging. 

But one thing that is very clear is it is multinational, it is integrated. The agency plant now is much more diversified in the number of businesses it's in terms of its revenue, health, employee benefits. Mergers have not just been on the property casualty side they've been all across the business. They're in the wholesale side, but just to give you a number that we didn't put it in the deck. But if you look at 2020 you'd say, OK, how does this impact Travelers? 

Well, in 2020 alone if we leave out the announced, but not completed merger of Aon and Willis. Even this far into the acquisitions or the merger and acquisition time frame a billion dollars of our premium was consolidated in the year 2020. If you bring Aon and Willis into the equation two fantastic partners that would be adding somewhere over a billion and a half dollars. So levels that we still have never seen before, and it continues to speed up. 

One of the questions that we've gotten on the call is--gotten coming in. I think Joan was is consolidation good or bad? Has it been good for the industry or not? I think one of the questions is, how has it been to the industry. And I think my friend Rob Bouvier asked how has it been for the consumer. 

So I would say selfishly to this point mergers and acquisitions and consolidations on the agency side has been net positive for the Travelers. It has been more than net positive. We have been a beneficiary of it. 

We also get the question of what do we feel about it. It's not my choice. We have to find out how to distribute and bring our surplus and our product offering to you. However you're going to be organized and come down the path. And so we've long ago gotten over the idea that we can control it or do something with it. 

We fundamentally say, no, we want to be the best partner however you're going to organize yourself. And so I think Joan we had that question. And then Rob the second question on related have we seen the benefit to the consumer yet. That's a fantastic question. And I think is the race for efficiency, the investment in efficiency, and as both of us reduce cost in this I think it's really hard to believe that those benefits will accrue to either you or us exclusively. 

And really hard to believe that it would not accrue significantly to the customer. And that it would be in our interest both of us to be continuing to be able to bring the product down, the price down. But also to be able to change the equation of between how much loss is covered in on a dollar premium and how much expense. And I think we've all seen Vijay Dowling's analysis that he thinks over time the industry will go from 65.35 to 75.25. 

We're not calling where that goes, but to your question Rob, we do think that any time anything gets more efficient if it doesn't help the consumer it ultimately probably isn't the best thing for either side. So moving forward. 

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Text, What are the trends post-COVID? Customer centric design now critical to future success. Digitization and friction-less trade now a high priority. Distribution and carriers adapting sales and marketing processes to compete in a virtual world. Agency management systems adapting to serve the changing needs of the distributors. Distributors, carriers, and agency management systems partnering with InsurTech companies. 

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So that's just the landscape of what's been going on with distribution, and I will take other questions on that. 

Pre-COVID we saw consolidation. We saw everybody looking and bringing their pieces together, and seeing what they should buy and where they should buy. We saw a lot of experimentation with different technology, digitalization of the business. A kind toe dipping. Really people looking at it. 

The Travelers had been spending a lot of time on what we were calling the agent of the future and the broker of the future. And in those conversations we had a lot of receptive conversation from our distributors, but you also could see that each side was trying to figure out where it was going to go. And I think most sides felt well, we got time to figure this out, and we're going to figure out how to make this industry have less friction. We're going to make it more efficient. 

Travelers kept investing down that path, and we would say the hero of what we see coming out of COVID. I'm giving you general answers if my friend Michael Kleiner or Lori Taveman went on they'd give you specifics for Personal Insurance. Or if Greg T and Scott, or Myles were on they'd tell you how it might be a little nuisance into Business Insurance, or Tom and James in Bond a little different there. But these are global trends that we see have really happened post March 13th. We went home on the 16th. 

So number one, customer centric design now is critical to future success. The process is exposed across all of it, but your process our process. The customer's access to both of our processes, the connectedness of those processes, the cost of those processes. It's now all on the table. How does it work? How do I get to it? 

I'm sure you guys have seen we've seen an explosion in the access to our websites into my team. We've seen significant more use by you guys of our distributors of all of our digital assets. And so customer centric design around you are our partner and around the customer between you and us. We believe is critical, and the customer is no longer going to tolerate an inefficient process. Digitalization in a frictionless trade now are a high priority. 

We can no longer tolerate an inefficient way of trading data back and forth. We've seen a real move in this arena in the last number of months. And you'll see in a minute, I'll show you there's been some high profile acquisitions on the agency part down the path of digitization on the trade side. All of us have had-- we're one year in this now and all of us are talking about how you've had to adapt to sales and marketing process to compete in this virtual world. We've seen agents do extremely well in this world. 

We heard a lot of conversation about how you're able to bring more resources to the sale because you don't have to travel there. You can really--when you get a customer you can really bring your value proposition to bear even better than you might have--all of us might have thought in a virtual world. But these services or skills are evolving as we speak. 

One of the most interesting things we see we had ramped up as Travelers in addition to all the great work that our businesses do with the agency management systems on the day to day keeping the trains running with each other and you. Two and half years ago or so under Bill Devine's leadership with Bob Jenkins and a number of our people internally. We started really ramping up our engagement with the agency management systems. And felt that agency management systems, and the relationship with you was going to change drastically because of your size. And as you got bigger and bigger you would become more of the person that defined how the process should work to support you than the other way around. 

And so we are seeing and have seen post COVID a lot of investment,  interest, and much more adoption coming in on the agency management systems than we've seen in years. And we are seeing the problem of connection and integration being solved not only for small commercial, which has historically been the businesses-- the industry's focus. But in essence for all information it trades back and forth between us and our distribution partners. We think that's game changing. 

And also so much work has been done on the value chain, and what it costs to own things. And what's the right thing to buy, and what's the right thing to build. The industry's mindset has changed on that significantly over the last five years. And so now much more open to looking at pre-COVID InsurTech solutions to solve repeatable problems in the process. It's really moved now to all of us considering how do you--how do you bring this into the process, so all of us considering how we bring this into the process. 

So if we move forward. 

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Text, "The times they are a-changin." Brown & Brown Inc. Announces the Asset Acquisition CoverHound and CyberPolicy. American Family Insurance to Acquire Small Business Insurtech Bold Penguin. Aon to acquire CoverWallet, Small-Medium Business Digital Insurance Agency. Applies Systems to Acquire Indio to Digitize Commercial Lines Sales. Applied Systems to Acquire EZLynx, Comparative Rating, Agency Management Vendor. Insureon to offer it quoting and rating technology to insurance brokerages and agencies. Insureon Accelerate, a cloud-based product, expands revenue opportunities in the small business insurance space. BrokerTech Ventures Co-Leads Highwing Funding Round. 

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All right, so I said the times are a changing, and just to give you an example of what's been happening, how people are thinking about this, how COVID has changed some of this. Just on this piece of paper just absorb all the different things that are happening. But all the things that if you said to yourself if I had a time machine, and I went back five years would this have been what you would have saw on the page. And would you have predicted this going backward that this would be where we evolved. 

So Brown & Brown acquires CoverHound and their CyberPolicy, right? Really interesting acquisition will change the way that some parts of our business has to interact or will interact with Brown & Brown through CoverHound. So now technology coming in to deal with access to markets, integration, seamless process. 

And CoverWallet another operation coming together that brings the power of a known brand that has a huge platform that it can support. Coming to a technology and bringing the ability to bring digitization to that process. And you can continue around this from anything from Insureon moving faster and faster towards creating comparative ratings rating technology for BI or for business insurance or commercial insurance too. 

Just a continued movement around in the agency management systems from Applied to acquire Indio. I think Applied got recapitalize or revert afforded one got a new president. The moving around in there has been intense. 

And then you saw one of the newest things that got announced before CI be the last time it was in person. So that would have been what, '19 I guess was the last time we're there. BTV got announced at that time its broker tech ventures is a really innovative partnership between 10 or so the top independent regional distributors. And BrokerTech to look at technology that is coming into the industry to see how it should or could help those partners, and how they should adopt it. They then also have decisions of what they fund as a tech startup or incubator. 

And that has led to things like Highwing, which is a different way for the distributor to trade with the carrier to pull data to be developed. So you could spend hours on this slide trying to understand exactly what it means, where it's going, and how does it change the future of distribution and relationships between the distributor and the carrier. What I think all of it continues to point to it needs to be API enabled. 

It needs to be integrated. It needs to be efficient and quick. It needs to be repeatable, and it needs--and we will need to be able to manufacture the way that our distributor is going to want to sell it in terms of whether or not it's online digital type ways, in person. We will both continue to have to iterate. 

If we roll forward one more. 

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A three-way Venn diagram titled, Innovation in our Industry. The Travelers umbrella appears in one red circle along with digital applications, real-time quote indications, E-submission, proprietary portals, Appetite API, loss data download, and Broker Data platform. A second circle is full of Vendors, including Groundspeed, Applied, Broker Buddha, Vertaforce, Indio, Highwing, AskKodiak, Salesforce, Insureon, Superior Access, and AP Intego. The final circle is labeled Distributors. 

(SPEECH) 
So as we look at this just to give you a--and Joan said I could have a shameless plug at some point. So I'm going to go there at this moment Joan so. 

As I opened what I said that we've been innovating, and really looking at it had a lot of you in to do innovation tours. Want to spend a lot of time on the phone with you sharing our ideas. Having the heart for--if you look on the left with the umbrella what we think we all need going forward a digital applications appetite APIs. An API library where we can connect things with you, and you can come in and pull it down and connect it to your system. Real time quote indications we're bringing that up, but we brought that up in workers compensation for small commercial. 

We rolled out a new product during COVID developed it, and rolled it out in less than 10 weeks, which is the ability to give our agents lost data on their claim side. Which would be five years of data I think it's about 84 fields. We rolled it out, redesigned the legal process, redesigned the process to integrate the data with our agents and share it with them. And at this point we have 13 of the top 25 of our top 25 distributors have already signed the contract, integrated the process, and taken down the data. 

We've actually gotten this process so efficient that we have been able to demonstrate it in the morning, send the contract over after the demonstration, execute the contract, and deliver the information that day. So just the way that agile and the data and the tools are getting better. We are also designing E-submission. 

We want to be able to take information from you however you want to send it to us. We want to be able to read it and load it in our systems, and feed it back to you. We both got to get away from re-keying, re-efforts simplify the process. 

And then what we're doing, which is maybe different than we would have done or not maybe definitely different than we would have done as an industry five years ago. Is instead of us trying to figure out what do we have to do to build it and all the pieces, which could take six years and $60 million. We looked at it and said, what do we need to own, what don't we need to own, what's a utility, what's not a utility, what adds value, what doesn't. 

And have spent the last couple of years with our partners looking at all these different companies and technologies and integration. And determining how they snap into the process, how they bring efficiency, how they reduce costs for both of us. As we keep pushing them and the partners towards the answer that we think will provide the lowest cost of doing business with Travelers, the most access to the information, the fastest process and the most informed. And so we believe over time that you will make value judgments on how efficient we are to trade with, what the yield you get from us, what's the time of that trade, how long does it take a submission to go through the goose, how long does it take to get a policy issued. 

We believe with the algorithms and the information that our distributors are developing at some point they will have--you will have an opinion that says Travelers is 10%, 20% cheaper to do business in total not just at the deal level than its next closest competitor. We feel we need to do that to be able to get to that point where more of the dollar covers lost costs without impacting your margin or ours. But helping all of us hopefully sell more insurance more efficiently. So Joan that's where I am If you'd like, and I think there's another slide, but I'll stop. Let me just go--let me go one more Joan and then I'll-- 

Sure. Sure. 

--roll it forward. 

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Text, Aligning Capabilities and Markets. A chart lists capabilities across different size markets, small, middle, and large, represented by a small storefront, a middle sized building, and a large city. Quote indications and proprietary portals are mostly small market capabilities, with some crossover into middle sized. Appetite is a small and middle sized capability. E-Submission is mainly middle, but crosses into larger markets. Broker Data Platforms for both middle and large markets. Salesforce for primarily large markets, but some middle sized. And Book of Business Loss Data is a capability of all market sizes. 

(SPEECH) 
So if you just think about this from the picture of how we're thinking about it. When I said we didn't come at this from the standard traditional solve the small commercial integration problem, which a lot of us on this phone have spent a large, large part of our careers talking about. 

We asked and said what's the problem? How big is the problem? What do you need at each phase in the problem? 

So what's the problem for small commercial, you want speed, you want accuracy, you want cloak to issue. And you want the process to be seamless, to connect it to service centers, APIs for certificates, understanding where appetite is. Just really making it smooth and as frictionless as possible as you move up into the middle, and into large the--what you have to consume, or you have to send us changes. 

More need for integration capabilities like Broker Buddha or Indio. More need for E-submission capabilities that take the data from you, bring it to us, we bring you back. We take it from you. We bring it back to you in a way that you can consume it. 

We've been doing a lot of work with our top distributors on data integration, and seven of our top 10 shared data with us today. And where we can integrate the entire process of what's in our appetite, what our partner writes, what we would like to write in addition, and how we bring a quote to the table. We are also in our world starting to integrate stuff around Salesforce as a display vehicle, and are in conversations with distributors on this line who want to see if we can connect together through Salesforce. And look at different ways to integrate with Salesforce. 

So there's a lot of goodness in Salesforce to us from the standpoint of things that sound simple, but are maddeningly difficult. The right email address, for the right issue, inside the right agency. You think that'd be easy. It's not. 

And so as we're going down these paths lots of things are getting solved. Producer codes are being shut down, we're figuring out how to make them go away, we're cleaning up the experience. And at the end of the day, we want to use all of it, and all these capabilities to make us the fastest, most efficient way to exchange the information, understand the appetite, bring the best people to bear, bring our best price, and risk control and services to bear on that risk. And get both of us out of a processing business you and the broker in business and us in the underwriting business, and that's where we want to go. 

And then I have--if you want to just roll forward one more. 

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Text, Closing Thoughts. Consolidation will continue. Advancing digital capabilities will accelerate. Distribution and carriers must be focused on relentlessly improving the customer experience. 

(SPEECH) 
So what are our closing thoughts. There's just no doubt consolidation is going to continue. You see lots of different thoughts on this. There's a school of thought that says it will continue, but move down in size of agency because of what is left, and that could begin to impact cluster and aggregator. 

Organizations, as those--the anchor stores and those organizations begin to sell, and we have seen some of that. We do believe with 11 of the top 25 owned by private equity that somewhere there's an exit strategy. We also believe that that exit strategy or just the need to continue to consolidate will start to cause more mergers akin to the Aon and Willis merger that's going on now. 

The advancing digital capabilities it's just accelerating. Every day the conversation I think we're both learning what we need getting better at it, but that drive is never going to go away. We're going to have to master it. We're going to have to get a lot better at it, and we can no longer make money on unnecessary complexity. And the process being difficult to understand. 

We've got to make the process of getting to the surplus not the discussion point, and that's what we need to use digital for. And I think we're both now in a relentless cycle of improving customer experience across everything we do, and that's not going away. I think I've heard from a lot of you that's saying the virtual has allowed you to separate your capabilities at the point of sale. 

I think now our customer experience yours, ours, the integrated parts of it. All of it will now be under and should be under much more scrutiny, and we'll be held to account to make it better as an industry, which will be great for all of us. So Joan, I thank you for your time, and I'd love to take your questions. 

Yeah, well, that was a lot, and thank you Patrick. 

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The slide presentation is closed and the speakers expand to fill the screen. 

(SPEECH) 
Really, really thoughtful and interesting given you've been in the industry so long to see these trends emerge, and thinking about it for the future. So all right, folks this is your time to ask Patrick, your question. 

You can do it anonymously if you want or attach your name to it. It's that Q&A function at the bottom of your screen. So just type it in, and I'll get to as many as we can. We'll do a rapid fire at the end with Patrick. 

But first Patrick I want to dig a little deeper on you talked about trends over the last five years. COVID hit. March 16th we all took our laptops home for what we thought would be a few weeks or a few months maybe in our wildest dreams staying home for a few months, people can even imagine it. 

So here we are almost a year later. What are the different impacts of COVID by agency side? So you talked about the pace of change, and the consolidation. So talk about the small, medium and the large brokers and the agents out there. How has COVID affected what they're seeing? 

Yes, so I'll take it in the order you asked depending on small truly independent, small connected with a partner an aggregator partner, middle and large. So I think across everyone COVID is focused each of us on our businesses, and every aspect of our process. So no matter what size agency you are Joan every part of the process got exposed. So you could be a five person shop selling personal insurance for us in small commercial. 

And you've had to adjust how you're getting to that customer, what they can see, how you're doing certificates, how you're connecting, you might have sold one way. Now you're digital. So it has impacted everyone, and I think what I've also seen is the impact. One of the major things I've seen is focus. 

That this industry has talked about the issue of data integration and sharing and reducing friction like I said all the time I've been in it. It's now really, really doing something about it. And if I look at the projects we have underway with our top distributors it is stunning how far it's moved from March 16th to now. And that Joan is everything with how do you get marketing materials. So our agent centric tool and PI or agent toolkit in PI has become--its usage is up like 300% because it's there to help that agent who is combining our resources, and those resources to bring a total picture of that agency. 

And then on the highest end everybody again is still working on the same problem. We might get to bigger size partners, but the problem is the same. And everybody is attacking it I think much better, and adjusting faster. And I also think that as strange as this might seem Joan, and I think a lot of us have felt this in parts of the industry. The fact that we're home I've never felt more connected to my distribution partners than I do right now. 

And I think our field folks would tell you that, because our partners have been available, they've been interested, they've been focused, we've been focused. You can do more of them, you can bring more people in, you can have deeper conversations. So I think all the negatives of not being around people, not the camaraderie, not learning the culture are still there, and we got to overcome them. But in some ways I think we've never had better connection from our field folks, AEs through our agents in the toughest market in my career. As well as the toughest environment any of us have ever worked in our lives. 

Yeah, Patrick that's really a good point, because I think for the first few months all of us were trying to figure out, oh, do I really need to do that webinar or Zoom call. And now it is just--it's just second nature to us. And so the silver lining as you point out for our agents and distribution partners is that connectivity. That we Travelers really, really, really, really want to embed ourselves in their agencies and in their thought process. And so that has I think been a silver lining for us in this pandemic. 

And I think what it's done is sharpen the focus on what you should be investing in because we've seen a lot of things where we thought that was important. And then after COVID you're like, well, we haven't touched that for 120 days, can't be important let's not do it. Let's move on. 

And I do think I've seen our agents do this and us whether or not we all knew we were going to an agile work environment. COVID has forced us all into an agile work environment where we have to work integrated, connected all day long. Very in some ways different than what we think happens at the office. 

All right, so agile is just a fancy word for-- 

Connected. 

--doing what we been doing in the last, right? 

Connected. Yeah. 

Yeah, connected to each other. Is that different--so one of my questions is that different? You mentioned PI and the tools that agents need to be successful in the PI world. Is it different for commercial insurance and in BI? What are we seeing there? 

So personal insurance and our partners just do a phenomenal job bringing the right tools to our agent to help sell those products. In the business insurance side we work with the agent based on size of product. So we have similar tools from our select partners. We're ramping up more of those digital tools. What I talked about on the last exhibit--second last exhibit Joan about E-submission, all the lost data, and things we're bringing to the table. 

That's coming in more on the BI and BSI side of the house as opposed to PI. So we're trying to make the interface and interaction for our agent who focuses on small or our agents who have small on a lot of it easier and more efficient, and allow a lot more self-service. So they're both headed in the same direction, and we feel good about where they are. 

Great. OK, now it's time for all of our wonderful questions coming in from the audience. We have a ton, so we're going to try to do a little bit of a rapid fire Patrick, with some of these. So this is a really interesting one coming in from Frank Doyle. Do you see millennials or Gen Zs moving towards agents as they gain wealth? I mean, we talk all the time about talent, talent, talent is important in this industry, and not only attracting good talent but retaining them because they have options these days, right? And so how are you seeing millennials moving into our industry? 

So I'll take that question two ways. So the first part is do I think as millennials grow, acquire more assets will they begin to think more about a personal agent relationship than maybe buying it on--seeing it as purely a transaction. We do believe that. I mean, that's been our bat and conversation that we've had with our agents since forever about. We believe they will go up, and as they earn more assets or own more assets that they will come and lean on our independent agent. That's an assumption made on what the technology was five years ago, and clearly the technology can always change. 

In terms of people joining this business or the agent side of the business. I think this is a fantastic industry. A lot of us didn't start out wanting to be in it, and once you get in it you really-- you find out that there's unbelievable facets to it. Joan, I think we're--it's one of those times with the economy in a tough spot. We're able to recruit a little bit more right now. More people are interested in talking about it. 

And I think our distributors have more concentrated needs now because their own--now they're so big. They'll be hiring in more bulk. I think we are going to, and have to attract that age group into our business to work with us and stay with us and become the backbone of the future. And I think we're doing that. I think this summer Travelers has over 400 interns that come in for the summer and people so we're doing it. We know many, many, many distributors on this phone are doing it, and we need to keep doing it. 

Great. And you want just spend a minute and talk about attracting females to our industry. I know our CEO, Alan Schnitzer stood up a program for the whole industry called SHE Travels. You want to spend a minute on that, and why that's important to us. 

Yeah, sure. So SHE Travels is an initiative that now feels like--I think Joan and I made 21 trips across the country as we did this in 21 regions. And really it came out of Alan at TLC, which for those of you who don't know, is the Travelers' Leadership Conference. And being amazingly self-reflective as he is as a leader and looking at our management team for three days on stage in front of our top distributors and it was all white men. 

And so the conversation became are we doing enough? How do we do it? What do we think about it? Can we help spark more conversation on this topic across the industry. And that's how we got started on this Joan, as you know, and it's expanded. 

It continues to expand about into inclusion of all types. And so we are committed. We as a company do I think a really good job of hiring women, promoting women, getting people to come in. A lot of women hired into the industry. But it's not enough. 

It's not wide enough there--we don't have people enough of a quality up and down the organizations in this industry of who's in the right spots so who's getting the right opportunity. So we're pulling for it and pushing hard. And Joan, you did a phenomenal session yesterday that was incredibly well attended on SHE Travels, and maybe you want to spend a second talking about that. 

Well, just I was going to say for the agents out there on the line we have a lot of resources for you as well. So for women and men on our SHE Travels LinkedIn page, so join that group anyone out there. And there's a lot of really good resources in terms of attracting, retaining that talent, and diverse talent not just women, but diverse talent in your agency so check it out. 

All right, back to insurance for a second here. So this coming in from Bill Daley, Brown & Brown Beecher and Carlson. 

Hey, Bill. 

Patrick, how do we accelerate the use of technology to work better together on a transactional basis? So renewals, cross sells, quote to bind. He wants to know about that. 

Yeah, sure. Hey, bill. Thanks for the question. 

I think if again, if you go back to breaking down the trades by size and technology, Bill. We're a huge proponent of driving our small business to an AFI issue type basis where you can come in, you can quote, you can rate quote, and then connect to our systems to issue. When we talk about E-submission, Bill it's exactly what you're asking for there. Is take the data right out of your AMS system, right off your record forms, take it right out of the spreadsheets that you might have, and ingest it right into the process so we can respond faster. 

One of the other parts, Bill is taking it in the way that we'd like to or R and E-submission other tools up front. We can then route it to quote more lines and move it around in our system so we're able to run it through our appetite--an appetite process. And then say, OK, we should be quoting five lines on this not the three that came in. Let's call back, and offer to quote the inland marine or we want to quote the cargo. 

So being able to get the data in up front in a standardized way where we can move it. We can run it up against tools that we have like certified business, our new certified agent tools. We can run up against that and say there are six lines we want to write on this come back to our friends in quote six, which would be three in addition to we write now. So we think technology is going to drive that. 

Our middle market partners and our business insurance partners have been building out a proposal. One proposal that our distributors will now be getting so we can pull together an inland and ocean, a comp, a GL, a property an umbrella quote all together, and bring that to you in a much more seamless manner than we have in the past. So we're examining every account that comes in to see what are the line opportunities. Our goal is to sell more lines to more customers on new and renewal. And we're building the processes to mechanize that so we can move it around our shop, and get the right resource in the right process to the table on each individual transaction. 

OK, Patrick. Rapid fire. You only get--you only get a 30 second-- 

One second. 

Rapid fire. Here we go. 

Here you go. 

Jack Rice wants to know since money has been cheap if interest rates were to go up will you see a sell off of some of the PNEs to a more traditional broker? Could it adversely affect the distribution system, and could it slow down the M&A market? Good question. 

Yeah, that's like asking me if I think the Eagles are going to win. I always say yes, and Jack you know I'm not real good at predicting stuff. I would say that for years the conversation has been when interest rates go up, and the debt that's been used to get into this world and backed the ability to buy I think the answer to that is yes. 

We've thought long and hard about what the impact of us would be if people had to sell because interest rates were going up or if it went to private equity to public. We can't see the downside for us, and that's being selfish. They may trade at lower levels, there may be issues that impact their valuations. But hard to see what ultimately would be the--it wouldn't be nice. But I don't know if it hurts us if that's what happens. 

OK, great. Next question from Cody Benton. Is there any concern that large brokerages will begin to underwrite their own clients, and begin to operate in some capacity as an insurance carrier? Good question. In short will some of our distribution partners begin to become direct competitors? 

Well, that's always a possibility, Joan. And I think that's an option that everybody has. And we get asked that question a lot, and my answer all the time in no way, shape, or form being flip or a wise guy which is, hey I'll trade you your 32 for ROI. 

And so you know we've not proven that you can make a lot of money taking risk on this business, and our brokers and agents have proven they're amazingly effective at making money in theirs. Well, will it happen? Sure it will. Risk takers have been coming in and out of this forever, Joan. We will have to show what our value is. We will have to be able to be there for our distributor byline on each transaction, how they want to trade into the future. 

OK, next question from Russell Brown. What are one or two key actions should front line underwriters take to best handle these distributor changes? It's a great question. 

Yeah, really interesting question because I turn it around a little bit to our frontline underwriter and say, does the fact that x distributor that was on that corner yesterday in Tuscaloosa, and is now owned by another firm. Does that change the nature of the trade or the transaction? I haven't seen a lot of that in the process where--what we've seen is stronger relationships, ability to bring more resources to that distributor, more technology, more capability, more information. 

So I would say we keep working as hard as we can because that distributor and those distributors are part of what our future is going to be, Joan. And I think that when our agencies are bought or join other agencies that it always seems to be a cumulative positive accretive not negative. And I think it helps make both of us more efficient and effective. 

All right, great. Next question is about Travelers. So you open the kimono a little bit. People want to know more here. Travelers top 25 distributors include 11 PE back brokers as you said. You also mentioned not one or independently owned as of the 2020 list that we just looked at. What type are the other 14? 

Oh, they range anything from aggregators. So there's public entity. I mean, public like publicly traded Gallagher, Marsh, Aon. We look at aggregators in terms of our terms like our friends in SIA, Keystone, and Iroquois. 

We have a tremendous number of friends and great partners there. And then we have payroll companies, Joan that we do some workers compensation business with. But like I said it's PE public entity aggregators payroll companies. 

OK, this is a crystal ball question. For 10 years, 15 years down the road, which I know you'll still be a Travelers and so will I, Patrick. So Bill Stone, our friend Bill Stone says this is just terrific want more of it. Given the history and acceleration of COVID has caused for frictionless sharing of data, reducing re-keying et cetera. Where else do you think we need to be, and what's coming in the next 10 to 15 years as you do strategic planning at Travelers? 

Well, that's a great question. And so I'd like to say that we're thinking out that far. I'd say it's changing go fast forward about five years out in terms of what we think is happening. 

I think if you said to us what's the number one thing it keeps coming back to APIs, digitalization, connection, APIs, digitalization, connection. Remove steps, remove steps. 

Why do we ask 42 underwriting questions? Because we lost money on the 42nd question 30 years ago on a Tuesday in New York in the ring. So we have to ask that question, right? So I think AI will come in to tell us which questions to ask. I think you guys will be incredibly more efficient, and trading the blocks of risk. 

They still will probably go down an individual risk category. But I think our distributors are building data and information, and beginning to apply AI and others. That you will actually come to the market with an idea of what you want to do before we have an idea as the carrier. So AI see I coming in big. I see us learning how to take--to understand and underwrite and quantify risk without asking as many questions by using the data to be more predictive. 

I think if I look out further I think the underwriting jobs, the broker jobs of the future change. I think they're much more consultative. They're much more into what that risk does, and how it does it. And how you feed it, but I think it changes. 

If I were to look back 10 years from now, I'll say whoever missed the arms race, who missed the connection of the data and the value of the data, and lost track of the value chain and where it's going will be the ones that lose out 10 years from now. And what it's going to take from that here to know to get there is evolving. But I think it's going to be speed, speed, accuracy, and precision, and talent that we're all going to need to succeed. 

Great. I'm really glad you brought up AI and technology and big data, and these can be scary words, right? For a mom and pop shop or even small mid-sized broker. But we're going to have-- I'm going to host our Chief Technology Officer in a month or so here in a Wednesday webinar. Mojgan Lefebvre who is just dynamic, and incredibly thoughtful when it comes to big data, AI for carriers and distributors. So she's going to join me on a webinar just like this in a few weeks, and we'll get that invitation out to everyone. 

Another question here on that API question from Kevin Durant. This is great, Patrick please do it again. Are the API libraries and data access available to your mom and pop partners or only to your largest distributors right now? 

And they're available to anyone, and we put it in the API library. My understanding of Jenkins and those guys might be on to that. But there's no size limitation if you can use it, and we have it available you can take it. Bob just hi hand, yes, so I didn't make that one--I didn't make that one up Joan. 

OK, good. And we're going to end on a note here. I think-- 

Can I take Kyle's question for a second on the bottom? 

Yeah, of you go. Kyle, yeah. 

I think Kyle-- 

I was just thinking that's where it's going to end. So you and I had-- 

Perfect. 

Make mind. So Kyle Langston, I'm sure I'm saying that wrong apologies Kyle. It seems that our youngest colleagues are struggling the most with a lack of ability to network and learn in a face to face environment. Are we seeing the same at Travelers? 

And I'm going to add my own question Patrick, which is talking about when we're all going to be back to the offices. Because I know a lot of the smaller brokerages and others are following. Some of the bigger companies leads in terms of when we send our workforce back, and when are we going to be able to have dinner and lunch and eat really big shrimp with you again, Patrick? 

I know. I mean, shrimp futures have dropped amazingly since we've not been able to buy them for our agents so. So let me go to Kyle's question. 

Yeah, Kyle we--I worry a lot, and I know our management team all the time is worried about this lack of ability to network. And that people begin to believe this is normal. One of the things that we talk about, and I see is Zoom however the protocol of Zoom or whatever you want to call it is evolving. It is not evolved to chitchat. It is not evolved to ask Joan how she's feeling. 

No, Zoom meeting starts late, and none end early. And so the entire and hey, what did you learn there when you're walking down the hallway. And I saw how you reacted with your face. You can't really read body language on Zoom. 

So yeah we're very concerned about it, and we are working on our way of how we get people back. We've ramped up doing virtual office visits, training sessions with people, opening up more of our management to our folks to talk about them to talk about what's going on. But there's major parts of this business that you just have to learn face to face, and you have to see how it's done. 

And I hope that our people will understand--not ours just all of us is how important that is. And not look at and offset the financial benefit they're getting now from not having to commute into Downtown Seattle. When they're not going into New York, and they see that instant life balance as we're sacrificing the face to face communication. 

And I think that will be detrimental for us as humans, but I think will hurt both of our businesses. And I think we need to get people back. I actually believe re-entry will be harder than people think. We all hate it this four or five months ago. 

I'm not wildly thrilled with it, but it's wearing on me. I'm starting to get used to it, and I don't know where that takes you over time. But I think if we don't get back to interacting with each other I think it's detrimental to us as humans and the business. 

So, Joan I appreciate your time. I appreciate what you do with these, Joan. You should be commended on how you handle the pandemic. 

I think we were going--Joan was our first case because she was going to be going to Seattle in March of last year. And so we had to figure out how long, and where we were going. But Joan you pivoted this. 

You moved it on to virtual, and the number of people you're touching every time is fantastic. The audience have been great. Thanks for doing this Joan, and thanks for having me. 

Patrick thanks so much for coming on, and we're going to have you back later this year if you're so agreeable. We've got a ton of notes here from agents saying this is particularly valuable to them. So we'll have you back online. 

I'll be putting out my book, The Fat Bald Insurance: Guy's Tips on Insurance. so. All right. 

We'll buy them, and we'll ship them out to everyone, Patrick. 

Thanks, Joan. Stay safe everybody. 

And thanks for your leadership. I just have a quick note at the end of the program here. Thanks for your leadership Patrick. 

You're not just a leader of Travelers you're a leader in the industry, and we all recognize that. That's why we had so many people sign up for today's session. So thank you for that, and all of your charitable work. That's incredibly important. 

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Text, Wednesdays with Woodward. A Webinar Series. Upcoming Webinars: March 3 -Crash and Learn: An Inside Look at the Insurance Institute for Highway Safety. March 17 -Are You Recruiting Military Spouses Yet? Travelers Institute dot org. 

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Look folks we have a couple webinars coming up on your screen. You're going to see March 3rd I'm going to interview one of the safety experts at the Insurance Institute for Highway Safety. We're going to look at the top 10 safest cars and trucks and SUVs out there. Hear what they're doing with autonomous vehicles. So crash and learn please be with me on March 3rd. 

And then on March 17 another important area is recruiting, which is we're going to talk about recruiting military spouses. We have found them to be incredibly good employees, and loyal employees for us. So we're going to share our tips, and hear from experts in the field. 

Thank you again for joining us. If you want to learn any more about our Wednesday sessions go to travelersinstitute.org. And stay safe my friends wear your masks, and get your vaccines when you can. Take care. Thanks, everybody take care be safe Thanks Joan thank you Patrick.